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Was 1080 on the S&P a Multi-Year High?
It looks like 1080 on the S&P is an
intermediate-term high, with the potential to become a major
multi-month—dare I say year—high. Sell the pigs that flew the
highest in this rally now.
To sell the rally you must have tried
to buy it first—the other option is a perma-bear situation that is not
advisable at any point. Neither is a perma-bull.
I have tried to buy it, therefore, I
sold it a couple of days before we hit 1080. How, it's not
important. The more important takeaway here from an intermediate-term
perspective is not to short bonds, to look to sell equity rallies, and to look
for bond spreads to widen for the inventory rebound that the economy
is experiencing is running out of steam. Complicated Numerous strategies that fit those themes can be easily devised.
The next leg down could
retest or take out the low on the S&P 500. Book value on the
index is in the 500s and we have seen it trade below book value
before. Whether that happens in 2010 or much later, I cannot see that
far...
Here are some charts that are beginning to show that major turning
point. Markets can deviate substantially from the underlying
fundamental picture, but they always gravitate back to it.
Even though we did not take out 29, it looks like a major turn has begun from a period of falling volatility to a period of rising volatility. This is bearish for stocks, bullish for the dollar, and bullish for bonds...
Resistance is not a number, but an area... the low 40s on the QQQQ are a good example. The former leadearhsip sector should see a sharp correction here, if not something bigger. Trade accordingly...
We just filled the LEH gap at 108 on the SPY, there you have your 1080 high in the S&P 500. The next gap to fill is near 900 (if you believe in that sort of thing)... Now we are falling out of a bearish wedge (volume not included, but spiking on the selloff). Hmmmm...
ro
We are due for a retest of the highs in bond prices/lows in yields... Don't short bonds if you don't want to lose money. Retests either fail or hold... No one expects the 10-year to trade under 2%, although I have maintained consistently in these pages that we will see it under 3%. But ask the Japanese how the 10-year JGB yield went to 39 basis points, even though no one expected it when it was where the 10-year is today. Just an example, not a prediction...
It is true that gold works both in times of inflation as well as deflation, but that does not mean it cannot decline a lot in a long-term bull market. The setup above implies another dollar rally, which is not bullion bullish. Last year both the dollar and gold were up, while gold stocks got killed... While I am not looking for a repeat of the 2008 drama, that does not mean a large selloff of such magnitude cannot happen... any trade under 920 on bullion implies an 8 handle. Any trade under 800 is extremely bearish and gives you a target of 680. Any break of 680, gives you a target of 500...
Currently, we have silver that is beginnig to act feeble—always a leading indicator as it is a smaller market. I would view a break of silver below 13 as extremely bearish... Just the heads up.
The 8 handle on bullion is a prediction; the rest of the numbers are not. I am pointing them out as I know how the ZH crowd is leaning and I know that gold bugs are never prepared for such outliers other than to say that bullion is manipulated, it's irrational, etc.
If you can't stand the heat, get out of the kitchen. The game may be rigged, but it cannot remain rigged forever (at least I hope not). But you have to be prepared. I don't think the gold bugs are...
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I am not a technician though I read some of the tech blogs such as
Slope
http://slopeofhope.com/2009/10/one-last-gasp.html
Evil
http://evilspeculator.com/
and Carl Futia
http://carlfutia.blogspot.com/
Futia is definitely short term bullish and while a bear, Knight (Slope) expects a short term rally perhaps to new highs before we go off a cliff. The current post at evil also suggests new highs in the short term.
87698...food for thought....you may want to read some blogs by the ellioticians....daneric's is listed on the zh blogroll and look to kenny's technical analysis blog as well. there seems to be growing confidence that p3 has begun and if not, it is close. i'm not a devotee of any particular school but follow and incorporate into my thinking standard ta, elliott wave, fundamentals, and, perhaps most importantly in this market, trying to figure out what the politico establishment is likely to do.
Then, I have my pet monkey throw a dart and that's where my dough goes.
I believe P2 is over...(I just feel a sense "things have changed", could it be QE is really over?)... I'm in Daneric's camp we should be in wave one down, I'm looking for a small bounce next week (4 of 1 of 3 of C... I think that's the count), and then the sell-off continues mid-late next week.
AAPL, will it stay strong into earnings?
d.o.d....i don't follow aapl close or most of the techs (i'm a spx and financial sector guy). amazon sure looks like a potential short to me. i'm in the p3 camp as well, though i don't closely follow the day to day minors, minuettes, etc
ROTFLMFAO! F--king hilarious.
