Just as we (well, NFTRH) did with the GDX gold stock ETF over the summer, when we gauged resistances 1, 2 & 3 on the Ukraine hype b/s (GDX stopped at #3), we now have established resistances 1, 2 & 3 on the S&P 500, DOW and NDX on the rebound rally, which itself we had anticipated.
SPY hit a trend line today, which I have a feeling will not hold as ultimate resistance. So understanding that in my nature I have a sort of chronic mental problem with being a strong short (this is me the faulty trader speaking, not me the top notch* macro market manager), I took the small step of shorting SPY today. No leverage, just a short. This is against some still held longs but the last 2 weeks have been pretty good and I want to seek out balance again.
This chart of SPY shows what could be the ultimate resistance level beginning at 196, but the indexes (ref. SOX post earlier) have started hitting some bounce targets so I thought it was worth a shot to begin creeping shorter the stock market.
* Sorry, but that’s just how I feel about my own work. It continually adjusts the faulty trader and keeps his head on straight.
Guest Post by EWI
Want to Know the REAL Reason Why the Stock Market Turned Down?
The rout in stocks is no “jinx”
In case you’ve been roving Mars for the past month, you’ve missed quite a fiasco from the world’s leading stock market:
“Since it topped out last month, the Dow has suffered eight triple digit losses� Add it all up, and the Dow has slid about 7.5% percent from its peak, the biggest retreat in more than two years. It also means the Dow has now given back all of its gains for the year — and then some.” (Daily Finance Oct. 15)
Now, according to the mainstream experts, there are 3 key causes for the market’s sell-off:
*  This is a 5 year relative view. Longer-term, the S&P 500 remains over valued per its historical corporate profits metrics.
Pretend with me that we are in Wonderland, where policy inputs can keep everything on the macro in control forever and allow conventional mainstream financial industry people to twittle their P/E ratios and growth metrics for individual stocks and sectors as if it is a normal recovery of a normal economy. In this scenario the S&P 500 is no longer over valued, at least by the corporate profits data compiled by this SlopeCharts graph.
It’s the same one we used to illustrate the over valuation that even a buttoned down Wall Street analyst could see (or should have seen) in the run up to the recent correction. Well, it’s fixed now. Again, we’re talking about what the financial services industry will want to promote to its clients, not the macro.
 From EWI, which has taken enough grief over its patient stance these last few years. Whether this is “it” or not, find value in a range of opinions. This is an extreme and possibly correct opinion. Good old Bob…
As Bob Prechter says, bear markets move fast and are intensely emotional.
Please read this free report that could help you sidestep perhaps the biggest bear market in living memory.
Anyone who has been watching the market for the past few years knows that Wall Street wanted the stock market to get back to where it was.
You know, to the optimism and price levels in the time before the 2008-2009 financial crisis.
And Wall Street did get its way in the Dow Industrials more than a year ago. The index reached new all-time highs in 2013.
As for the return to pre-crisis optimism, that took a bit longer. But return it did, and very recently, in two measureable ways:
- Stock ownership just hit “a rare extreme” — 34.4% of total financial assets among US households. That’s a higher percentage ownership than in 2007.
- The percentage of bears among advisory services fell to 13.3%, the lowest in 27 years. “This means 87.6% of advisors are bullish on the long term trend.”
Of course, these are contrary indicators. Many other similar measures have reached similar extremes. So when it comes to a “Return to 2007,” the real question is:
How far will the re-enactment go?
Markets are most likely to turn when the fewest number of participants expect it. The reason truly big market meltdowns become meltdowns is because so few people are ready beforehand.
We’ve seen a lot of down days in the stock market since the September 19 high. And, after every one of those losses, I read and hear the same idea from the media: This is “a buying opportunity.”
In truth, that notion is also part of the re-enactment.
It’s hardly been two weeks since Bob Prechter published his Special Interim Report. It posted in the afternoon on September 19, the same day as the high.
In 20-point type, Bob said
“This Is It.”
It’s times like these that investors need to prepare for the coming bear market. What we’re seeing is only the beginning. We would rather see you prepare early instead of late.
