We’ll preface this with a thought that the damn 1929 Crash Analog chart was perfect too. But once MarketWatch got it in their teeth they kept Gnawing at it like a junkyard dog, neutering any bearish effect it may have held. What everybody sees coming and all? It ain’t gonna happen.
So I really hope they ignore the bull’s 5th birthday (in March) from a bearish perspective. Or at least feature more bullish touts than bearish doomsayers.
S&P 500 weekly, from NFTRH 278
As NFTRH 279 noted…
“Now if only that 1929 Crash Analog chart would get out of the media! I mean yes, Biiwii.com posted it back in November but this is ridiculous. Seriously, there was Mark Hulbert again on Friday ruminating about it on MarketWatch. Just put it away MSM… Pretty please with sugar on top?
Man, we’ve got a market full of contrarian wise guys. Everybody’s a contrarian now. Cue Phil Gramm… “Ah’s conservateeve before conservateeve was kewwwl”. Well, contrarianism is now kewwwl. But it won’t be for long because the herd is always the herd… always. It is a law of markets.”
So up to the plate for the Bad News Bears steps the 2007 top and an eerily similar setup happening 5 years later. 5 years… that was the rough duration of the bubble phase of the secular bull, RIP 2000 and the entirety of the cyclical bull, RIP 2007.
With today’s little show of enthusiasm and bump to new highs the S&P 500 has now replicated the 2007 specimen. What it does with that is now up to fate. I did not blink on my bearish bets today. I’ll not let it get out of hand, but I want to let this situation breathe a little.
Look folks, I see the Dow up 90 points. I see the bulls about to knock the bear case down again. Yet still I post these things as long as they seem relevant. If we charted the Bank Index vs. the S&P 500 (market leader since 2011) all along during the bull rally as a warning against bearishness shouldn’t we accept it as a warning on a bullish stance now?
I mean yes, I look foolish posting bearish things when it is obvious the world is bullish. But BKX-SPX should hold right here or a bull leader will have broken down. Here’s the daily view, which like the SPY-GLD ratio posted yesterday, has not confirmed the bounce in stocks; at least not yet.
The daily chart of the S&P 500 is kind of self explanatory, don’t you think? Some components of the US stock market are testing their highs and others, like the SPX and Dow are testing some bounce resistance. If the bears are going to put a ‘fail’ on this bounce, they need to do it very soon.
The Dow is at a lower low to December and that is very bearish. But its amigos from the 2013 US stock party have not violated the December lows. FYI…
The VIX signaled that market participants were way too complacent about the bull market well ahead of the correction. This made sense because the complacency reading came hand in hand with ‘dumb money’ sentiment way over bullish.
VIX & SPX daily, from NFTRH 264
In this case the signal took patience that I for one did not have. If one had just noted the hysterical highs in bullish sentiment and the flat lined VIX at support, one might have simply bought call options on the VIX and paid no attention to them until they paid off. That is what one might have done, but psychology is such a prominent aspect of the markets for we humans. It is harder to do than it sounds.
While the nominal indexes struggle to hold an important ‘higher low’ on the recent downside theatrics, the ratio that has led the most intense phase of the bull – logically in tandem with rising long term yields (vs. ZIRP on the Fed Funds) – the Bank Index vs. SPX is still in its uptrend channel.
So if the markets do end up holding a higher low there is no negative divergence yet by this indicator. FYI.