We’ve been keeping an eye on COMP lately, as it has often been a solid indicator of froth in the markets. It recently reached our next upside target of 15,667, continuing up to today’s high of 15,966.

The gains are especially noteworthy, as just 5 weeks ago COMP completed a very bearish H&S Pattern that targeted a drop through its 200-DMA for a 11.4% selloff from its Sep 7 highs. Instead, it joined the everything rally which began on Oct 4 and began a 10.5% climb.Does this rally have legs, or is it ready to roll over?

continued for members…Before the latest pop to new highs, COMP had a nifty little bearish setup going. This chart is from Oct 4. They don’t get much more bearish than this. I would have had no trouble betting on at least a drop to the SMA200 at 13967.But, algos happen. VIX plunged, CL broke out to new highs, and USDJPY made a timely reversal. Now, COMP is above the 3.618 Fib extension and testing the top of the purple channel from 2009.I’m not thrilled with the rising red channel placement. It’s not a great fit, chiefly because the April 2000 overshoot to the upside. I’m focused now more on the purple channel, as COMP is bumping up against the top of it as defined by the April 2010 and Feb 2021 highs – each of which produced some sizeable drops.

If this channel holds, then the push past the 3.618 will reverse itself and the index would be susceptible to significant downside. The same thing happened in late 2018 when it had topped but couldn’t hold the 1.618 Fib at 7619. It happened again – obviously much bigger this time – in early 2020.The current situation shows a number of potential downside targets. But, I suspect COMP is going through the same exercise as SPX, DJIA, etc: don’t tag the SMA200 until it represents a higher low than the last one. Otherwise, this is a real, live breakout with plenty of upside potential to the moon.

In this case, that would be the Oct 4 low of 14181. The SMA200 just topped it today (14210) so is ready for its backtest whenever TPTB deem it safe for a 10%ish drop. With OPEX coming up and the EOY run for the barn looming, my confidence is on the low side.

GLTA.