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Guest Post: Is The Third Quarter High In Place?
There is A Real Risk the Third Quarter High is in Place for the SP500 with all trade below 1039-1041, Submitted by John Bougearel of Structural Logic
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does anyone else think this just blows of to s&p 1150-1200 thus creating a GINORMOGUNDOUS head and shoulders pattern on a ten year chart with a neckline in the 800ish range?
If that is what is happening....then uh oh
All trade below 1,041 and we're at 1,043 as I type this!? No! Buzz! Wrong-O John Booger of Stupid Logic.
i cannot access the article...can someone paste the text here instead of the imbedded attachment?
Attachment added
thanks TD
Sigh. Yet another "what the market should be doing, but isn't" article. OK, we'll see if this prognostication ensues.
I am not a trader, and don't track the volumes of data, so that is one reason this site is so good. It allows synopses for folks such as us.
Question- we're post-Labor day, are the volumes and trading patterns similar to the summer, with low volume, momo gunning, etc. or is there any sign of more volume, less possible "shenanigans", or what?
volume gets even worse everyday post Labor Day.
SPY volume merely 71 million as of the moment.
It might make sense to play teh market if it wasn't rigged in favor of teh banks.
Tohse banks are teh real problme!
what a bunch of kielbasa! long article with many lines and points! laughable! Just have couple of averages and couple of horizontal lines connecting prev highs/lows. You will come to the same conclusion without looking as smart as the author.
A colleague of ours, Jerry Favors, who passed away back in early 2006, was a superb technical analyst and specialist in various Gann, Gould, and Bradley formations. Jerry, like John Bougerel, always took special note of an important technical pattern called "Three Peaks and Domed House" which Mr. Bougeral again draws attention to ZH readers in this piece on Page 4. ZH readers may want to study it as our experience has been that it has a very high correlation to pending top formations. Good luck everyone...
"government-sponsored zombie"
Sounds redundant.
and so it is!
Gold is barely budging. I mean the Comex might as well be closed. We are again getting the bulls vs. bears stand-off that occurred at $950 where we were stuck for 5 straight weeks. Looks like the-powers-that-be have decided on a price range of $999.99-1000.00 for Gold for the rest of eternity.
data starts flowing again tomorrow. Something better/worse than expected likely to come out of that.
No way possible that retail can be better than expected.
Seeing Christmas junk out in stores already. Halloween being skipped for xmas liquidation I think.
Retail sales can definitely be better than expected. And if it is, the indexes should continue marching higher. Remember, expectations are low, and nobody is really expecting the consumer to rebound quickly. But in times past, the consumer has proven astoundingly resilient...gov't stimulus or not.
As an aside, I went to Best Buy yesterday to pickup a few things...they were cleaned out of a lot of stuff...laptops & LCD TV's. I live in northern NJ right outside NYC. I've never seen the Best Buy inventory so empty.
retail sales is expected to come in +2.0% that would be higher than the +1.6% print in May 07 The last time RS had a print above +2.0% was Jan 2006, almost 4 yrs ago.
That retail sales for August will be good has been well telegraphed. So, this has been a buy the rumor sell the news rally.
Could this be one of the reasons why " inventory is so empty" ?
http://www.dailymail.co.uk/home/moslive/article-1212013/Revealed-The-gho...
could this be the reason why " inventory so empty "?
http://www.dailymail.co.uk/home/moslive/article-1212013/Revealed-The-gho...
Nice article. My problem is that I watch the price action for the trend. Using a monthly TLB currently has the S&P trending up with a range of 1044.00-825.88. So it would take a 20.9% correction to reverse the trend. Monthly TLB chart of S&P: http://www.charthub.com/images/2009/09/10/SP500.png
I pay attention to the weekly & daily TLB's to see if the short term trends are in jeopardy. The weekly trend will reverse with a close below 1010.48. Another lower weekly close would indicate that a trend may develop.
As a side note the monthly TLB turned down in Jan 08, started trending down in Mar 08 and didn't reverse the trend until Jun 09. My .02
AmenRa
What you are describing are lagging indicators. The analysis above gets at leading indicators, puts you closer to the market, more in touch with sentiment, and eminently more useful when one gets a sense that a trend is likely to reverse.
Agree! It seems to me that this rally still has a way to go.
Good analysis but need to remember that this is not a normal functioning auction market,
Be wary of classic technical price action analysis
by going short you'll be fighting the Fed and now the Banking establishment .... these guys are fighting a life and death debt battle and they hold the keys to the castle. Don't underestimate what kind of BS they can invent and spin
CHICKENS TO THE RESCUE!!!
Fletch,
Funny you should mention the mkt axiom "don't fight the Fed"
I first wrote about not fighting the fed back in a 2001 article for futures magazine called "Don't Fight the Fed, You Just Might Win." Should be online somewhere.
We don't want to fight them per se, but we do want to hedge ourselves against them when we understand their policies are not going to work. The Fed oftentimes loses control of the economy and the markets. It lost control in 1929 and it took a WW to regain control,
They lost control in the 1970's when the Fed was a political puppet and inflation raged into double digits. The Feds under Burn's and Miller in the 1970s was a decade of shame for the Fed, for which they deservedely should hang their heads in a moment of silence under the Bernanke Fed.
