Here is the daily chart from NFTRH 360, which also used weekly and monthly charts of SPX to make its points, along with weeklies of several other indexes.
Here is a short clip from the analysis that accompanied it. There was a lot more in-depth analysis, including 4 near-term scenarios listed from most to least probable (in my opinion).
“It is getting a little monotonous to report, but the bounce is still intact, although it continues to lurk at resistance #1. With the Death Cross of the MA’s 50 and 200 the typical reaction is to burst upward to screw over everyone who took action based on this over hyped TA signal, but as yet the market is consolidating after the initial bounce.”
Any given day could terminate the proceedings, but thus far the market is doing exactly what we laid out for it, which was a bounce to either Resistance #1 (check) or Resistance #2. Here we recall the ridiculously over-bearish sentiment data from Small Speculators and Investors Intelligence (Newsletter writers).
The other side of the plan involved the VIX, which was hysterical at the time of the correction. We planned for a pullback to to the 20-22 range (check) and after that was hit, refined a range of 18-20.
It was hard to project a strong bounce in the US stock market, let alone a big decline in the VIX in the heat of the moment, but project them we did. The market has become considerably less exciting now.
As the fireworks were going off I covered shorts (too early of course), shorted the VIX (very profitably) and have since longed the market with one quick short in there as well. But mostly, it is back to the boring stuff (don’t tell me about the FOMC and its 1/4; that is a circus) as we await bounce targets (pullback targets on the VIX). The next phase of excitement, per the probabilities we are tracking and updating, should be coming fairly soon.
Well, the market still has its leader and boy did it not give damn today. The Semiconductor index is still in the channel vs. S&P 500. But that was a nasty in-day market reversal and is also why I have been recommending not trying to trade this middle ground chop in the markets with too much commitment.
The market is still trying to decide whether SPX 1975 (Resistance #1) or 2040 (Resistance #2) will be the bounce destination. We laid these out over 2 weeks ago…
But it is a whole lot of wasted energy (and maybe capital) trying to place bets before the market breaks upside or downside parameters. NFTRH is keeping watch on those, but as of now, the market is stuck in the mud of the middle ground.
Further, there are positive indicators like the above-noted leader and certain sentiment data, and negative indicators like two would-be bringers of renewed anxiety, the VIX and the Gold-Silver ratio (GSR), hitting our downside target zone today (VIX) and looking like a bullish consolidation (GSR).
Folks, if it’s a bear market there is going to be plenty of time to short into setups. I did go back to my old easy to hold straight short on SPY, with no leverage. But truthfully, the bull market is not yet negated and really neither is the bounce. That’s just the way it is. But today was not a good sign on balance for bulls. ← Thanks Captain Obvious!
Well, look who’s back in his leadership channel. The Semiconductor index, which led the recent market turmoil, is back up into the post-2012 channel. We noted this over the weekend in NFTRH 359 and the leadership status is only firmer now.
“I would like to close the segment with a nod to the bull case. The SOX has been a great market leader. It led the extent of the post-2012 bull cycle and it led the recent mini-crash. As a point of consideration, SOX-SPX bounced during last week’s bearish broad market activity. In fact, it bounced right back up into its former leadership channel. This is now back on radar as an inter-market indicator. It is supportive of a resumed bounce.”
As for nominal SOX, NFTRH 359 noted [chart omitted]…
“Nominal daily SOX has gotten resisted by the mid Bollinger (MA 20) on each bounce attempt, but MACD is triggered and the gap is filled. The bounce is intact.”
Take Mr. Cooperman here…
“If this bull market is over, it is the first one that ended without a Fed tightening.”
He goes on to list a other reasons not to be bearish, but the sensible player would tune him out the second he made the above comment. Why?
Well Leon, it would be the first bull market that ended without a Fed tightening, sure. It would also be the first one to have been underpinned by ZERO rate policy for going on 7 years. Leon, you can do better than that!
Here is the historical. Yes Leon, it would be the first time alright. Like the first time a bull market, 6+ years on, has been attended by ZERO % rates every step of the way. As we have noted often in the past, the last 2 bull markets rose with a RISING Fed Funds rate until the souffle dropped .
I am making no bull or bear claim here, because the situation is not yet resolved. But I am making a claim that CNBC put some cartoon on and fed lazy thinkers some lazy analysis.
The policy behind the market is asymmetrical and so mental extrapolations should not be linear.
By Tom McClellan
Correctly Defining “Bear Market”
August 28, 2015
I am starting a personal crusade to expunge the notion of “10% is a correction and 20% is a bear market” from our collective lexicon. It is among the most meaningless, useless, and untrue statements out there.
The reason I dislike it so much is that it offers no insights about what a trader or investor should do. If you find the market down some percentage, and conclude that, okay, it is a “correction”, then so what? What does one do next?
Continue reading Defining “Bear Market”
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.  added a bull stock on the afternoon sag, but still generally fading the market. No shorts yet, as I am a better bear when I can feel I am catching an extreme.
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?
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.