Trading The Technicals: "Beware The Bear Trap"

Tyler Durden's picture

While fundamentals remain, for now, as useful as useful as having the only phone in the world; we demur to BofAML's technical analysis team for their short-term trading focus across various asset classes. In light of the only thing that matters, the Fed balance sheet (as Hugh Hendry so eloquently explained), BAML warns "beware the bear trap" in stocks...


In FX markets,

CHF at risk of a bearish reversal. $/¥ choppy, but bullish


Across many pairs the CHF has reached significant resistance and is now at risk of a bearish reversal. €/CHF is particularly worthy of note as it has completed a Bullish Reversal candle from retracement and pivot support. With momentum rolling bullish from its lowest levels since Apr'12, €/CHF could squeeze back towards 1.2346. $/CHF is in a similar situation and could squeeze back towards 0.9240, potentially 0.9472.



Turning to $/¥; since the 101.62 lows, price action has turned very choppy and overlapping, a condition likely to persist for the next week or so.






101.62 should mark the low end of price action AND $/¥ CAN'T TRADE BELOW 101.14/100.62.

Bonds remain a sell...

US 5yr yields stall at support, but stay bearish.


We remain bearish Treasuries. 10yr ylds are on track for 2.950%/2.992%/3.007% (swing targets and multi-month range high), while we remain short TYH4 (Dec-05 LTA : Sell TYH4. Treasuries are in Trouble). The completed TYH4 Head & Shoulders Top targets 122-06+. Meanwhile, 5yr yields have held the initial test of 1.556%/1.551% support (50% retrace of the Sep/Oct yield decline and mid-Sep pivot), but this should be only a temporary stopping point before the bear trend resumes for 1.670%/1.659%.



Back below 1.488% (equivalent to 2.839% in 10s and 124-17+ in TYH4) warns of stalling, while below 1.445%/1.443% (2.790% in 10yr yields and 124-30 in TYH4) negates the bearish potential. We recommend adjusting TYH4 stops to 125-02 from 125-08.

But "beware the bear trap" in stocks...

Conditions align for an ESZ3 Bear Trap  

Finally we reiterate our BEAR TRAP VIEW on ESZ3. While 1773.25 support remains pivotal, BEWARE A BEAR TRAP!!. Intra-day momentum is at levels that have coincided with important lows AND seasonals into year end and the week of triple Witching are VERY BULLISH.

Indeed, the S&P500 has finished higher in 22 of the past 28 years the week of December Triple Witching (Next week). Above 1784.50 confirms a base and turn higher.

And Buy WTI...

Time to buy WTI


The CLM4 impulsive advance from 92.21(Nov-267 low) says the near-term and, POTENTIALLY, medium-term trend has turned bullish for WTI. Targets are seen to the Aug highs at 100.65, but likely beyond towards 105. Indeed, there is potential for a resumption of the long term bull trend towards 122/123 (basis continuation charts). We are wrong on this view below the Nov-27 low at 92.21 (CLM4).



BUY CLM4 at 95.00, add at 94.00, risking 92.20, targeting 100.65 & beyond.  

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Max Damage's picture

In other words MOAR

Stoploss's picture

Bigtime bear trap.

They must be pissed about something, to call it out.

Surprising from BAML.

johngaltfla's picture

No, this is an atypical pattern for a final push in a bull cycle within a cyclical greater bear market. The same thing happened after the 1929-1962 cycle and 1973-1982 bears. We'll see a surge based on the bullshit "Santa Clause Rally" which CNBS and FBSN will promote the hell out of. In reality, it is a basic repositioning against major short positions by the big boys which will kick into profitability in early 2014.


Translation: The Mother Fucker of all corrections then crashes is on the horizon the minute Janet Yellen strips naked and yells TAPER in a crowded movie theater.

max2205's picture

LOL...Now ZH is trading technicals....what a joke

johngaltfla's picture

Max, this isn't technicals. It's history. Every pattern, no matter the technicals, eventually repeats due to ineptness and human behavior. Am I advocating Elliot Wave? Hell no, that's Tard 101. But if you look at the EXTREME length of time since the last meaningful 20-25% correction (no well over 600 days) the markets eventually will blitz through the Fed's firewalls and human nature will cause everyone to realize things like "SHIT! Twiitter hasn't made a dime! It's just like!!!" and the rampage will begin.