We are not quite sure of what the final end result of what the Greenspan-Bernanke Fed will look like by the end of this decade, but we can certainly say this has not been a glorious decade for the central bank.
Investors would have done well to fade Fed policies periodically this decade as well as back in the 30s and 70s.
The stock market freaked out on Jan 3 2001 when the Fed did a 75 bps surprise rate cut. They asked themselves what was that about? What did they know the market didn't know. They freaked out further on Jan 31 2001 when the Fed did not feed the mkt another rate cut. The Fed was losing control, and couldn't do a thing about it, the stock market tanked in kind.
Their monetary policies, which kicked off a series of rate cuts to zero in Sept 2007 did not work either. The stock market did not bottom until three months after the Fed cut rates to zero in Dec 08.
But I digress,
the "don't fight the fed" axiom will play almost no part of the drama to unfold over the next month. But yes, fiscal and monetary stimulus beyond mid-October should be sufficiently strong to reignite animal spirits into 2010. Not in the near term however.
John, solid analysis...thanks for sharing here. But how do you position now seeing as the market is within inches of taking out Friday's highs? It seems to me retail sales tomorrow is just the kind of data point that (if positive) could really blow this market open to the upside.
Each person's style of positioning long or short is unique. Many choose options. Options give me the heebie-jeebies.
For futures traders, the optimum trade would be to identify short setups above Friday's high. I generally, as a futures trader, do not like to position short inside a range. Inside a range, I definitely like to trend follow when and where possible.
When sniffing out the end of a trend, I like to identify support and resistance above the range, not inside the range. Today's article was an internal debate, I wrestled with myself whether or not the market would wait for tomorrow or not before turning. If it did not wait, I expected the market would find resistance at the 1039-1041 zone. It did find resistance at 1040 this morning. It did not this afternoon as the reader above so kindly pointed out.
There are some attibutes that are somewhat unique to the SP500 and treasury market that I look for to confirm when a trend is potentially ending. If you are interested in knowing more about these attributes shoot me an email.
For this particular trade I have pre-identified 1048-1052 on the Dec contract "above the 1034-1039 range" if we got a high close like we did today.
The difficulty with 1048-1052 resistance zone on the retail sales report is as you said, tomorrows data point has high potential to move the market to the upside. Typically, market moving data points tend to drive the SP500 roughly 15 to 20 points higher from where it sits at the time of the announcements. So, if the SP500 is unchanged at 1043 when the number comes out, it could explode to 1058-1062. One has to leave room for a spike in ones chosen risk management strategies.
But here is the thing about my report. A sustained blow-off to the upside is an extremely low probability event. I detailed why that is at so in the report. The market has been discounting tomorrow's expected data point all month long, so, with today's high close above last weeks highs, it is quite easy to anticipate that no matter what tomorrows data point brings to the market, a lower close should not surprise at all.
Each person's style of positioning long or short is unique. Many choose options. Options give me the heebie-jeebies.
For futures traders, the optimum trade would be to identify short setups above Friday's high. I generally, as a futures trader, do not like to position short inside a range. Inside a range, I definitely like to trend follow when and where possible.
When sniffing out the end of a trend, I like to identify support and resistance above the range, not inside the range. Today's article was an internal debate, I wrestled with myself whether or not the market would wait for tomorrow or not before turning. If it did not wait, I expected the market would find resistance at the 1039-1041 zone. It did find resistance at 1040 this morning. It did not this afternoon as the reader above so kindly pointed out.
There are some attibutes that are somewhat unique to the SP500 and treasury market that I look for to confirm when a trend is potentially ending. If you are interested in knowing more about these attributes shoot me an email.
For this particular trade I have pre-identified 1048-1052 on the Dec contract "above the 1034-1039 range" if we got a high close like we did today.
The difficulty with 1048-1052 resistance zone on the retail sales report is as you said, tomorrows data point has high potential to move the market to the upside. Typically, market moving data points tend to drive the SP500 roughly 15 to 20 points higher from where it sits at the time of the announcements. So, if the SP500 is unchanged at 1043 when the number comes out, it could explode to 1058-1062. One has to leave room for a spike in ones chosen risk management strategies.
But here is the thing about my report. A sustained blow-off to the upside is an extremely low probability event. I detailed why that is at so in the report. The market has been discounting tomorrow's expected data point all month long, so, with today's high close above last weeks highs, it is quite easy to anticipate that no matter what tomorrows data point brings to the market, a lower close should not surprise at all.
sorry bout the double anon post above
i understand your point and thesis... and secretly hope you are right that this madness will end
my point was just that with the FED's new way of doing things, the FED plays a larger role than just setting the cost of money and trying to steer the markets;
they just might BE the market these days, due to reserve lending going straight into any market they choose; and the volume drying up just makes it easier for them
so the Fed reacting to itself is hard to predict; or maybe not
one can look at the Fed as just another trader. Essentially that is all they are. They get it right sometimes and sometimes they don't.
