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The 2 Charts That Have BofA Worried About A "Greater Correction" In Stocks

Tyler Durden's picture




 

While the S&P500 rebounded sharply on Friday, BofAML's Macneil Curry warns evidence continues to say that this is a very late stage advance from which a greater correction is forthcoming. The recent deterioration in breadth (52wk highs failing to keep track with price), the negative seasonal period and divergences between the broader indexes say that risk/reward is skewing to the downside. Bottom Line: "The S&P 500 is vulnerable."

 

Via BofAML's Macneil Curry,

The S&P500 is vulnerable

While the trend in the S&P500 is still higher, with potential for a near term push towards 2000; this is a very late stage advance from which we look for a medium term correction. 1944 (the June-26 low) is key. Below here confirms a top and turn...

 

The 2 charts he is most concerned about...

Breadth...

 

The bearish divergence for new 52-week highs from last May points to fewer and fewer new 52-week highs as the S&P 500 has continued to rally to new all-time highs. This suggests weaker internals.

The divergence in new 52-week highs from last May is a sign of a maturing rally from late 2012.

 

and Seasonals... 


With President Obama in his second
term, 2014 is an incumbent mid-term.2014 is following the incumbent midterm year YTD through June. The pattern calls for a June/July peak ahead of a pullback into September. This has the potential to support large and mega caps relative to small caps.

 

Going back to 1928, July is the strongest month of the year with an average return of 1.52% and is up 57% of the time.

However, June was up 1.9% and July returns tend to fizzle, not sizzle, after an up June. When the month of June is up, July is up only 51% of the time and has an average return of 0.48%. This is well below average for July and a below the average monthly return for all months of 0.59%.

 

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Sun, 07/20/2014 - 14:23 | 4980432 RevRex
RevRex's picture

What are charts for?

Sun, 07/20/2014 - 14:32 | 4980474 Jack Sheet
Jack Sheet's picture

They predict future prices unerringly from past data and make shitloads of money for technical analysts.
/sarc off

Sun, 07/20/2014 - 14:55 | 4980556 Sudden Debt
Sudden Debt's picture

In a way, they're like those guys you visit that ask you to lay down as tell how your relationship was with your mom and dad and than they give you all those free pills!
And they make a lot of money to!
And those guys that walk on the street that also sell you the pills but don't ask the questions also make a lot of money!
All jobs are kind of the same I guess...

Sun, 07/20/2014 - 15:16 | 4980623 Rick Blaine
Rick Blaine's picture

All bullshit aside, what sort(s) of events will/are going to cause the computers to stop the circle jerk of trading stocks back and forth between each other...and REALLY make the market crash?

Or is it just never going to happen at this point? 

Mon, 07/21/2014 - 08:23 | 4982814 PT
PT's picture

I don't know.  But allow me to blabber on for a minute here anyway:

1.  After everyone else is priced out of the market, there will be two players left, using the entire QE to buy and sell one share.  Until they need to make the price of that one share go a little higher.  At which point they will buy and sell a fraction of that one share.  And they shall fear the up-coming "FLOPS bug" -  where making a share portion smaller than 1 x 10-213 (or whatever the number is these days) will result in computers rounding it down to zero.  So go long 4 294 967 296 bit processors with proportionately adjusted maths co-processors!

2.  As long as the majority have their chips on red, the house shall ensure that black comes up.  And vice versa.  And when that is not enough, govt will determine that your compulsory superannuation contributions are not enough and won't be enough for you to retire on, so you will be required to contribute more because it is for your own good - you don't want to starve in your old age do you? but I suspect that by this stage, your "retirement contributions" will only buy leveraged products, not any actual shares (way too expensive).

