This page has been archived and commenting is disabled.

Citi Warns US Equities Are Facing A Pullback

Tyler Durden's picture




 

US equity indices are showing signs that a pullback may be developing, Citi's FX Technicals group notes, as the S&P 500 Index, the NASDAQ Composite Index and the Dow Industrials Index all posted bearish key days yesterday. A short-term correction on the order of 3%-6% may be developing on the back of this.

The Dow Transports Index, which has been the leading US equity Index this year, has already been showing signs of stress as well. The VIX Index is also turning higher from low levels and should head up towards at least 14% if not 18% if the pullback in equities materializes.

 

 

The US S&P 500 Index posted a bearish key day at the trend highs yesterday. (The last bearish key day at trend highs back in April was followed by a high to low move of -4.4%.) Daily momentum also turned lower and negative momentum divergence has developed (though not triple divergence).

A short-term pullback towards supports around 1920-1925, the converging channel bottom and recent low, appears likely at this point. A break below there then opens the way to good supports around 1900, which would result in a high to low correction of around 4%.

At this point our bias is that a short-term pullback to the above supports would not be out of line within the overall trend higher (markets don’t move in straight lines after all). However, a deeper correction, which is not yet our base case, could see a pullback towards the 1814-1820 area (converging April low and 200 day moving average, which has not been tested since 2012).

Other equity markets are also showing signs of stress.

 

Source: Citi

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 06/25/2014 - 20:52 | 4896020 SmilinJoeFizzion
SmilinJoeFizzion's picture

Yellen has the kavorka- I cant stop staring at this woman

Wed, 06/25/2014 - 22:14 | 4896340 flacon
flacon's picture

Perhpas Tuesday was the pullback... 

Wed, 06/25/2014 - 22:19 | 4896353 johngaltfla
johngaltfla's picture

If Citi said it, we'll see a 2000 SPX soon enough...

Thu, 06/26/2014 - 00:50 | 4896553 TheRideNeverEnds
TheRideNeverEnds's picture

Indeed, the bottom is in, 1950 is firm support.  Four whole down days this month is super generous of the market gods; you had your chance to buy the dip.  

 

Hell right now we are a solid ten points off of all time highs, its free money!  What more could you ask for??

Thu, 06/26/2014 - 01:10 | 4896750 Lost My Shorts
Lost My Shorts's picture

Yes, the simple fact that this article appeared on ZH, and that Citi called for a pullback, gives the best possible indication that the market will keep rising.  I am all in tomorrow.

Thu, 06/26/2014 - 05:13 | 4896955 RadioactiveRant
RadioactiveRant's picture

Wed, 06/25/2014 - 20:54 | 4896027 DirkDiggler11
DirkDiggler11's picture

The end of the article says everything you need to know :

Source : Citi

I think I will go long equities tomorrow ...

Wed, 06/25/2014 - 21:11 | 4896095 Groundhog Day
Groundhog Day's picture

We still have two trading days to hit 2000 spy. I have got my fingers crossed.

Wed, 06/25/2014 - 21:26 | 4896139 Squid Viscous
Squid Viscous's picture

three trading days til end of 2Q for the pig men, then they get paid...like all good little piggies

Wed, 06/25/2014 - 20:59 | 4896045 adr
adr's picture

These idiots claim the market needs a correction, that will probably last two days, so it is safe to move higher.

I never understood calling a short decline a correction. A correction means where something stood was flat out wrong. Once corrected there is a new correct value. Returning to the old value means the correction has been undone and the new value is once again wrong.

The S&P belongs below 1000 points. Based on any true value of the economy. There has been no real progress since 2009. Artificially pumping trillions of dollars doesn't solve the base problem of true production and utility being removed from the American system.

Thu, 06/26/2014 - 01:04 | 4896742 FreedomGuy
FreedomGuy's picture

So, I am heading out to work today listening for the traffic reports and I hear that GDP contracted about 3% for the last quarter. I say, "Holy shit, that is big!" to myself. I then wait to hear the early stock market numbers figuring that I will hear of some huge drops given the current lofty heights. What do I hear, "Market up about 28 points."

