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Call This a Warning Sign
This is the first real technical warning sign that the market is on
the verge of breaking down and the economy is on the verge of a
recession.
See figure 1, a monthly chart of the
i-Shares MSCI Emerging Market Index (symbol: EEM). The pink labeled
price bars are negative divergence bars. As I have detailed numerous times
negative divergence bars represent slowing upside price momentum, and
typically, the lows and highs of that price bar will provide a range for
future price movements until there is a breakout or breakdown. In
addition, a clustering of negative divergence bars typically is a sign
of market top. This is fairly consistent across time frames and
different asset classes. For example, see the article I wrote on April
27, 2011 entitled "Long Term Treasury Yields Going Lower". That “call” was based in part on this research.
Figure 1. EEM/ monthly
The cluster of negative divergence bars is
an ominous sign, and as you see, the 2007 top had a cluster of negative
divergence bars. For example, in the SP500, a similar pattern was seen
at the 1965, 1968, 1973, 1977, 1981, 1987, 1998, 2000, and 2008 market
tops. As an aside, I need to dig into the numbers a little bit more
deeply, and I will do so over the next couple of weeks, but for now call
this a warning sign!
Lastly, this is “call” or observation is
obviously bearish; however, I do not believe that it will affect the
market over the next couple of weeks or maybe even months. My
contention is that the market should bottom as sentiment is bearish. I
will give the market the benefit of the doubt here. I have questioned
the quality of the ensuing bounce, but in the absence of a crystal ball,
I still believe the correct “play” is to get long when others are
bearish.
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A cyclical structural equation model of the DJIA pointed to a severe contraction of economic activity in 2011. Back on May 24, I thought maybe the model was broken, since the predicted price was a few standard deviations under the actual price.
http://econocasts.blogspot.com/2011/05/blog-post.html
A later run of the model with data up to June 19 suggested that the model still retained predictive value.
http://econocasts.blogspot.com/2011/06/model-djia-longshort_19.html
"It's free!"
You get what you pay for...
I threw down some chicken bones, they seem to indicate EM is going up. Are their any voodo witch doctors in the house?
What? Did they make the shape of a double head and shoulders? Please post a sketch!
Great stuff as usual.
I think it is interesting what has happened in the last week, Greece problems, Bernanke admiting US is crappy, and oil problems too. A crazy week, I am guessing there is a bigger move coming on the market.
Been following this guy for a while, his trading advice is killer and is very accurate.... latest video - http://www.youtube.com/watch?v=xKP90DrpfzQ
not that i understand, but I trade this with eem, am a bit pissed I blew it today, but the buy was yesterday with the futures sol low, getting short on the close, closing the short at the cloase today and being long. re short close monday, break down tues weds, with potential lower low. we will bouce up at each lower low because that is what the algo's do. hard to trade, close shorts open thursday?
Consider this a warning sign:
http://www.youtube.com/watch?v=hhNHeAFdsUw
the first in a five part documentary. And the US has atleast nine nuclear power plants on the east coast ...right in the path!
Seen it. Fear is a great motivator. Perhaps someone is trying to create some cheaper oceanfront real estate. Scare some owners away. Remember; the future is uncertain and the end is always near.
As Zerohedge says...on a long enough timeline the survival rate drops down to zero.
And if I may add: for everyone, individually & collectively. I mentioned this documentary because there was an earlier post here on Zerohedge about the deteriorating situation at Fukushima. We have to take a strong stand against nuclear technology, whether to make bombs or for peaceful purposes like generating electricity. Either way we are not going to have peace of mind.
Imagine a mega tsunami destroying a dozen nuclear reactors, releasing fatal amounts of radiation similar to Fukushima....we will shrink that timeline zerohedge mentioned in a hurry.
Sambo, "..on a long enough timeline the survival rate drops down to zero. And if I may add: for everyone, individually & collectively."
I think your addition doesn't help any. The world is entirely an individual experience, there is no "collective" even in the dying phase
Do you know what collective means?
I got sucked into the buy the dip thing last week. The volume looked like some buying going on. The last couple of days are a reminder that the short term trend is still down. If volume takes a holiday it is only because we aren't making new lows.
