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Goldman Technician Says To Short Market Unless S&P 1083 Is Recovered Today
Courtesy of reader Apocalicious, we present the following piece of technical analysis from Goldman's Tony Pasquariello. According to the technician, a critical level to watch is the 12-month moving average, which many consider a critical indicator of upward (or downward momentum). According to Goldman, "unless S&P recovers the 1083 level today, we will have crossed down and through the moving average. On this simple basis, the technical signal is to be short the market." In any other market we would say a 40 point ramp in the S&P on a day such as today when the ADP came in so far below expectations would be simply insane... But not in our market. After all, the best traders taxpayer money can buy reside at Liberty 33. And they are on a mission.
Full note from Pasquariello:
this is a monthly chart of S&P back to 1994. the purple line is the 12-month moving average. as mentioned before, historically a powerful signal occurs when S&P crosses through the moving average at month end. based exclusively on this metric, the strategy would have gone short in late ’00 and caught the post-tech bubble selloff … it would have gone long in early ’03 and it would have stayed long through ’07 … it would have gone short in early ’08 pre-BSC collapse … and it would have gone long in Jun ’09. the only false signal over the past 16 years was a short at the end of Aug ’98 during the Russia/LTCM crisis – but that position would have reversed by the end of Sep ’98.
at the end of May, S&P approached this moving average – then around the 1070 level – but thanks to a month end rally it ultimately held. unfortunately, with June soon to be officially in the books, the chart is clear: unless S&P recovers the 1083 level today, we will have crossed down and through the moving average. on this simple basis, the technical signal is to be short the market.
I’ll reiterate my normal disclaimers: (1) I’m not a trained technician; (2) we expect some buying of S&P in the next few days related to quarter end; (3) as a colleague pointed out, in each of the last 2 violations of the 12-month MA, it was also at a time when the MACD was very overbought (which is not yet the case, so there’s less confirmation of a sell signal).
nonetheless, as a relatively long-term indicator with a respectable track record, this is a sobering chart that confirms an incremental loss of upward momentum in the US equity market.
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Well, that pattern is starring everyone right in the eye. When you have the nutsacks on TV talking about it though, my spidey sense warns me it might not turn out that way.
Percentages are with a test of I think 869 if 1040 is taken out by 3%.
It's the first post I've read from you, Mako, that doesn't say "nothing will make a difference" and the "exponential function always wins", or something like that.
Are you turning bullish?
Cycles within cycles.... it's a game of musical chairs, eventually there will be no chairs left. Eventually there will be nothing left to short, and no more dead cat bounces to ride up. Until that time, party on Garth.
I agree. All of a sudden in the past two weeks print and TV has been talking about moving averages. I went long for a week last time they did that and we bounced back up through it, and went short once the inverse ETFs got sufficiently hammered. Now they're talking about it again. I'm tempted to go long here.
So are these technicians paid for by the Squid? There is a short squeeze that got set up yesterday, that is kicking into gear today.
Way off topic... but Houston we have a problem!
http://www.godlikeproductions.com/forum1/message1116630/pg1
Basically, anyone buying or holding BP is betting the relief well works.
If relief well in August does not work, BP is then a 0 very quickly.
I said a few months ago that 50/50 a nuke has to be used, I would say 70/30 now and there is potential that a nuke will not work either.
Yes, that thing could be bleeding for 30-40 years.
how do you know the nuke will not bring those 30-40 years forward totally destroying the atlantic after it?
There are no givens.
So, you're saying that the market will close at 1084.
So, you're saying that a close at 1084 would actually surprise you?
No, I'm saying that a close under 1084 would surprise the world.
+++ (chuckle, chuckle)
Or at least a close under 1084 would surprise all of us here on ZH.
+1
We are only just past half way in the trading day and I have no fingernails left :-)
This dead cat bounce on 1040 couldn't be more obvious. I was suprised at 9:30 when the market opened and sunk to 1038.xx, 2 minutes later tho I was assured that business as usual would continue another day.... sigh
Technicians? More like carnival barkers. Looking for suckers is more like it as they telegraph the play that commences at 2:30 or 3:30
yup...
iep right... what will happen will be the opposite... GS Sucks
I hear ya, TD. In any other case, there would be NO WAY the S&P could rally 40 points today, but we'll see.
However, the conflict is too great. Goldman issues a note saying we need a 40-point rally and then Goldman causes a 40-point rally?!? Are they really that brazen? I know...silly question.
Apple iPhone VS. HTC Evo
(Caution: NSFW)
http://youtu.be/FL7yD-0pqZg
Seriously, thank you for this.
awesome, I needed that.
Well folks, time to go long until 1084!