3.  When one PTB fails to deliver to another PTB.

4.  Consider the housing collapse.  When the paper work got too complicated, they outsourced it to the lowest bidder who promised to do all the due diligence really fast and on time and under budget.  Do we have any more complicated paper now?  Or is it still just CDOs, synthetic CDOs and CDSs?  Who is responsible for creating / shuffling / accounting for it?  Or have the algos managed to bypass the need for complicated paper?  Does Linda Green still have a job?  Or did she get promoted?  Outsourced?  Or automated?  Perhaps one day some fresh, new, barely-graduated accountant with a bad hangover will forget to file a form properly that will lead to someone losing a run-of-the-mill can't-lose court case which will lead to - hey!  It's getting late! Isn't it time for another high - ranking bank(st)er to fall off the perch?

 

 

Sun, 07/20/2014 - 14:57 | 4980564 max2205
max2205's picture

Fuck BoA 

 

 

 

....................../´¯/) 

....................,/¯../ 

.................../..../ 

............./´¯/'...'/´¯¯`·¸ 

........../'/.../..../......./¨¯\ 

........('(...´...´.... ¯~/'...') 

.........\.................'...../ 

..........''...\.......... _.·´ 

............\..............( 

..............\.............\...

 

 

Sun, 07/20/2014 - 14:35 | 4980484 post turtle saver
post turtle saver's picture

charts are there to tell me what I already knew... if I'd put my money in S&P index funds in 2012 and then forgot about them, I'd be up 50%...

Sun, 07/20/2014 - 14:38 | 4980497 Pheonyte
Pheonyte's picture

But the dirty feeling that would have come with that doesn't wash off.

Sun, 07/20/2014 - 14:47 | 4980533 post turtle saver
post turtle saver's picture

don't hate the player, hate the game

Sun, 07/20/2014 - 15:25 | 4980649 deflator
deflator's picture

 I have no problem whatsoever with hating the players as well as the game. 

Sun, 07/20/2014 - 17:24 | 4981137 post turtle saver
post turtle saver's picture

look in a mirror

Sun, 07/20/2014 - 15:40 | 4980692 All Risk No Reward
All Risk No Reward's picture

The game relies on the players...  think before repeating.

Sun, 07/20/2014 - 17:24 | 4981131 post turtle saver
post turtle saver's picture

you're a player whether you think you are or not... think before posting

Sun, 07/20/2014 - 18:21 | 4981314 All Risk No Reward
All Risk No Reward's picture

Only through force, fraud and coercion....

Repeating "don't hate the player, hate the game" is far different.

Yeah, I've thought about it, but thanks for caring.

Sun, 07/20/2014 - 21:49 | 4981945 post turtle saver
post turtle saver's picture

don't hate the player, hate the game

Mon, 07/28/2014 - 00:10 | 5011539 All Risk No Reward
All Risk No Reward's picture

You aren't a "player," you are being "played."  Part of duping the dupes is to let them "win" at first.  That con has been going on for a thousand years.

Sun, 07/20/2014 - 15:40 | 4980690 ChartreuseDog
ChartreuseDog's picture

charts are there to tell me what I already knew... if I'd put my money in S&P index funds in 2012 and then forgot about them, I'd be up 50%...

... for now

"Know when to hold them, know when to fold them, know when to walk away and know when to run. Don't count your money while you're sitting at the table, pleanty of time for that when the dealing's done." - Kenny Rogers, The Gambler

Sun, 07/20/2014 - 17:26 | 4981142 post turtle saver
post turtle saver's picture

this place has been the best contrarian indicator going for several years now... no signs of that changing

Sun, 07/20/2014 - 21:41 | 4981920 hobopants
hobopants's picture

Meh, not really a site for investment advice in the first place. If anything they do a good job of explaining why stocks are on the rise, and why it's going to end in the shitter, but what you do with that info is up to you. Hell pile all in, I'm sure you'll know when to get out. 

Sun, 07/20/2014 - 21:51 | 4981948 post turtle saver
post turtle saver's picture

I don't know about when to get out, but sure as hell will know when to get all in... again...

mumble mumble when people are scared etc.

Sun, 07/20/2014 - 22:06 | 4981999 hobopants
hobopants's picture

I think there might be too much blood in the streets this time, especially if they break the system all together, but who knows... What kind of indicator is a tortoise on a fence post anyway?