The Fed has alway had more tools than just short term rates to play with. Open mkt ops have long been the hidden hand that the public never sees. Now its the credit lending facilities.
There will come a time, down the road, which I hope to see published in the WSJ in the coming weeks, when the Fed will have to navigate an exit strategy without creating inflation or another recession. If and when they get that one wrong, the broad mkts will endure another huge drawdown. The timeline is pretty well spelled out to be sometime after the first half of 2010 at a minimum.
That is what I am watching mostly on the bigger picture stuff, what this report focuses on are the tailwinds which have been driving the stock market higher in recent months are climaxing this week. Metaphorically, the whole climax imagery is sexual, even the "dome."
Yes. It is unfortunate but the fed and GS are in charge and until this market actually goes down significantly we can only watch it go sideways or up.
"If your not short already, you'll risk missing the turn"
I stopped reading after that first sentence, good for a chuckle.
at your service. I was quoting a client, who had a point to make to me.
the pavlovian training to buy on the dip is complete, now it is time to sell IMO
doomed house, is that jay leno?
ok for peak @1055, but for some other reasons
"the pavlovian training to buy on the dip is complete, now it is time to sell IMO" and other counter-trend/contraian plays would normally work in a "normal" market - but this ain't normal when banks have unlimted funds w/o any risk and can literally throw billions of dollars at the market each and every day. They control it, that simple. If and until the Fed cuts their free money, I ain't betting for much on the downside, small pull backs at best.
The author of this note lays stress on an 18 month MA as a major resistance to any further move beyond that for the current move. He also lays a lot of stress on the 50% retrace level as a major hindrance to any continuation of this upmove.
The MAs' have lag built into them. Any projection based on them has to be taken with a grain of salt, as with any other projection.
If one were to look at lag reduced ( so caled Zero Lag ) MAs' the picture is decidedly different.Matter of fact a 36 month ZLMA has been breached this month and the trend does not seem to be weakening.
Also the 50% retrace is not sacrosanct. Any chartist worth his salt would know if the momentum is strong enough supports/resistances lose all meaning till the trend falters.
The title of the article itself shows an amateurish approach to the business of trading. Real money is not made catching turns. Real money is made by walking into a trend on a pull back and riding the trend till money management rules kick in and take us out of the trade which all the readers must be aware of.
the author also lays emphasis on the tailwinds driving this market higher are expected to climax this week.
And you are 100% correct the 50% retrace is hardly sancrosanct. But when nearing a 50% retrace, one is mindful of its presence. Another more intriguing observation is the boomerang effect of this six-month long 58% bear market rally mirroring the 58% bear market decline and showing a strong correlation seven-month long 55% bear mkt rally in 1975.
I disagree wholeheartedly that one can only make money with trend-following systems. There are plenty of opportunities to be had with countertrend trading systems with simple money management rules to take you out of the trade when wrong.
One problem: this market has gone topless and she likes it. Once you go Barack, you don't go back.
"gone topless" I like that one.
John Bougerel
They are more leading than lagging. Throughout most of 2008 the market was in denial. Yet the monthly TLB had turned down in Jan 08, was confirmed and began trending a few months later. You can use the weekly or daily TLB price action for shorter term sentiment. The price action happens before the sentiment changes. But to each his own.
Amen,
I confess, I know nothing about "TLB" indicators. You'd have to define them for me to discuss them intelligibly with you. There are a gazillion approaches to trading, investing and understanding market behavior and sentiment.
After 15 years of studying markets and their behavior every single day of my life, I have developed a very simple approach to trading and reading mkt behavior. It keeps me out of the market when I don't need to be exposed to risks, and it gets me into trend following or countrend trade setups quite readily enough when I do want to gain a little risk exposure.
John Bougerel
The indicator is discussed in Steve Nison's book Beyond Candlesticks (ch 6). Here's another explanation of TLB: http://www.surinotes.com/Tradestation/articles/3lpb.pdf
It's used to determine the underlying trend and when the trend reverses. The reversal may be late sometimes but a reversal candle formation may indicate that it's coming. It can be used on any time frame as a daily reversal can lead to a weekly reversal which could then become a monthly reversal.
* I still use EMA's, fibonacci, MACD, Williams %R as additional indicators also.
I looked up TLB on MetaStock chart. Theere is no reversal yet.
It is a good indicator, not a lag one at least. Thank you Sir.
Amen
Thanks,I checked it out this morning.
The TLB study is an excellent one to be applied to all time frames. Btw, I use less technical studies and rely more heavily on reading shifting market sentiment and market behavior to key economic data points or news. This is called behavior modeling and these models/studies provide excellent pattern recognition. These patterns themselves are leading indicators that guide me through the jungle of price movement.
hey john ,
can i know your website add or email od to contact u in person,
thanks
my contact info is
jb2@structurallogic.com
My Website address: http://financialfuturesanalysis.com/
My Blog: http://www.financialfuturesandequitymarketanalysis.com/
John, it looks like your scenario did not work out as planned.