A post on Wednesday wondered if 2040 to 2060 resistance or the pattern’s measured target* of 2100 would win out. Barring a quick reversal, it’s going to 2100 short-term.
Doesn’t it always seem to go this way with the stock market? In the depths of despair such a thing is unimaginable and now the wise guys are all out with sermons about why people should not be doom and gloomers. And so far they are right. Now what about comps 1, 2 & 3 that we reviewed by weekly charts? 2 out of 3 (2000, 2008) are bearish and 1 (2011) is very bullish.
Interestingly, I have noticed a lot of technical chatter out there about the similarities of the current situation to 2011 but not nearly as much talking about 2000 or 2008. Funny how sentiment works, eh?
I am trying to learn to adapt my bottom feeder ways and somehow stomach the momo environment, unhealthy sentiment and all. I started by rotating out of what big momo’s I had and settled into some laggards/chart spec’s.
* Speaking of measured targets, STOX/HEDJ are already a big chunk of the way there and I am not chasing that momo at this time although I still want to write up Europe this weekend for future reference.
With respect to the S&P 500, this is an important question: Who wins, 2040/2060 resistance or the pattern’s measurement? It’s a simple question because it’s a simple chart.
We used to talk about Mr. Fat Head on the HUI (see chart at end of post). That was the big H&S targeting 100 that not many thought was doable back then. I was reminded of Mr. Fat Head when using the ‘Live Charting‘ link at the above right. There you can quickly manipulate charts and time frames thanks to TradingView‘s dynamic charts. It’s really cool.
The first chart is a weekly view, showing a potential H&S, the resistance that would put in its right shoulder, and the neckline. If actualized one day, it measures to 1600.
Then using TradingView’s handy tools we zoom out to a monthly view and find that voila, the H&S target is pretty close to rock solid long-term support on the SPX.
Continue reading Mr. Fat Head Returns? If So, it’s S&P 500’s Turn
As published at NFTRH.com, a historical look at the US stock market (SPX weekly charts)…
S&P 500: Is it This Simple?
Excerpted from this week’s edition of Notes From the Rabbit Hole, NFTRH 364…
In an age of Algorithms, High Frequency Trading, Quant-injected performance engines and every Casino Patron with an e-Trade account hyper-stimulating the market after each bit of news that is fed (no pun intended) to us by the financial media and Policy Central, the lowly individual can be forgiven for feeling small and vulnerable; for feeling as if the answers are beyond her, or that long-term success is out of his reach.
Indeed, this very publication has ground its gears pondering the fact that August-September market sentiment became historically over bearish in ratio to the relatively minor downside experienced thus far. That was a bullish, not a bearish thing. With sentiment now being repaired it is time to ask if we are giving the bulls too much latitude.
Continue reading S&P 500: Is it This Simple?
SPX has popped to resistance at the top of a ‘W’ pattern and halted there. This is a valid termination point. The chart however, has higher levels where the bounce, which was anticipated since before the Tinder Box post, can terminate. The 2000 area, 2040 and a measurement of the ‘W’ to around 2120 are the next levels.
As it is, the bounce has gone high enough to get CNBC and Cramer to start rethinking the well publicized bearishness.
Continue reading Market Happenings
We drew the parallel in NFTRH 362 using a weekly chart like this one. As it happens, the ‘quants’ are on this theme as well. As B.I.G. points out, it’s been one of the longest runs on record (1,326 days) without a 10% correction. Well it is here and it is remarkably similar to 2011’s correction.
Blow the chart up by clicking it. You’ll see a similar price pattern below the EMA 70, which is starting to turn down, similar MACD, over sold RSI and AROON down. A difference is that 2011 had big down volume bars and this one does not have capitulation type volumes yet.
Now, will history repeat? I am certainly open to it. But the very fact that it’s been 1,326 days without a 10% correction is a negative, not a positive. Something about pressure buildups and the like.
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, 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.”
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.