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One More "The Status Quo Is Saved" Rally and Then...?
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
We can anticipate another rally once the political charade plays out, but what happens after that?
We can safely predict the inevitable budget-debt ceiling deal will spark yet another "the Status Quo is saved" rally in the stock market. But what happens after that?
Here is a three-year chart of the S&P 500 (SPX). The potential for another spike higher is reflected in the rising stochastics.
But overall, the chart is showing weakness and the potential for a serious decline. The negatives include:
1. A number of indicators (MACD and relative strength) are negatively divergent, i.e. they are declining as price moves higher
2. The 20-week moving average (MA) is stretched above the 50-week MA (i.e. the market has reached a point where the 20-week tends to converge with the 50-week MA)
3. The upper Bollinger band is flattening, showing loss of momentum.
Some similarities with 2011 are discernable. In 2011, a multi-month topping process traced out a classic head-and-shoulders pattern. This year, the chart has a similar structure of divergence, with a potential double top in play or even a spike higher to a nominal new high in the the 1750-1775 area--a target that some technical analysts have forecast for quite some time.
Regardless of whether the market double-tops or hits new nominal highs, the set-up for an extended decline is already in place technically. All this can change, of course; negative divergences can reverse, and a new uptrend can push indicators into bullish territory. But until that happens, the bearish indicators bear watching.
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Lots of chartologists are comparing 2013 to 1954, not 2011.
Did they have QE in 1954?
QE makes any chart comparisons, or any chart for that matter, worthless.
1954? Didn't the reserve currency status change in 1954? Oh wait...
Yes they had QE in 1954. In fact they've had QE since 1913. That's kinda why your dollar has lost more than 97% of its value since that year.
what is a 1954? or a chartologist?
can we export the charts to the world
as there charting capacity has been
destroyed along with 10's of millions
of there chartists?
Wouldn't 1976 be a better comparison in terms of monetary policy, budget situation, AND gold price trend?
Yeah, it's a bit humorous to realize just how completely QE has obliterated any technical or fundamental analysis of investments of any type. Like, funny in the way Clockwork Orange was funny, you laugh, but in that "this is absurd, and also creeping me the fuck out" way.
Yes, how true... I was just noticing Graham & Dodd's "Security Analysis" in my library this past weekend. I wondered outloud how hard and fast Grahamn must be spinning in his grave.... Oh, then simply laughing, I noticed Kaufman's "New Trading Systems and Mehtods"... then the CFA texts..... all meaningless dribble at this point. Howevef, I did take out my M4 this weekend as I needed some clarity.....
"M4".....
Colt, Bushmaster or BMW?
Bushmaster, but isn't it really the uppers that matter in terms of accuracy....
http://www.youtube.com/watch?v=y2QYJ64iVWE
Feelin' Good - Levon Helm
the rally in 2011 lasted about an hour on Aug 1.
Thats the problem... There's always a next time..
short the indexes at the end of the month!
OT, but the action in Gold is seriously brutal today, and with China on vacation all week, the manipulators have carte blanche in the overnight session to do as they will.
Government shuts down: Stocks up, gold monkeyhammered
Government reopens: Stocks way up, gold really monkeyhammered.
Hold tight on to those paper promises, and then...
http://www.youtube.com/watch?v=skv3wSIL5xI
Perspective: estimates are the economy is taking a $300 million hit daily from the shutdown and the FED is printing $85 billion/mo in perpetuity. Even then, the economy barely has it's nose above water. Obamacare is handing me the equivalent of a half million dollars in savings based on <1% interest. How long can this show go on?
When gov reopens market goes down a little
TSLA: how much further up? (It is ridiculous)
FB: how much further up? (It is completely obscene)
NFLX: how much further up? (I am rolling on the floor)
It seems AMZN laid the model for all of these nosebleed valuations--and the Heisenbernanker provided the meth to get them there.
seriously right!?. tsla is the biggest joke, negative cash flow and no earnings. at least FB and AMZN claim cash flow, nflx claims growth. tsla worth more than KIA??
once tsla breaks, should indicate whole mkt will get 'conservative'. tsla is the poster child for 'to the moon alice!' its tough to battle a billionaire shareholder though. puts at 160, sooo cheap....but keep expiring!
Even though I thought it would be the case (raw instincts) I don't really get why the market is reacting positive to this.
The one thing I see happening is that this is the first tremor of the end of regulations. Of all kinds. Corporate, accounting, environmental, the lot top to bottom.
The big dogs must be salivating at the prospects.
Market rallies are like hot-weather spells: There is always "one moar" to come.
It's almost 80 in Pittsburgh today. On October 1. It's going to be at or near 80 the rest of the week and into the weekend.
80 this month, and then winter will arrive with an absolute vengence and out of nowhere you'll have 20 feet of snow.
The next 200 years are going to be just peachy.
...the government will just have to threaten the status quo again. Lather, rinse, repeat.
The market cannot roll over. Grandma will get crushed.
\http://theautomaticearth.com/index.php?option=com_kunena&func=view&catid...
Your Pension Is Under Attack From All Sides. Here's 10.
Technicals mean absolutely nothing in a centrally planned fed controlled market.
"Some similarities with 2011 are discernable."
Some similartities with Nasdaq 1999 are discernable. The S&P has gone parabolic, due to eternal QE. How far will the S&P fall if the still ongoing financial fraud is backed out?
good question. law of diminishing returns should be evident on this one. $ of gdp per $ of new debt, same story. equities have shorter half lives though.
perhaps first a fall b/c it doesnt work anymore, then they actually taper since its not 'working' and it falls further.
What happens after that? Well, DOW 20,000 happens after that.
Basing trading decisions on technical analysis is like hanging oneself. Price action dictates SP is still strong. Markets are all about strength and weakness. I hate technical analysis.
the terms 'strenght' and weakness are technical terms. some might say price action is final arbiter. if youre not technical thenyoure fundamental, and those always work out, right?
RSI has an uptrend still valid. Should be buying the dips.