I follow both sides of the tech blogs as I am totally in cash. Would you agree that bears are so scared of being flushed again by the PPT that each time they have a small profit lately, they immediately close their trades and hope for the PPT to pump it higher so the bears can get a better entry price? If I were part of the PPT and trying to catch the rats, what would be my strategy when the rats refuse to bite after having learnt their lessons too well? I would set up a really big bait right? The PPT machine is a live vampire squid, it understands and react to its enemies. It might not ultimately win, but it will surely try a new trick each time. So the rats be prepared for the unexpected the coming weeks :)
I agree with your analysis and posted something similar yesterday. The gap has filled and we found resistance at the 50% fib retracement.
http://scottsinvestments.blogspot.com/2009/10/what-im-watching-on-spy.html
Andy,
SPX, if you chart it on a non-log scale, has not broken its March-July trendline yet. Nasdaq is still hanging above its bear trendline connecting the tops since Oct 2007. SPX also has not touched the top of its big bear channel from oct 07. In fact it is lining up well to touch its 50% retracement from the high and the top pf the channel sometime soon.
Until these things change, as well as rates and oil beginning to rise uncontrollably, I am reluctant to believe in any big downward action.
Just like the 2003 -2007 correction, this one may last longer than expected and may even establish new highs. One measurement of stock market value that cannot be gamed, however, is the S&P/Gold ratio, which is destined to go down to the hundredths IMO.
Check out this link: http://www.zerohedge.com/article/key-price-levels-mission-accomplished
Andy....from my seat, this is your best article yet (and, you didn't even have pics, think about that!) and this overall view is most welcome.
quick note....there is a nice little gap at spx 1016-1018
it was on jesse's amer. cafe... here it is (not a great chart)
http://1.bp.blogspot.com/_H2DePAZe2gA/So7JoK3UnzI/AAAAAAAAJnA/m7k5mgl18wA/s1600-h/sphourly2.PNG
Deadhead, you made an important point.
This link leads to some pics:
http://www.ad-hoc-news.de/aktfotografie-im-studio-von-fotograf-omori--/d...
pretty european women! probably a good idea to let others know that the pics would be considered NSFW.
Ok,
this is not an arts blog ;-)
Andy,
TumblingDice is right, we have not broken the trendline on the SPX on a log-scale. As long as they keep buying the dips, we are going to head higher. That employment report was atrocious, coming in well below my expectations, but they bought the dip hard. Also, from Bloomberg, Leuthold Sees S&P 500 Rising to 1,350 on ‘Psychology. Must read...here is an excerpt:
I could forsee a senario where Q3 earnings are good, we rip to new highs, only to fall again once we see Oct ISM/jobs indicating that Sept was not an aboration. Let's not forget that July/Aug were good months, and that could be reflected in Q3 earnings assuming expectations are not too high already.
That's another Wall street myth that bears little resemblance to the fact that the market is usually late in selling off & early in defining a bottom of the economy. Case in point, the rebound in 2002 followed by another dip down in 2003. Myths are not an investing strategy...
...but they bought the dip hard....
Hard?? I'm not convinced. I think we have a tried and true ages old distribution going on here......then again, these differences are what makes markets.
edit....daily chart of spx on friday. spike at 10 obviously, then the distribution layoff.
http://data.cnbc.com/quotes/.SPX/tab/2
Obama has some a need to keep this pumped, I don't know how they will do it but I'm pretty sure they will, what's gone on up to this point is mind boggling and I expect more. I suspect there are national security waivers floating around, there is no other rationale for the manipulations taking place in broad daylight. The Dow would be at 4500 if the gangster-gamers weren't involved.
Love your stuff Andy, I just can't get past these imaginary White House conversations I keep hearing in my head. I wish I was wrong. The damage they are doing is beyond belief.
the obamas are about to divert approx 100 billion of the stimulus money that has not been spent/allocated to unemployment extensions and the cobra 65% subsidy.
Don't forget Timmay's 800 bil. slush fund and Kamikaze Ben saying things like "no limit". Holding a market up is not the issue, it's the integrity of the market that is at stake. No one plays three-card monty for long.
There's no point in showing a chart of GLD if you're not going to follow the technicals and just say "it's rigged". Well that may be true, who knows, but the chart says IF it closes above 100 for a few days -- buy it, and have a 97 stop.
