Ever since the market cracked, NFTRH has been illustrating and updating a road map for subscribers. Well, target #1 is in the books with SPX hitting 1975 today and the map is 100% right on so far. Target #2 at the next resistance level can be seen on the chart in this post.
In Stock Market Genius school they tell you to take profits in a volatile market when you have done the work of being brave (buying) while most were scared. So rather than getting into the hedging game (the above target corresponds with a 50% Fib retrace) I am taking profits today and standing aside, except for a couple of positions.
As we have been noting in NFTRH, cash is the default position and that is what I am defaulting to. This is a market in motion now after somebody pulled the plug on that bloated balloon that was just floating around up there a couple weeks ago. The media is blaring, Fed Jawbones are flapping (to a moderate degree, anyway) and finally the market is predictable (as it ever gets).
I covered short positions early but profitably, shorted the VIX right at the market’s bottom, took ‘bounce’ longs and with SPX at the first target I am fading sidelines and going to have a trading mentality. I’ll let perma-bulls and perma-bears fight it out. I now like comfort and a non-locked position with every bright new day being met by a bright and sunny attitude by Mr. Sometimes Gloomy Gus blogger here.
NFTRH has a road map, completely illustrated for subscribers, that includes clear views of the S&P 500 and the VIX. I ‘think’ the bounce is going to go higher before a new shorting opportunity, but the combo of those two items will tell the story of what actually happens. Regardless, I am staying really nimble now that big boy and big girl time is over and all the momo’s are coming out.
As for the precious metals, I am mostly not playing because while the fundamentals are improving, the technicals are undefinable to bearish. I am seeing the regular stock market much better, technically. Sort of like being able to see the spin on a curve. The precious metals are a knuckle ball and who the hell can make sense of that?
As we have been noting for months now, we are in the back end of the economic expansion, where growth in consumption of services is driving the bus. Here is the breakdown of the most recent Payrolls report from FloatingPath by way of NFTRH 355.
For a country with a relatively strong currency and what it seems to view as a right, even a duty to consume, it makes sense.
In short, Goldilocks is in play with the world gripped in deflation. Goldilocks is usually a transitional thing. She tries 3 bowls of porridge, consumes one of them, takes a nap and then gets the hell out of there… or does she get eaten? I am hazy on my fairy tales.
Anyway, the GDP number is not surprising. So many parallels to the time period that led up to 2000’s climax are in play now, including this ‘strong dollar spurs consumption’ dynamic. Another interesting one is the ‘Asian Contagion, part 2’ that is in play. So we continue to manage the market with the view that this is a correction only (currently in a well-anticipated ‘bounce’ mode), with no need to define what comes next.
Here are a few different charts we have used in NFTRH in order to keep a view of the US Stock Market’s big picture in mind even as we managed the shorter-term picture, which culminated in the daily SPX breaking down out of the nose of the 50 and 200 day moving averages per the chart in this post.
The point I was trying to make even last year as the MACD rolled over, was that the market was coming due for a correction and that while the MACD looked like a bull ender, similar conditions in 1998 and 2006 were not. They were bull refreshers as momentum refueled for the ultimate drive to the top. The EMA 20 (green) was seen as the bounds of a ‘normal’ correction and as of now, in-month, SPX is well below that MA.
Another message of the chart is that SPX can correct all the way back to 1550 and SPX would be in a cyclical bear within its big bull market breakout. Click for a monster sized view.
I created this chart after reading some cycle work by Peter Eliades, by way of one of Robert Prechter’s EW Theorists. This further defined the time window for the correction. Boink, good job Peter.
This chart shows the ‘higher low’ that SPX needs to make to avoid doing what some other indexes have done in making lower lows to October. Generally, SPX and other US markets need to not close August below that level or a cyclical bear is likely.
People talk about how the US market has not yet accelerated upward and indeed, there is a chance that the manic up phase is still out ahead after this fright fest cleans the market’s pipes. But the slope of the post-2012 bull phase looks similar enough to the post-1998 bull phase. There is no implicit need for further acceleration to end the bull.
It is really interesting though that China/Asia are being blamed for everything right now. The similarity to the late 90’s ‘Asian Contagion’ is clear. That thing ended up being an accelerant to mania. What will this thing end up being? If SPX does not get back above the EMA 20 soon it will look different than the 2 previous downside whipsaws.
Gold Manipulators Should be Fired for Poor Performance
Despite the huge differences between gold and all other commodities, gold is still a commodity and its US$ price is still affected by the overall trend in commodity prices. In particular, a major decline in commodity prices will naturally put downward pressure on the gold price and a major advance in commodity prices will naturally put upward pressure on the gold price. That’s why gold’s performance can be most clearly ‘seen’ by comparing it to the performances of other commodities. When this comparison is done it becomes apparent that gold is now very expensive or at least very highly-priced relative to historical levels.
As evidence I present the following chart of the gold/CRB ratio. This chart shows that relative to the basket of commodities represented by the CRB Index, gold has just made a new multi-decade high.
When I look at the above chart I can’t help but think it’s just as well that gold is being manipulated lower, because just imagine how expensive it would otherwise be.
It won’t surprise me if gold moves even higher relative to commodities in general over the coming month in parallel with an on-going flight from risk. Also, I expect the long-term upward trend in the gold/CRB ratio to continue. Lastly, it’s clear that the operators of the great gold-market price-suppression scheme have been doing a lousy job and deserve to be fired for poor performance.