Sun, 07/20/2014 - 14:50 | 4980543 Sudden Debt
Sudden Debt's picture

They use them for example to calculate how much pressure you need to have in your tires related to the temperatures.
Cold is higher pressure, to hot and you have to deflate some air.

So... I guess they want to deflate pressure because it's getting to hot?

DAMN WEATHER AGAIN!!

Sun, 07/20/2014 - 14:30 | 4980466 wmbz
wmbz's picture

Nothing but blue skies from now on! DOW 18,000 hell yea! To da moon...Alice!

Obozo just said last week that the world has never been more at peace! It's the best time to be born!

Fucking prick!

Sun, 07/20/2014 - 14:31 | 4980471 Spastica Rex
Spastica Rex's picture

In 1814 we took a little trip...

Sun, 07/20/2014 - 15:24 | 4980648 bonin006
bonin006's picture

...along with colonel Jackson down the mighty Mississipp.

http://www.youtube.com/watch?v=50_iRIcxsz0

(does this have anything to do with this post?)

 

 

 

Sun, 07/20/2014 - 14:32 | 4980473 drinkin koolaid
drinkin koolaid's picture

Useless BS. 5 years of dumbshits everywhere calling tops. It's a huge bull market, admittedly based on shit fundamentals. I learned many moons ago to NEVER fight the big trend. The top callers will eventually fade away and then look out below.

Sun, 07/20/2014 - 15:28 | 4980657 Pool Shark
Pool Shark's picture

 

 

"The top callers will eventually fade away and then look out below."

Does that mean you just called the top?...    ;-)

 

Sun, 07/20/2014 - 19:35 | 4981565 All Risk No Reward
All Risk No Reward's picture

Think it through...  the establishment is now calling tops and highlighting bubbles.

That fact is NEW.

Pay attention.

I recommend listening to Gary K.

http://www.businesstalkradio.net/weekday_host/Archives/gk.shtml

Sun, 07/20/2014 - 14:38 | 4980501 q99x2
q99x2's picture

What does this have to do with software?

Sun, 07/20/2014 - 14:41 | 4980510 CPL
CPL's picture

TLDR:  "Oh fuck, we shit in our own sandbox and we're painted in a corner." 

No shit.

Sun, 07/20/2014 - 14:47 | 4980528 Sudden Debt
Sudden Debt's picture

Since when did technicals started to matter in this market?

But people should all buy silver now :) can't go wrong there :)

Sun, 07/20/2014 - 14:50 | 4980542 yogibear
yogibear's picture

Exactly. Buying the dips has worked for years now.

Sun, 07/20/2014 - 14:48 | 4980531 DirkDiggler11
DirkDiggler11's picture

BOA:
The dumb money. Proceed with caution ...

Sun, 07/20/2014 - 15:04 | 4980590 disabledvet
disabledvet's picture

Little odd BofA would be so negative as they are the most levered to a housing recovery.

Then again...

Mon, 07/21/2014 - 08:22 | 4982812 Ban KKiller
Ban KKiller's picture

And idiot attorneys at all levels. Thank goodness.

Sun, 07/20/2014 - 14:49 | 4980539 yogibear
yogibear's picture

Not as long as William Dudley is around and his NY Fed's member bankster trading systems are set to full-bullishness.

Sun, 07/20/2014 - 14:56 | 4980563 post turtle saver
post turtle saver's picture

true, you can't spell 'bullshit' without 'bullish'... why fight it? BTFD/BTFAH and make money, success is its own revenge bitchez

Sun, 07/20/2014 - 15:03 | 4980587 Quinvarius
Quinvarius's picture

Markets move on easy money, and nothing else.  With QE cut in half and dropping, and all the collateral worth borrowing against being bought out of the system by the Fed, being long is unwise.  Zero percent doesn't even matter with no collateral, and it never mattered to the economy as a whole.