AAPL turned down almost 6% in 48 hours. I'll keep watching that as my crash indicator.
You're watching AAPL for a S&P close? OK.
My canary in the coalmine is IYR. It's a bet!
That's odd. My canary seems to have died some time ago.
what you make of AAPL's decision to offer IPhone on Verizon's network?
Verizon is only a rumor. Apple is locked into ATT until 2012.
I would be careful of that. It would be more of a contraian indicator IMO. APPL has become the uberdefensive stock x100. If APPL goes up, markets are going down and vice versa. Since APPL is going down, and Goldman is telling clients to short the market, my take would be to be positioned long at the moment.
Harry, you keep watching that. Notice that the correlation between Aapl and SLW seems to have been severed. There is an indicator for you! Do PM stocks finish decoupling now? I am waiting.....
How does one become a "trained" technician?
first a H.S. guidance counselor sees that you have some promise in this area and suggests you go into it because 'you'll always have a job'. Then in college you major in 'technical'.
Bend over and let 2+ bankers take turns.
When you're able to explain in a logical way why 1 + 1 = 56, you've got the job
40-handle rally on the S&P? Coming right up!
</sarcasm>
I'm actualy considering getting long. The bear case is getting TOO obvious here. July 2009 had a VERY obvious head&shoulders and we only rallied to new highs based on huge short covering.
Good luck with that.
For once, the Goldman guy is right. A monthly close under 12-month MA would be significantly bearish. Just look at the chart for proof.
Just when I think everyone's getting bearish and it must be time to close some shorts I watch CNBS (Simon Nobbs is sheer lunacy) and try to catch one of the perma-bulls like Paulson - "record cash on corporate balance sheets", "the market's cheap to 2011 earnings", etc. As if the profits or balance sheets of 50 companies is representative of the entire economy...He was on Bloomberg Rewind last night and looked a little pained...
Not as pained as BB looked taking to Obama yesterday though...
"cheap vs 2011 earnings" is one of alltime favorite bullshit rationales.
As if 2011 earnings were guaranteed and in the bank! What if, as the economy continues to bounce along the bottom, 2011 earnings actually come in, say, 40% less than currently expected. Well, then, the market is definitely NOT cheap.
What utter fucking nonsense. Propagated by shills just simply looking for the "greater fool".
The day CNBS becomes bearish is the day I become an "investor".
I am thinking that earning season is going to be a trainwreck. I think the shorts have some protection for the next few weeks knowing that companies are going missing their numbers and revising earnings downward. Get use to hearing about "Europe and the stronger dollar" as their explanation.
Yep. Watch the Fleckenstein vid just posted on the main page. He said it better than I can type it.
Could Goldman be right this time?
I'm short from 1043 on the esu. But this story has my stop and reverse order ready to blow.
Blow me fifty dollars goldman.
edit: Disclosure: I have been kicking ass the past week as all of this crashing has been coincidental with my predictions of crashing, which non-coincidentally has been great for profits.
'Apocalicious' holy jaysus I love it...
btw FU Goldman; and where is the 'buy' button on my platform here?
Goldman has kept PCLN afloat during this crash. All the other travel sites have been pummeled while PLCN is floated by Goldman's upgrade that screwed me over. They must have a sizable position in the POS, but hopefully their stop is somewhere nearby.
What I love is that these mercenary traders (Brian Sack) think that the regime will never turn on them for being "manipulators" when the whole system collapses. Keep it up, guys. You're their black box. They won't hesitate to throw you under the bus.
+100000000000000000000000000000000000000000000000000000000000000
Modern day Bolsheviks
That technician has been reading a blog posted on one of the sites, which claims to have backtested this method back to 1970.
It has been posted everywhere.
1 example: http://www.marketoracle.co.uk/Article20162.html
I concur with the analysis. If you look at the chart back to 1994, there really is nothing below 666 to stop a test of the 1994 era price levels barring the Fed coming out and openly buying equities to support the market. A violation of the March 09 lows opens the 400-454 range right up and probably one of those once in a life time shorting opportunities. If you want to see a good chart of a parabolic move then cratering, pull up a 5 year of PCLN with the 200 DMA and 365 DMA. In reality it would appear that this market is severely over priced based on real economic activity and "expansion" so as the economy rapidly contracts in Q3 and Q4, I expect the parabolic stocks to come back to earth and with that, the indexes to follow them down post haste.
Exactly. +++
johngaltfla = Louise Yamada ??