If this market is going to rally, it will have to give EVERYBODY a chance to sell first.
BUT, the dollar looks set to go up. Gold is weak, and the UST is hanging up there, ie, yields are staying low. Take your cues from the dollar, gold and the USTreasury 10 year.
Don't trust "support"....
gh
No doubt, bro--Monday gonna be fugly...
The PMs look like they're getting ready to jump off the Empire State Building--might as well short 'em, and make some dough for the next couple months.
We Americans have three signs of wealth: our house, our job and our stocks.
RE is out for years to come.
Joblessness is high for the foreseeable future.
If The Bernank allows the last sign of prosperty, the stock market, to crash, Americans will fall into The Longest Depression in history.
not a problem.... they just need a 10% - 15% drop (hopefully quick) to SCARE THE LIVIN' SHIT out of everybody, who will then beg Benny to print ("and this time, don't stop....ever!")
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Here's a warning:
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No wonder many aren't going long this weekend in the market. They know that something bad is going to happen.
fakeout to the upside first. look for top between now and 1st weekend of July.
Understanding how devious she can be, I'm looking for tease over 1300 before every seller that has been taking his meds in order to stay patient finally sees his opp and dumps the entire 'folio. Big swoon thereafter, FINALLY breaking 1265 which has withstood several thumps recently
for some reason - EVERYBODY is looking for another bounce before a big swoon. pretty much everybody...bears and bulls. I posted an Elliott Wave setup within this thread. The shit could very easily hit the fan as soon as Monday!
"The shit could very easily hit the fan as soon as Monday!"
Would there be a specific catalyst for that event?
yep - elliott wave count -- technical setup -- doesn't require any nonsense "news event"
Doesn't require reality either.
Too true Elliott Waves don't do reality, their greatest exponents (Rob Prechter, Steve Hochberg and the other EWI goons) went from 2009 right through to end Q1 2011 screaming "Bear, Bear, Bear, Bear in the woods" literally every week of every month for every sector (S&P, Dow, Nasdaq, Gold, Silver and calling for a US Dollar rally)... nope fukwits, it was Bull, Bull, Bull (in every way)
So predicting wrong nearly 100% of the time, a Prechter speciality, and worse than a 50/50 coin toss (ie. pathetic) and the King of Delusion, Prechter, still thinks his techniques can be "scientifically validated" (what a fuking dreamer).
GoldToothChimp maybe being related to these monkies you can explain how Idiotician technical indicators were a complete wipeout 2009 to 2011, wrong 14 months out of 14, and indeed worse your Idiotician compass was pointing in precisely the wrong direction (let's try to touch base with reality on that one). Here's Mr. Clueless for you:
http://www.youtube.com/watch?v=Tz5PrY2gjz0
Captain Bob 'Shipwreck' Prechter and his Loony Charts strike (rocks) again. . . i was beyond lucky not to be wiped out in 2011 by these deluded frauds, take a hint, bin the Elliott Wave charts because these goons of garbage have to every month too
To give any credence to TA when we know that virtually all markets and heavily manipulated is
pure stupidity. To give TA credence during free markets, if any exist, is plain faith.
I'm still waiting on the Hindenburg Omen.
On the verge of breaking down! On the verge of a recession! Where have you been since 2006.
On the verge? As in the Titanic was taking on water, it was on the verge of sinking.
Technicals are nice, but not in isolation.
A second scenerio to follow is the cross of the 200 day $SPX through the 20 day which are heading toward convergence on about 7/1.
Last time, when the inverse caused the 20 to cross the 200 on 9/28/2010, the market took off from 1117 to 1371.
Technical prints is how the smart algos extract wealth from other market participants running dumb algos.
This would of course be predicated on the notion that somehow financial markets are tied to reality and actually affect main street. If the gangster bankers making dough ain't making things better, how can the gangster bankers losing dough make things worse?
The real economy is crippled all you are looking at is frosting on a rotten cake. What happens when the cake falls apart?
When the cake falls apart, then it will be time to "be on the bus".