Sun, 07/20/2014 - 15:08 | 4980604 buzzsaw99
buzzsaw99's picture

the collateral shortage meme is ruse. they need people or the fed or the gubbermint to buy garbage for top dollar. they need bag holders. the previous bag holders are suing them down to their shorts so really they are, um, fucked.

Sun, 07/20/2014 - 15:09 | 4980607 Beam Me Up Scotty
Beam Me Up Scotty's picture

How do you know QE has been cut in half?  Because they said so?  Remember, when it gets bad, we lie.  Have you or anyone else audited the Fed?  They could still be pumping 85 billion a month or more into the markets, all the while telling everyone they are tapering.  It would be a good way to keep the market pumped in the face of tapering, if they were lying about said tapering wouldn't it.

Sun, 07/20/2014 - 15:23 | 4980646 Greenskeeper_Carl
Greenskeeper_Carl's picture

Very true. I seem to remember "Belgium" nearly doubling their UST holdings. The fed may not have DIRECTLY bought them, but I think we have a pretty good idea where the money came from.

Sun, 07/20/2014 - 17:03 | 4981052 Quinvarius
Quinvarius's picture

If they are hiding it, not all the players will benefit or be able to make use of it.  I am pretty certain that Belgium is an illegal Fed money laundering operation.  If it is not on their books, then they are not paying the Treasury the interest they owe it.  Therefore it is a massive crime and violation of their charter.  But the end result to missing collateral is the same.  If there is nothing to borrow against, zero percent doesn't matter.  I just don't think there is a good way to get enough money into the system to maintain this stock bubble using currently announced methods. 

Sun, 07/20/2014 - 15:05 | 4980601 Lewshine
Lewshine's picture

What a crock!! I don't care what BofA or any other bank says!! You buy ANY AND ALL dips - Unless you're an idiot! 

Sun, 07/20/2014 - 15:17 | 4980628 Spungo
Spungo's picture

Dow 35k!

Sun, 07/20/2014 - 15:29 | 4980659 RabbitOne
RabbitOne's picture

David Elias says dow 40K!!

Sun, 07/20/2014 - 15:23 | 4980629 medium giraffe
medium giraffe's picture

Whew, things are getting a bit mad in the comments sections on the other articles.  Thought I might hide in here and look at candlesticks.  Very pretty chart that, I think you should maybe bang some fibos on.  Fibos always look very impressive and professional on a chart.  Not that I use them myself, they're a bit Elliot Wave for me - 'should I use this top, or that bottom, is this a first wave, second?'  But it looks good.  Clean.  Sexy channels and stuff.  And mindless chart porn would be great compared to what's going on out there.  Maybe a special request for some bolly bands?  I like how they're all wibbly-wobbly, they make me giggle.  Maybe MACD? Actually, scratch that, MACD looks shit.

But yeah, that lower high, lower low business looks a bit dodgy.  I'm probably going to have a lie down and some cake now.  Ooh, and tea.  Haven't had a cup of tea for at least 20 minutes.

Chocolate, if you're wondering.  Which you're probably not (in which case you're just confused now).  Lovely.

Sun, 07/20/2014 - 15:36 | 4980664 Winston Churchill
Winston Churchill's picture

Someone needs to chart the increase in CYA statements by bankers,economists etc.

I'm sure it would show an enormous spike starting a month ago or so.

As we know the market is so rigged it will do whatever they want it to,this

chart and its spike is the only chart that matters.They are pulling the plug,

you have been warned.

Sun, 07/20/2014 - 15:44 | 4980713 medium giraffe
medium giraffe's picture

Yup, even the Orange Princess is jumping on that particular bandwagon ffs.  I'll probably throw on a short before heading to the bunker.

Sun, 07/20/2014 - 15:39 | 4980662 Dubaibanker
Dubaibanker's picture

Just look at Cyprus for the future template of US and European banking systems:

This quote will get into history books soon:

If banks fail, then the newly voted pan-EU framework for bank rescue kicks in. Any bank that fails to raise capital from the private sector will be subjected to a liabilities haircut (meaning debt, deposits etc) of up to 8.0 per cent.