LOL, nope TF, but the examples of parabolic stocks are everywhere, especially in the NASDAQ. AAPL, AMZN, BIDU, GOOG, etc. are all great examples and IMHO worthy of exploring. There is no "fundamental" reason to buy and hold now and more so of a reason to gamble on the short side as the Fed let the window of opportunity close and failed to add a new layer of monetary expansion and Q/E thus raising a huge risk of a liquidity squeeze and deflationary death spiral this autumn. Once we close solidly below 1040 and kiss 918 on the S&P, we're going DOWNTOWN and I don't care what mythical statistics the Bubblevision critters dig up. This is an entirely new economy with a different dynamic where the debt based growth model is D-E-A-D.
From a technical basis this market is set up as ugly as it gets. And the end play when/if we break 666 will be to go short the USD, because then the Fed will have to inflate or die or we will have more than just the streets filled with rioters; we'll have retirees and their kids who lost everything in a prety nasty mood also.
Get a job you idiot.
Nice retort. Did your mom type that for you?
Actually, it was meant for "Mr. Turd Ferguson" who seems to be all over this blog with inane comments.
No offense intended. My apologies.
Ah, thank you..... Then "Get a job you idiot" so as to relay that message to TF.-:)
It's a trap!
I took a long look at that graph and there are several instances in which a crossover occurred and the market continued to rally. Normally I would call BS on GS and go long on ES but there is a lot of bad juju floating out there.
I'm mostly in cash right now but I've got a some SPX puts to hedge a few long positions(and I'm ready to close out those long positions which, of course, means the market will shoot up 20%).
Yes but those instances occurred when economic fundamentals were actually improving.
Yep and that's why my head is spinning. It's tough to see all the data laid out to bare in which ZH does a great job and then listen to CNBS and the mainstream glossover it and say "better days are just around the corner" But then GS comes out with this recommendation to possibly go short, and we know their lousy track record which Tyler has documented well.
Which end is up?
Read the posts from johngaltfla above. He's nailed it.
My nuts are tingling to the tune of us closing at 1062 today.
*disclosure* my nuts nor myself have a series 7 or 63, so our advice separated or combined cannot be guaranteed.
http://www.marketoracle.co.uk/Article20162.html
I have a naive question. With all of the externalities that are distorting the markets, why is this chart relevant?
I am not suggesting a bearish conclusion is wrong. I am just asking what this means when the markets are fueled with funny money and driven by robots.
Ding-ding-ding. We have a winner! Charts matter now becuase of algo trading can only be programmed on mathmatical probabilities. God help us when the headline reading algos get turned on, the VXX will be on the norm over 50% becuase they will not be able to make heads nor tales of the rumors or truths.
the banksters' bot has got total control of the ..."markets"
whatever benefits el machina goldman f***ing sachs the most, well that is exactly what the "markets" will do
all with Ben and Timmy's help, of course
Gs prop is long stocks, short gamma today.
Must be time for GOLD to make its run to 1300 then.
I'm in full agreement, if the close is below the 12 month MA, if you're not out already, get out.
Back in 2007, I had built a model looking for a simple timing indicator and it has proven it worth.
Technical analysis is beautiful - it works great, until it doesn't - then your money management skills kick in until it starts working again.
Having said that, I kind of agree with him.
wait a minute is this the same Goldman that has been wrong on every client recommendation for the last couple months. I get it, if we fail to make it back to 1084 today I should go LONG the market.
Has anyone backtested this MA before the year 2000?
It might be very coincidental that it works since then (don't forget that this is a monthly chart with not many candles on it and 1 simple indicator).
Yes, I have. Back tested it with all available S&P500 history.
Ignore macro realities at your own peril. There are just as many reasons why the market should tank as reasons it should go to 2,500. Believing in technicals got you burned in June 2009 with that huge "head and shoulders top" that turned into the second leg of the bull run. This ain't Kansas anymore
What are those reasons to go long again?
Not saying there's any reason other than it's the will of the Fed, the Treasury, and the global banking community. Technicals can always be rationalized away (as the June 2009 head and shoulders fake) on the basis of "stronger" macro factors or "the bigger picture".
In 2009 the market priced in the recovery from a temporary bottom.
The stimulus cash in all major economies around the globe worked its way into the system.
Other than employment which is a lagging indicator, all other indicators improved.
Now the indicators are turning South again, net employment is increasing, benefits are running out and stimulus has been spent.
There is only one direction this market can go from here, even with all the manipulation.
Investors are taking profits or going to cash and gold. Dividends are not guaranteed when the economy is shrinking and a company has to preserve cash flow.
HFT can hold this up for a bit but when selling volume increases the fakey HFT bids don't support it. Hence the flash crash 5/6 which was a liquidity event. Someone cashed in.