Then I do a second "Holy shit!". I feel like we are in economic Alice in Wonderland. There is now about zero connection between the market and any rational economic thinking. The market is tied to HFT programs and completely focused on government/Fed/Central bank actions...not actual economic data.

This is really insanity and the complete coopting of the economy by central planners and the willing participation of the financial sector. It is codependency at best between the two or you conspiracy types are right. I might have to apologize one day.

If the market did not "correct" today, exactly what would trigger a correction? It seems bad data is bullish (because of expected government intervention) and good data is even better. So, there is only one direction for the market by current logic, right?

Thu, 06/26/2014 - 04:29 | 4896935 Baby Eating Dingo22
Baby Eating Dingo22's picture

What is proven daily is that a correction will only be triggered when the central planners give the green light for a correction

But given that the entire global economy is being sustained on this paper wealth being created by the CBs, that may never happen. Even nuclear war would be bullish for the algos.

Fri, 06/27/2014 - 02:01 | 4901236 Nick Jihad
Nick Jihad's picture

Keep in mind, that US equities are still a refuge for many other parts of the world. Japan, China, many other precarious places - investors will be shifting money into US equities as a safe harbor.

Thu, 06/26/2014 - 04:24 | 4896932 Baby Eating Dingo22
Baby Eating Dingo22's picture

No, actually the SP belongs well below 1000. That number may have worked before we took on trlllions more of unservicable debt. Now that the USA has printed their way into bankruptcy 8 times over, shouldn't the SP be negative?

Oh, never mind. This is the serfs' problem. Corporations might threaten to take their minimum wage jobs overseas if any new tax burden were imposed upon them.

No wonder smart serfs are taking the underground railroad and renouncing citizenship

Wed, 06/25/2014 - 21:00 | 4896047 Squid Viscous
Squid Viscous's picture

any day now...

Wed, 06/25/2014 - 21:07 | 4896067 yogibear
yogibear's picture

Any year now.

Wed, 06/25/2014 - 21:04 | 4896061 buzzsaw99
buzzsaw99's picture

we had the only correction we're likely to get yesterday

Wed, 06/25/2014 - 21:08 | 4896073 yogibear
yogibear's picture

Didn't Citi  say this a few months back?

Wed, 06/25/2014 - 22:08 | 4896320 NoDebt
NoDebt's picture

They issue them at regular intervals just in case it actually happens they can say "we called it!"

They've correctly called 42 of the last 3 corrections.

Wed, 06/25/2014 - 21:21 | 4896127 undertowed
undertowed's picture

Another buy signal from citi? 

Wed, 06/25/2014 - 21:39 | 4896194 Never One Roach
Never One Roach's picture

bullish!

Wed, 06/25/2014 - 21:46 | 4896224 Hindenburg...Oh Man
Hindenburg...Oh Man's picture

Technical analysis in the current monetary environment is utter and complete bullshit. 

Wed, 06/25/2014 - 21:54 | 4896268 Joke Heros
Joke Heros's picture

I'll never forget back in 09ish when CNBC/Marketwatch dickweeds were saying stuff like "we need to test the lows before the market holds its gains!" while posting fancy charts like above. Well the fucking market didn't do shit like that, it just took off to the moon.

Then you got complete nuts like that Altucher guy on CNBC who claimed DJIA to 20,000 and SP to 2,000 back in '10 and '11. For cripes sakes, if this guy was right all along this planet deserves to have an asteroid smash us into oblivion, because god forbid it crashes into the Federal Reserve bank only and saves us all from their syphellitic monetary policies.

I seriously doubt these mongrels at Citi believe the tripe they feed to the public about market pull backs, when they know gawdamn well that stocks are going to be backstopped until the point that Fed policies drive the monetary system into the ground.

Wed, 06/25/2014 - 22:13 | 4896332 NoDebt
NoDebt's picture

God bless you for metioning James Altucher.  He was so crazy-bullish and crazy-right that reality almost surpassed him.

My favorite was when he was talking about demand for cars or gasoline or some such.  Somebody asked him if he even owned a car.  He said no, he didn't even have a drivers license!  And he was still right.  