July 2, 2014: Central Bank of Cyprus issues ultimatum to raise capital: http://cyprus-mail.com/2014/07/02/central-bank-issues-ultimatum/

July 13, 2014: Bank of Cyprus decides after pressure from Central Bank of Cyprus to raise new capital of EUR 1bn. http://cyprus-mail.com/2014/07/13/another-blow-for-bank-of-cyprus-deposi...

July 14, 2014: Major lawsuit against two largest banks of Cyprus filed in Greece / NY: http://www.marketwatch.com/story/greek-investors-file-notice-of-lawsuit-...

Today, July 20, 2014: Reasons why Bank of Cyprus needs more capital and the news that there could be 8% hair cut on depositors and bond holders, as per new EU framework if the bank is unable to raise capital soon: http://cyprus-mail.com/2014/07/20/why-bank-of-cyprus-needs-additional-ca...

This time Cyprus may not have a happy ending .

Total deposits in Cyprus have declined from a peak of EUR 72bn in May 2012 to EUR 50bn in June 2014. EUR 5bn left just last month.

Latest deposits: http://bankscyprus.com/bank-deposits-in-cyprus-fell-in-june-for-5-billio...

Deposits in Cyprus 2 years ago in July 2012: http://www.reuters.com/article/2012/08/28/cyprus-banks-deposits-idUSL6E8...

 All financial statistics of Cyprus: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=9837&lang=en

 Feel very sad for all Cypriot citizens and others who maintain bank accounts in Cyprus.

 Despite the bail outs, the banks keep falling apart and now even the bail outs seem to have ended. Now bond holders and depositors will have to pay to save the banks! 

Cyprus is indeed becoming the template of the future of banking in Eurozone. Switzerland, Ireland and many others already have laws to confiscate the moneys but people won't listen until it actually happens and then all hell will break lose.

Dijsselbloem did tell us that Cyprus is the template so we have been warned....http://blogs.marketwatch.com/thetell/2013/03/25/heres-the-gloss-on-those...

http://blogs.ft.com/brusselsblog/2013/03/26/the-ftreuters-dijsselbloem-i...

Sun, 07/20/2014 - 15:42 | 4980695 Eyeroller
Eyeroller's picture

If the Fed pump/algos/dark pools/reverse repos won't 'allow' a pullback, then why didn't any of that prevent the 6% pullback in February and the mini-pullback in April?

No intended snarkiness here, and would appreciate any insight.

Sun, 07/20/2014 - 15:54 | 4980771 DOGGONE
Sun, 07/20/2014 - 16:33 | 4980935 adr
adr's picture

Oooohhh chart bullshit.

So a healthy "correction" for a few days means the market is then free to move much higher, right?

Because we all know if you are driving in the wrong direction a quick reverse on the same road going the right way means you can then turn around and head the wrong way again to keep going the wrong way with a clear conscience.

A correction has to last, otherwise it didn't correct anything.

At this point it doesn't matter because the market doesn't follow anything resembling reality.

Sun, 07/20/2014 - 19:02 | 4981451 teslaberry
teslaberry's picture

there can be no stock market crashes anymore. the too big too fail policy is to bail in your deposits should the banks have a run on electronic collateral. 

 

utnil there are no deposits left in retail banks, their gambling arms cannot go broke. and even then, the fdic can just pull a 2008 and eight style hyperinflationary print fest. 

 

look at the nikkei. 2008 was the big fake crash that will proceed decades of hyperstaglation of the real economy. in 30 40 years when everything truly goes to hell and the powers that be will have some unsightly result, like the next great war, ---the 2008 collapse will be considered a historical moment that preceded the period of hyperstagflation...

Sun, 07/20/2014 - 21:23 | 4981867 SweetDoug
SweetDoug's picture

'

'

'

How come nobody is ever coming out and showing how the charts actually predicted and did what they said they would at that time?

 

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