Of course if you're an Obama supporter, you may ignore this bit of sage advice, listen to Pelosi, embrace the suck, be it another male, dog, mule, or whatever turns you on.

Al Huxley's picture

Exactly - TWTR is the canary in the coalmine.  It's not being controlled in any meaningful way - fucking vertical, 8 straight days, in the face of selling on the major indexes.  Who's buying TWTR now?  Last of the retail crowd, come on in, here's your chance to score big. Not a fucking chance - the reversal that TWTR's setting up for (probably right after FB is added to the S&P 500 next Friday) will be the turn for the whole fucking market.

JustObserving's picture
‘Lie of the Year’ prize goes to Obama

It’s probably not the kind of recognition he wanted to receive, but President Barack Obama has been awarded PolitiFact’s “Lie of the Year” for 2013.

The infamous prize, handed out annually by the fact-checking website PolitiFact, was given to Obama because of his statements claiming that Americans would be able to keep their health insurance under the Affordable Care Act if they liked their plan.

If you like your health care plan, you can keep it, Obama said on numerous occasions over the years. Soon after cancellation notices began arriving in American mailboxes this fall – more than four million people have seen their coverage cancelled at this point, largely due to the fact that their coverage did not reach the ACA’s minimum requirements – Obama denied that such a promise was made, saying he actually meant that plans could be kept only if they hadn’t changed since the health care law was passed.

Dr. Engali's picture

He's told do man whoppersy, I'm surprised they could narrow it down to just one.

GeezerGeek's picture

I'm surprised they narrowed it down to a single year. He deserves to be deemed liar of the decade, liar of the century and even liar of the millenium. 

Haager's picture

How's BofAMLs $eurusd short going? They've called it a short at 1.362 with target of 1.27 and SL 1.383.

Somehow I believe it will hit SL before it really heads down.

$usdjpy looks like a no-brainer - but it will surely ask for some patience if entered now. Nice that they call a 'bear trap' these days, I am waiting for 2 to come the following days - and I'm not a single bit bullish pre FOMC on stocks. Gold is a different issue, albeit there's possibly another low in the range of 1210-1220 before it looks to 1280.

101 years and counting's picture

so, short stocks and oil is finally a safe play.

TheRideNeverEnds's picture

A safer trade may be short VIX short gold in a ratio of 2:1 against long twitter. 

Al Huxley's picture

Short the miners is even better than short gold.  But when TWTR falls its going to be fast and furious.

Yen Cross's picture

    Is "fortune telling" part of the curriculum at ivy league business skools?

  I'm looking at this esz3 (SPX futures) chart, and LMFAO!  Doc E. mentioned the 1750 area 2 full days ago as a pivot!

doggis's picture

BofA/ML has batting average of thomas stolper from GS.  

Each time they indicate lower - the market goes higher. When they indicate higher - the market goes lower.

just search all articles for bofaml on zerohedge. do your own homework.


If they are indicating "BEAR TRAP" on the ES - then watch out below you, the floor will collapse under the market.



Al Huxley's picture

I don't think TWTR's being driven up 5% / day as a favor to the retail ownership.  Fucking vertical over the past 8 days, in the face of the indexes rolling over at big-time long-term resistance.  Maybe I'm wrong and this is how TPTB are planning to compensate the masses for their lost income, but I've seen lots of charts like that in the past, and the one thing they NEVER do is keep going straight up.

Bear's picture

TWTR at $60 ... I wish I had any money left.

BullyBearish's picture

Over and over and over again when the buying slows, the "market" is sold off, suckering the long-suffering BEARS who, inadvertantly, provide the fuel via well-engineered short squeezes to propel the market up yet another leg and lament, "I can't believe I fell for that again!"


Same as it ever was until it's not...but probably NOT this time

Yen Cross's picture

  The Fed. announcement next week will be status quo, with a healthy dose of Bald Eagle.

Sam Clemons's picture

I like how they always have to use figurative language.. "bear trap" oooh so scary.  Couldn't it just be called a rally?  There aren't many bears left, these guys are high.

Oldballplayer's picture

But, as you clearly know, "Bear suits are funny.  Bears as well."

I Write Code's picture

"Conventional Wisdom" is supposed to be a mild rally through Xmas and a significant correction through Easter.  Therefore I presume that is exactly what will not happen.