I've never read anyone contradict themselves so many times in one paragraph. Bearish sentiment has barely moved the market down since this years high - so must not be all that bearish-yet.
thinking the same thing
"the economy is on the verge of a recession"
" I still believe the correct “play” is to get long"
"I do not believe that it will affect the market over the next couple of weeks or maybe even months."
WTF?
Hey Cow, kinda OT, but are you a TLH breeder too?
Nope
Looks like down, could go up. What's so hard to understand about that?
Shushup
Where is the contradiction? I couldn't have been clearer...this a monthly chart; the bearishness will likely take time to manifest; I am long and would rather be a buyer at these levels then have been a buyer higher; 80% chance that I will be selling to you at higher levels.
How about 80% chance all the longs seize into wretching heaves Monday...yeah...Monday!! Extended session open a few more hours...last chance to save yourself!
Banks will fail before sovereign defaults. Markets see it coming and will not wait for defaults to
exit banks. Confidence is the name of the game. And with the banks go the markets.
How's this for an Elliott Wave setup! 1-2, 1-2, 1-2 coiling...building energy....Bwam!!!! huge 3 wave coming!! possibly kicking off today...gap thru the 200 dma monday
http://jeffreygtc.blogspot.com/2011/06/friday-june-24th.html
First warning signs I had of the economic system crumbling (which includes the stock market) was after taking classes from a brilliant and renowned Eco Professor. He pointed out that all fractional reserve banking is fraud.
The REAL warning sign for me was when David Walker quit his post as US Comptroller General. Numbers don't lie, and this was an honest public servant.
Herbert, "..a brilliant and renowned Eco Professor... pointed out that all fractional reserve banking is fraud."
Eco Professors are experts on fraud that's for sure
Yes, all the honest, straight shooters are calling b.s. Our fractional reserve banking system was guaranteed to blow up from it's inception...you can't just keep compounding interest on all our debt based money -- now we've got nothing but debt
Ending the Federal Reserve system is the best thing we could do -- but it will probably happen only after an implosionary crisis/failure scenario sadly. We as a nation weren't smart enough to listen to the Ron Pauls. The average sheep thinks he's a kook! LOL Sorry sheep - you all are deluded morons!
But he IS a cook. He's a senile moron, whose only redeeming quality is anti-Fed stance. Everything else he says is plain stupid.
You consider ceasing warfare all over the world, bringing the troops home, a stupid idea? You could, at the very least, present an agrument for your namecalling.
Paul is a fellow Austrian, and so he has my affection for that. Sadly, he comes off as a kook because of his bogeyman-ish claims about the military industrial complex, and his precipitous (and never well explained) admonition that we have to cut and run on all defense related activities around the world. From abandoning North Korea to slashing procurement of (I think) necessary weapons systems. He typically operates as the butt of jokes for comic relief during debates, thereby discrediting his true strength in economics (and Constitutionalism). He disappoints, and he frustrates. Snap out of the thrall Ron, given time one could make the argument for decreasing military commitments, but get an ear about the way you come off on TV.
War is expensive and unnecessary. It causes lot of destruction and pain.
But the morons who run the military-industrial complex do not understand this....neither do the idiotic fundamentalists who have a fatal commitment to protect an irrelevant ideology at all cost.
good points...he doesn't communicate real well. He throws around the econ. jargon - but 99% of his audience has no idea what it means. He really needs to get simple with his explanations and walk people thru it - of course i'm not sure how you do that with 1-minute interviews. He needs to engage people more effectively.
Yup, my opinion as well. I do not doubt his honesty. I do not doubt that he would actually do what he says, if others would let him. I do however question his diplomatic skills.
If were living in the USA, and had to pick someone, i would still pick him. Yet, as i mentioned he is not without significant flaws.
Ron Paul is NOT a cook. His wife is.
If you think he's a senile moron you aren't listening close enough. What's senile about following the constitution? I ask that because EVERYTHING that Ron Paul has said boils down to: "The federal government should follow the constitution". Yea...I guess you're right...following the constitution is just plain stupid.