The Spooks has held the 50-day so far. Past history has shown that the GS Prop Desk Boyz like to push it below the 50-day, hold it there for 3 days, then McQueen it back up just to destroy a few bears.
They did this repeatedly during the 2003-2004 bull run.
Anyway, I think there is going to be a bounce coming within days.
The McClellan Oscillator is now the most oversold since March.
There has yet to be any negative divergences or lower highs on the Summation Index.
The 50-day is now over the 200-day on all major indexes and major sectors, the last one to cross up was the XLE.
COP, one of the larger components of XLE, looks like its ready to move...
Huge accumulation the last two days, coming up off a monstrous base.
Good luck bears.....
weekend journal had article about conoco warning on earnings....
Nice analysis - thank you. I'm not sure that technical analysis, Elliott Waves, or much else will help for the next downturn. Instead, I think we get the downturn when the market runs out of weak short sellers to crush. I reach this conclusion because I fervently believe that this whole rally has been nothing more than a concerted effort to crush short sellers and force them to cover positions. Now that shorts are becoming exhausted and more careful, I think we're close to a turning point.
But, if shorts get a little too careless in here, I think we get one more major upmove. Ultimately, I continue to expect the market to fall much lower than the March levels because I continue to believe that fundamentals always win out over manipulation. And since the Street has destroyed the short seller, there won't be any natural buyers to put a floor under this mess once it gets going.
SPY seemed really top heavy around 108
Early shorts always seem to get burned.
Trust, me, I've been smoked time and time again....LOL
The 50% retrace is 1120 on the SPX, could be another blast up to that number, which could result in a higher high with huge negative divergences.
That seems to be the better time to throw out a huge short line.
My rule is I never short a market down 4 days in a row. Never.
"Complicated strategies that fit those themes can be easily devised."
That's a bit of an oxymoron isn't it?
Just messin' witcha man... I'm no grammar nazi, the sentance just made me laugh that's all....
=]
Here's what I'm talking about....
I'm keying in on the fact that the Nazcrack has broken down below it's march low trend line. The question in my mind is will confirm or recapture, if it recaptures, I think we very easily could go test the top trendline but new highs would imply AAPL goes above 200...
http://www.freestockcharts.com?emailChartID=2b227ce8-7a0d-4e26-9b15-3e3b...
as of now my target for nasdaq is 1960, but that is pending break down confirmation...
I aggree andy, except that, as of now, I'm not 100% convinced that Uncle Ben and Obamaman won't whip up some 1 minute green shoots and rice with a little QE to wash it down. Would a war with Iran be bullish or bearish?
I took the chart one step further; for the Elliot Wave count to be correct [4 of 1 of 3 of C] Nazcrack cannot tick one cent above 2085.34 on the next leg up (the red horizontal line in the chart).
So I expect a back test to the lower wedge trendline; we'll see what happens from there...
http://www.freestockcharts.com?emailChartID=32558da0-3640-41ff-a01d-d52f...
Nothing Andy. They didn't think it would go so far. Now they can't believe it might have ended. The whole world turned bullish last month and any technician worth his salt knows in a bear trend what that means.
Robot, that is a bad count. I never understand where they get some of these waves, as I would be leaning toward waiting for another myself. But the way the top ended, I can buy an ending diagonal 5th in that mess. For one, 4 will never touch the top of 2, which is what validates we are going down. I don't exactly like the date of the turn, as I am an anniversary guy and I like a day like 10/8, 9 or 10 for a top. But, the fashion in which the market has broken down has me convinced that if you gave me a nice up open, I would be short on it. It is time to fade everything.
I have been drumming deflation on the net for years. Looks like I have found some company. The economy isn't producing enough private credit and on top of that, the financial assets are going bad. Not only here, but around the world. There isn't money on the sidelines. Bulls would have you think people are alcoholic for stocks, keeping all their money for their next buying binge (drunk). All money on the sidelines represents is how much money is owed. Bulls would like you to think that the shrinking of the money on the sidelines went into the stock market. No it disappeared.
I was reading the report posted here last night. In it, the guy said that 10% of the delinquent mortgages in the US hadn't had a payment made in 2 years. The banks are dodging bullets, pretending their trash is good. You can bet they are doing their best to sell out. GS won't prop this thing if they are pretty well sold out. They were fighting for naked shorting the other day.