Anyone going long this market is doing so against all economic indicators, against all warnings and at their own peril. Even Cramer wouldn't go long here. What does that tell you?
ridiculous, simply ridiculous.
this is going down or perhaps sideways for a bit, but general direction is down
all leading economic indicators are worsening and that's the reality folks.
until another stimulus is announced, this is going down.
guys take a deep breath then a short look at the individual charts and you'll see that the casino is falling apart
I only get short when the 1040 area break (close below)...
I went short when the S&P couldn't hold 1090 in its last attempt.
1040 will sound like a fantasy in a few months from now.
Fundamentals of course matter. Technicals are people's way of interpreting what price actually does. Price is the ultimate indicator of what people currently believe.
Prices are dropping sharply and unanimously on down days and computers whose job it is to disguise their actions are failing at their jobs. Outflows of funds are up. Unemployment is up. Banks are being seized weekly. HFT's are adding extra volatility to a hollowed out market.
Don't let technicals feed your uncertainty about your position or lack of position. Make your bet or be a spectator.
Three hours to go and the S&P is only up 3 points.
Anxiously awaiting the "BREAKING NEWS" that will be the excuse for the algos to ramp. I would suspect that it will be after lunch, sometime around 1:45 EDT.
Article summary: ‘Market has fallen. Go short, cause it may keep falling. Unless it goes back up, then don’t be short.’
However obvious this no talent ass clown’s predictions are calling both sides of the coin, it serves as a beautiful metaphor for the state of the market. Goldman Sachs calling, “heads we win, tales you loose.”
On a monthly basis:
10 mo Aroon Osc.
14 Mo Commodity Channel index
3&9 True Strength index
15 Mo vortex Indicator
All say the same thing as the 12 mo Ma xover
Aroon and Vortex were not whipsawed in '98
A lot of talk on here of propping up the market by the few big players. I don't consider that an issue at these levels since only one of them needs to dump a few hundred million into a selling algo to send the es down 50 handles in an hour.
The domino effect will be in fast forward. Set your tivos.
Technical analysis works best when the open market creates volume, not when the PPT makes the candles move.
So, will we see a break and the fulfillment of a double-top? Who the hell knows.
To get back to technical analysis that is reliable, you have to eliminate HFT, and who or what is going to do that?
And, maybe one day, fundamental analysis will work again, too.
Notwithstanding, I don't believe a damn thing that anyone from GS says.
Seeing 1040 as a churn point means, if you want contrary big balls trade, set a buy stop at 1041 and sell stop at 1039. You may get churned but I think it will be worth it as the next move is a 20-40 handle bonanza.
First question out of gate... (cynically) And why do you think that? Answer: volatility clusters in nature and markets. This is a bet that we have entered volatile territory and that the cluster idea is true.
Edit: To hold myself accountable for this silly idea, I marked my es chart with a timeline of my post. I'll report at 4pm how many times my ass got churned. So far short and waiting for churn number uno.
@juwes : how many times have you been stopped out, today - honestly ?
I was just going to say silver was zeroing into to an inflection point, but I didn't get to it soon enough because it just broke out.
And gold too while I wasn't looking.
Hey GS, a 40 point move in the $&P would mean silver would have to jump to the top of its recent range and gold would need to move upwards of $1288 per OZ. Good luck explaining that to the masses, who are starting to wake up to the fact that gold is monie!
Gold is about to hit its next inflection point. It will have to move with massive velocity right then if the $&P is to be saved. Check it......
Mrtrader, I've had a great day and an amazing month. Thanks for asking.
Edit: P.S. The trade idea is for a weekly trader who thinks a huge move is coming. I trade on hourly, daily, and weekly levels, depending on the currency sway carry decouples on different time frames. Push CTRL F: juwes : and you will see I am enjoying another nice day short from 1043 (stop and reverse never came close to happening)
P.P.S Check out the VIX, down today as if no one can imagine a world where the algos don't melt up every other day. VIX should be rising violently when we get nearer a bottom.
@juwes : Thanks for your answer. Appreciated.
And another great day. Just covered for a 16 handle gain. If anyone took my trade idea they are short from 1039 having been churned only once for a net gain of +12 handles.
Thanks skynet!
Sometimes the obvious answer is the answer. Even GS can spin this crappy market as anything but crappy.
I guess 1084 is no longer a topic today.
ruh roh
Did BB just fall asleep at his desk, or is he trying to lure in more shorts before squeezing them til their heads pop off?
looks like even the T-minus 15 minute melt-up won't save us now.
Oh look - canned goods are on sale!
Shit! I have been looking at this article from the wrong direction. They want the market to close below 1084 today so people start piling on shorts this afternoon and tomorrow morning, only to be squeezed out on Friday.
Certainly a lot of details like that to take into consideration. Thanks windows vps | cheap vps | cheap hosting | forex vps