I guess if you're right CNBC stops having you on after a while.  Of you're making so much bank you could care less about meaningless CNBC interviews.

You made my night.

Wed, 06/25/2014 - 22:28 | 4896396 disabledvet
disabledvet's picture

"Hayabusa 2."

Wed, 06/25/2014 - 22:01 | 4896297 bubblemania
bubblemania's picture

It's all Bullish!!!

Wed, 06/25/2014 - 22:07 | 4896319 nakki
nakki's picture

Can you imagine an Apocalyptic 7% correction that would take the S&P to 1810. My god it would surely be the end of civilization as we know it. "Oh the horror, the horror".

Wed, 06/25/2014 - 22:24 | 4896375 I Write Code
I Write Code's picture

Instability may come, but only as a melt-up.

Otherwise Yellen's army the Inflationary State of Insane Printaholics (ISIP) will attack and capture YOU!

Wed, 06/25/2014 - 22:25 | 4896382 disabledvet
disabledvet's picture

Historically speaking "pull backs in bull markets are very real affairs."

Still...the "Twin Towers" this time around are debt and inflation. That means two strikingly contradictory people: Karl Marx (means of production) and Josef Shumpeter ("gales of creative destruction.")

Both saw capitalism as inherently flawed..."prone to collapse."

But Shumpeter saw deflationary pressures as existing within the growth of industrialization and the opening of huge swaths of land.

Rather than seeing Peasants in need of "reforming" he saw a hardy and sturdy people who knew something of enormous value when it was just given to them (land) and something they absolutely would pay for if they could scrape together the money (a "John Deere tractor and plow.")

So absolutely "the dollar is worthless." Just not against the Yen...and right now that appears sufficient to provide market support...even as the economy contracts.

Still love treasuries...but I think if Warren Buffet et al are still capable of "swinging for the fences" now is a good time to at least lay down a bunt or two and try and take first.

Of course you can always borrow 250 bazillion and take Coke private too.

Maybe the could start making soda good for a change. (Real sugar, real root beer, real ginger ales). It's not like there is a shortage of water in the USA. "Vote for me under the I don't make shit and make you buy it like everyone else Platform!"

Wed, 06/25/2014 - 23:08 | 4896528 TabakLover
TabakLover's picture

Citi - "Correction".  Everyone - "Can't happen".  So, it happens.  

Thu, 06/26/2014 - 02:05 | 4896811 Bemused Observer
Bemused Observer's picture

So, are they gonna go up or down?

Thu, 06/26/2014 - 02:09 | 4896818 Bemused Observer
Bemused Observer's picture

Why don't they just eviscerate a sheep and read the portents in the entrails?

It would make for more interesting television.

Thu, 06/26/2014 - 05:23 | 4896957 RadioactiveRant
RadioactiveRant's picture

Baltic Dry is now at a 52 week low, 63% down YTD. Its the App Store, hair dressing, nail painting recovery.

Thu, 06/26/2014 - 05:23 | 4896958 DavidC
DavidC's picture

ALL bubbles end. It's just a case of WHEN.

DavidC

Thu, 06/26/2014 - 07:31 | 4897047 orangegeek
orangegeek's picture

Follow the POMO

 

http://bullandbearmash.com/chart/sp500-hourly-17th-worst-economic-contra...

 

MSM gives markets a pass.  Higher markets give the perception that the economy is doing well - and that's a lie.  Yellen prints while economy tanks.

Thu, 06/26/2014 - 07:35 | 4897052 ThisIsBob
ThisIsBob's picture

Just relax.  Its the 0 Hedge weekly market teotwawki call.  Been going on for years.  Been wrong for just as long.

Thu, 06/26/2014 - 08:00 | 4897086 Ghostdog
Ghostdog's picture

If the S&P drops .00001% I am selling my house and businesses and going all in with that cash.Yeah I know its a pipedream but if she corrects anywhere near to that I know where my money is going

Thu, 06/26/2014 - 08:36 | 4897158 timmeh
timmeh's picture

a pullback? what's that?

Do NOT follow this link or you will be banned from the site!