"For one, 4 will never touch the top of 2"
Never is a long time Anon, you are mostly right, but there is an exception, an expanding diagonal, which is what RT's chart is showing...
That is a bad count RT. Waves 4 isn't supposed to touch 2. The trend rolled over.
bearish stocks, bullish dollar, bullish vix ?
sounds like what i've been warning about for some time . . .
MORE:
www.zerohedge.com/forum/market-outlook-0
Look, we've got a good idea what 2010 earnings will
be under the best of scenarios....you've got to be
an idiot to pay 25X 2010 GAAP earnings here in a 1% real
growth world, let alone argue for a another leg up to 30X 2010 GAAP earnings. I spose one can imagine there is an unlimited supply of bigger fools. Who might they be? The funds are just about out of cash and the inflows are meager.
I seriously doubt any reversal in dollar. Planet is not stupid.
Good analysis Andy and Robo. Personally, I'm selling equity rips from here on out. We might get a new high (although unlikely in my view), but I think upside is very limited (1120-ish??) beyond that, so to me it doesn't matter. For those who follow EW, it seems most of the wave 2 retraces in this bear market have been strong, so that could be another good shorting point if you missed the 1080 rip.
I like to look at financials and tech, and both have faltered recently. When stocks like JPM and AMZN are pushing within shouting distance of their 2007 highs, you know the gig is up. The primary dealers and their surrogate henchmen can only prop things so long, and no one wants to be the last bag holder. As we know, it only takes one big counter party to send the dominoes falling.
The flip side is that some people don't mind paying historically high multiples on operating earnings, and continue to rely on muscle memory created by the biggest bubble in history. Well, folks, I have some news; that growth wasn't real, it was illusory. I suspect that prices will reflect that in the upcoming months and years.
Thanks, just thought I'd throw in a little odd fibonacci fact: SP 666 x 1.62 = 1079. As I noted at the time, I am not aware of any real reason for the outright number 666 to be used alone as the basis for a fib expansion target except that it's easy to model.
Andy ,
your calls are very early, that could be a thing making them controversial. There were a lot of minor breaks where shorts got killed. Robo pointed that out already.
To me it is too early to tell, all charts could show a trend change but no chart definitely does show the change. In the GLD chart it is possible to see an inverted head and shoulders pattern as well.
Jesse draw such a chart a while ago. http://1.bp.blogspot.com/_H2DePAZe2gA/SrEDSrCHAfI/AAAAAAAAJyY/Ym4p0M0KAP...
Moreover, on the weekly silver chart I can draw a rising trend line connecting the bottom points that is right now @ 14.50 ish, similar on a daily chart pointing to 15.50 ish.
Both are not penetrated to the downside, same for gold.
Moreover there was a big buyer in the market running up the price some 20$ before the PM fix. Friday spot gold fell before the London PM fix to 987ish and shot up to 1007ish, fix was 1003.5. My take on this type of action is that somebody with deep pockets buys metal, not paper.
London had in August average daily trading of 16.4 million oz. http://www.lbma.org.uk/stats/clearrct
Running the price up that much takes a bit of money. For the price of gold to correct meaningfully, this buying has to stop.
Are you prepared if the buying continues?
Up to now it is too early to tell the future direction.
Sounds like a sideways move would surprise everybody.
this is a great thread, enjoying the point of views. let me through this out there in terms of a short term, i.e. next week catalyst... what's the thinking on the massive (another record or close to it) confetti issuance going on next week? i think we got 138 billion (or trillion, kajillion, i'm losing count!).
thoughts?
wrong.
wrong.
wrong.
there is too much capital injected into the system and too much money sitting doing nothing in institutional funds that have a MANDATE to recover their losses from 2008 to cover liabilities on fixed income, insurance policies, pension plans, education funds, you name it, and too few places to invest other than real estate and stocks that represent as much of an upside as the us stock market.
the second the fed raises rates even a quarter point will signal the beginning of a tightening monetary policy and the bond market will reverse, sending trillions pouring into the stock market.
inflation from the increase in the money supply will create massive inflation of the us dollar, making the us stock markets ridiculously cheap.
why else would china be gobbling up every last usd on the cheap that they can?
just do the math and buy, buy, buy.
this market ain't going nowhere but straight up.
and even if it does crash 10-15% on a correction...
so what.
i'll be hedged with puts and double my money again on the bounce back up.
fear mongers. idiots.