Preparing early means sidestepping perhaps the biggest bear market in living memory. It means safeguarding your spending power as others struggle to make ends meet.
As Bob Prechter says, bear markets move fast and are intensely emotional; investors and traders who are prepared have greater opportunities on the downside than on the upside.
About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world’s largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.
 Adding the daily view of GLD-SPY from this morning’s NFTRH ETF update. I’d say some progress is being made here as GLD-SPY threatens to join several other indicators in a macro phase. The trend is still down, but this is impulsive stuff.
For all you gold vs stock market sports fans, here is the big picture view of gold measured in S&P 500 units. Though the stock market is making bearish technical signals and indicators are flashing a counter cyclical warning, the best that the Gold-SPX monthly chart can say at this moment in time is that MACD is getting interesting, RSI has a positive divergence and momentum to the downside by a Rate of Change (ROC) is slowing down.
The macro is changing in a big way, but we continue to note the poetic justice that would be satisfied if gold fills the 2008 ‘fear gap’ before resuming a bull market vs. SPX. Given the damage that the US market is incurring, this could be satisfied with one final plunge with gold declining faster than the SPX or it could happen by other means. Or it could not happen at all if MACD furthers its signal.
But it looks like we are grinding around, leaving one macro phase and entering another in the coming months.
A long-time subscriber has a great nickname for gold stocks and gold stock investors. That nickname is Club Misery. Comfy US stock market bulls, so well tended by Big Daddy’s policy for so long are starting to wake up and feel just a tiny bit of it now too. Yet there is an embedded confidence in place that was not there even 2 years ago when we began to note real indicators for coming strength. The bulls now think…
Daddy Momma will weaken the dollar, create more credit and do what ever it takes to get me comfy again! Frankly, I am not used to discomfort. I am simply going to click the heels of my ruby slippers and await more seed corn to devour because I am set in my thinking now. I watch CNBC and Jeremy Siegel is resolute and smirking (now that’s confidence!) and the other guys sound a little cautious short-term but even Jeff Saut does not question this secular bull market. Maybe I am not so miserable after all.
And do you know what? Our dullard bull here could be right. Personally, I find no need to define this other than a satisfying disturbance to a robo market that drifted ever upward on policy and then on momentum to over valuation. My big picture fundamental view is that it is and has been bogus with respect to real fundamentals (not the PE’s and growth metrics all built upon destructive policy that they talk about incessantly in the mainstream financial media), but that policy’s windmills can keep turning longer than you can tilt at them.
So for me, if this has been a market top I’ll be happy. If it is a big buying opportunity in the making, I’ll be happy because the damned thing is now trade-able both ways and the macro is moving. There will be opportunities aplenty going forward and I don’t just mean long or short the stock market. Too much to go into in one post, but I now declare Robo Market dead. It is still a FrankenMarket however, as it has been since I began my public writing journey a decade ago.
Anyway, here’s the venerable one… the headliner of headliners, Mr. Dow making his lower low today and introducing himself to the other Club Members. I expect a savage market bounce back soon, but as noted in an NFTRH+ update earlier, these breaks of trends can be considered like scouts for what may still lay ahead on the near to medium term. Doing the work of identifying support and resistance levels in service to being prepared is going to be fun. Robo this.
 My apologies, the SPX is not at a lower low. Razor thin though it may be, it maintains a higher low right at the key SMA 200.
For your viewing pleasure here are some of the uglier items littering our fine and sound financial markets, so organically rising on natural fundamentals these last couple of years. Here are some stocks…
And a couple indexes…
Now, the bears have seen this movie before. For instance, the DOW made a lower low last October and what did it do? It ripped shorts’ heads off into year-end. But still, there sits the venerable S&P 500 below the August low.
Here one conjures up the charts that I shall not brow beat you with again (for this week anyway ) that show S&P 500 in utter lock step with policy effects and having well-outpaced corporate profits into over valuation. One also looks around and sees a landscape littered with charts that look like the first 3 above.