I have to go sit with a group other people hoping not to get picked for a jury this morning. Meanwhile, click the graphic below for the pre-market view of what is fomenting (right on cue) with China’s Central Planning front and center as the Bailout Olympics begin…
Hey guys, the S&P entered a correction the moment it broke down from the nose of the Diamond and the pinch between the MA’s 50 and 200. But here’s Reuters by way of Fidelity to clue us in that S&P entered a correction today.
“NEW YORK (Reuters) – U.S. stocks ended more than 3 percent lower on Monday, their fifth straight drop, in an unusually volatile session that confirmed the S&P 500 was formally in a correction.”
I don’t know about you guys, but I’ll take the informal kind of correction and prepare accordingly. It started when SPX dropped out of the red dot for the 2nd time and was confirmed when 2050, a whopping 157 points ago, was lost.
Here is what actually happened. SPX chose ‘down’ from its moving average decision point. This had been the most likely direction given momentum, leadership and participation that had been fading long before hand, although it also seemed pretty obvious. I mean, you and I both saw it, right? SPX then broke support #1, turning into resistance #2. SPX then broke support #2, turning into resistance #1.
And now here we are. The bull market is intact and the test is at hand. What the market has going for it is Mr. Frumpy Trader up there, and a lot of bear market calls coming out.
So everybody’s got the bear memo, the Margin man has probably made a good amount of his collections and nothing is resolved. Not unless the market loses the October lows.
 I shorted the VIX on the open and Fidelity is all screwed up as its servers get pounded by millions of casino patrons fleeing the margin man, so I don’t know how/if it filled. Thanks guys. Got to love asymmetrical markets. [edit 2] Check that, it filled right near the hysterical highs at the open. [edit 3] Covered, ha ha ha… 15% in nanoseconds. Better ways to be a bull if applicable (VIX was a would-be “circus act” as noted in an NFTRH update this morning).
Now I know why I didn’t buy anything on Friday after covering my short positions. I hovered over the buy button, I thought ‘hey, I love buying peoples’ fear’ but then I thought that it felt amateurish to be doing something like that so soon.
So being a non-astute bear trader, I covered my shorts but at have a ton of cash. Positions are mostly in quality gold miners, but there also, protective shorts were covered on Friday, so there may be some pain on that front, although positioning is very light.
NFTRH 357 was all about opportunity and a road map toward that opportunity. With this morning’s global crash it appears the road map is going to be happening on a much more compacted scale than I thought. We noted this weekend that the margin man was likely to come calling and so there could be another shoe to drop on Monday. Well, he’s on the phone bright and early and he’s got a lot of margin to call in after all these years of speculation as instigated by easy money policy.
The good news is that it appears there will be no delay in the big test that is going to decide whether this is a massive shakeout prior to a coming bull mania blow off or a new bear market. The test is very generally the October lows in the US.
We will have an update over at NFTRH.com to refine the map and strategy as it is big boy and big girl time now and the only way to manage it is to continually balance short and longer-term perspectives and parameters. Keep your heads about you and enjoy the festivities. It is getting off the hook, in double time.
#357 is about road maps for the US stock market. There is one road map for the immediate-term, one for the next 1-2 months and then another, which will be the decider between a new, manic and bullish stock blow off phase or a brand spanking new little baby bear.
Regardless of what the big answer is in the fall, the next 1-2 months is going to be very trade-able, in both directions. Parameters are clear.
As for the precious metals, they are a work in progress. For now, the US stock market is a better trading vehicle, technically. I’d advise people to tune out anyone who would try to use last week’s events to scare people into gold. Gold will get where it is going in its due time, and it does not need pompoms and cheering squads to help it.
[biiwii comment] It’s a promo, not an article. But a promo well worth looking into IMO. Recall, Prechter, along with only a very few others (my hand raised) caught the bottom of the 2008-2009 crash and went bullish. Now, all these years later everyone has become bullish and the market, at the least, is again wonderfully volatile.
Pandemonium in the Stock Market
This week’s stunning sell-off sent the Dow 1,000 points lower. Other markets have surprised investors lately, too:
Crude oil just fell below $40 a barrel
Gold just broke above $1160 an ounce
The U.S. dollar is enjoying the strength not seen in years
Almost every step of the way, Elliott wave price patterns have guided Elliott Wave International and its subscribers:
On July 24, EWI said to turn bullish on gold — the exact day of the intraday lows in gold and silver after four years of decline
Crude oil has followed its Elliott wave script since 1998, including the all-time high near $150 in 2008 and the more recent secondary peak — one from which oil fell below $40 a barrel this week
Wave patterns warned EWI and its subscribers of the huge declines in commodities and the huge rally in the U.S. dollar — both against nearly universal disagreement
The credit goes to the Elliott wave method. For the past 80 years, waves have warned thousands of investors like you about risks — and new opportunities! — at countless market junctures.
This week’s #1 story is the 1,000-point sell-off in the Dow. To show you what we’ve been saying about the markets, we just put together a new, free 2-page Special Report with most relevant excerpts from our flagship publications: Elliott Wave Theorist and Elliott Wave Financial Forecast.
It’s the kind of report a well-informed investor shouldn’t go without.
The Meaning of the 6-Year Low in GLD’s Bullion Inventory
At the end of the week before last the amount of physical gold held by the SPDR Gold Trust (GLD), the largest gold bullion ETF, fell to its lowest level since September-2008. What does this tell us?
In many TSI commentaries over the years and in a couple of posts at the TSI blog over the past year I’ve explained that changes in GLD’s bullion inventory are not directly related to the gold price. Neither a large rise nor a large fall in the gold price would necessarily require a change in GLD’s inventory, the reason being that as a fund that holds nothing other than gold bullion the net asset value (NAV) of a GLD share will naturally move by the same percentage amount as the gold price.