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Was The Most Important Line In The Equity Market Just Broken?
The post-2009 UP trendline in the broad Value Line Geometric Composite was violated today.
Most technicians and chartists have what they consider their important levels on a chart. Whether it is a prior low or high, a moving average, a trendline, etc., these are levels that, if violated, mark a significant change in character for that particular price series – or at least it marks a significant change in its interpretation. While our firm is generally more interested in analyzing more comprehensive measures pertaining to the market’s structure rather than a single price point on one specific chart, there are a few undeniably important levels in our view. And perhaps the most important price point in the entire equity market was broken today.
When we consider what, to us, constitutes a significant chart level on a market-wide basis, it must be characterized by 2 things. First, it has to be an index or security of substantial influence. And second, the price level should preferably be of consequence on at least a cyclical (i.e., years) basis. Well, probably the single most beneficial force in the global financial markets for some time now has been the steady uptrend in the U.S. equity market. Other equity markets around the world have waxed and waned and other asset classes have varied between average (fixed income) and abominable (commodities). But U.S. stocks have been the rock – fortunately too as it is the largest stock market in the world.
And the most important barometer of the U.S. stock market, in our view, may not be the general consensus pick. In fact, many market participants likely have never even heard of it. The Value Line Geometric Composite (VLGC) is an index comprised of approximately 1700 stocks. It is also equally-weighted. Therefore, we feel it provides a better picture into the health of the broad U.S. stock market than a more mainstream pick like the S&P 500, for example. And despite the fact that there are no VLGC products actually trading anymore, it still adheres very well to most chart analyses.
That being the case, today’s break of the VLGC’s post-2009 UP trendline is one of those select price developments that we deem to be important to the macro market – and maybe the most important.
As you can see, although there is no trading based on the index, the VLGC still respects basic technical patterns, at least the one shown on the chart. The trendline drawn from the 2009 low connects almost precisely the 2011 and 2012 lows. Extending it further, you can see that today’s shallacking in the VLGC took the index clearly below the post-2009 UP trendline.
This, to us, is significant. That’s because it passes the 2 tests of an “important” price point that we laid out above. First, as the broadest equal-weight measure on the U.S. equity market, it is of great influence. Secondly, as it pertains to the most important trend in the financial world (from a positive standpoint) – the cyclical U.S. stock market rally – today’s development is of great significance both on a macro level and on a multi-year (cyclical) basis.
No, it does not mean that the stock market will drop straight down from here (the VLGC is actually nearing some key Fibonacci support lines). It doesn’t even mean that some of the averages cannot eventually make a new high in this cycle. However, it is significant in that it is the first price crack in the post-2009 uptrend. It is significant because the index is comprised of roughly 1700 stocks, as opposed to a top-heavy, potentially misleading index. And it is significant because the trendline that has been broken had held precisely (i.e., respected) on its previous touches the past 6 years.
Thus, this important development changes our interpretation of the chart, and potentially the market in general. The odds of the post-2009 bull market continuing unimpeded are now significantly reduced. The odds are much greater that the VLGC (market?) will enter some combination of a protracted decline or sideways pattern.
We don’t get happy feet about too many lines on a chart – only the important ones. And this one is about as important as they come.
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meh.
Isn't North Korea about to launch nukes?
PPT to the rescue. Sleep my sheep, sleep.
Crap. Time to get a new trendline.
Massive epic biblical crushing market implosion dead ahead!
Biblically crushing is correct. The name "Satoshi" in Aramaic is "Ya-ba-do-ah" or "digital safety" and in times like these, we all need digital safety.
https://localbitcoins.com
Yes yes...this is true. However "Satoishi" in its original Flintstonian is "Yaba-Daba-Do" or " "Man-Wearing-Orange-Tiger-Dress"...and at times like these we all need have a gay-old-time....
fork off (pun intended)
So, I think this is how it works... the econ journalist at ZH is told- "Find a story that proves the sky is falling!" So the intrepid journalist (unpaid intern, illegal alien, slave, etc), roots around until he finds an index (the VLGC, the LGBT, whatever) that can be stretched to prove his point. Hey, it is an exercise in creativity, and we all need to be more creative, right?
Don't know if you've been keepin' score man, but we just got our asses kicked!
Does get a bit old, doesn't it. After a while, you'll be contemplating the ol' ice pick inbetween the eyes lobotomy. And the comments, ......no comment.
'...But what I really want to know is - are they gonna raise those rates...???
So these guys mean to try and tell us that theyve had no clue what the PPT does or that the Fed Res has over 4 Trillion in that shit on their books or that all the corporations have been buying up their own stocks to inflate values to these bullshit levels? And now that the shit show is about to commense and the house of cards Ponzi scheme about to collapse these assholes come off as if there was never anything wrong in the first place? That the U.S. markets have always been the "rock" that we can all count on?
What a bunch of fucking scumbags.
That rock that most morons depend on has turned into a ponzi pile of shit.
Fucking NWO can't bring in a new currency until you kill the old one. They worship the return of slavery.
Graphs, trendlines and historic references mean nothing in a fabricated and manipulated market.
That trendline wouldn't exist if it wasn't for FED largess.
Great point and absolutely correct --
And some more FBI guys, I guess
https://www.youtube.com/watch?v=TVC6wbWsq3I
The most important line in the equity markets WAS just broken. However, the most important line in the equity markets isn't WTF they are pimping. The most important line is the 20-month moving average, which actually (with one minor exception) correctly identifies the trend (bull or bear) over the last hundred plus years of NYSE data.
We are at the crux, and the name of the game for those who seek Profit! in perpetually rigged equity markets will change from BTFD® to STFU® -- (Sell The Fucking Uptick) if we don't change course soon.
The real question is, why does the PPT let it drop now?
We still have months of Obamma's legacy to protect-so are they flasing a sign to not vote for Donald-not vote for Hillary. Who is going to be the fall guy/girl>?
Remember what happened when W was on his way out, the sky was falling and they came out with TARP
TPTB don't like the prices they are paying even with free money, so they will burn everyone and buy on the cheaps.
OWning it all has its privileges.
Yeah... don't they always reset it when someone is on the way out of their term? Clean slate right? the next guy then proceeds to blame the previous even though business cycles have almost nothing to do with the president.
Regulation rollback and
abolishing agency abuse would have a big rip to many charts.
Rather Reaganesque, right?
Never let a crisis go to waste - and if you only have a year or so left to work, you might need to manufacture your own crisis so you can really take the wheel.
Market drop can't be allowed to correlate with 1/4 point rate boost or the Fed looks worse. Must get it over with now.
I've wondered the same myself. We're looking at the wheels about to come off, but why? A precipitous drop in markets would have strange duality.
First off, it's horrible for the incumbent party. Makes the Dems look like shit on a macro scale, so it calls their ability to win the election into question just on the face of it, no matter their nominee. If Sanders somehow gets the nomination, after a significant sell off, Bernie would be fucked and doomed to lose nearly for certain. People aren't going to want to elect a tax and spend socialist when they're scared to death of losing everything.
Hillary, oddly enough, might get a bit of a boost given her familiarity. People vote (if their votes are actually counted, dubious) with their heart more than their head. Scared people do dumb things and in a freefall they'll reach for known quantities to try to alay that fear. Hillary could be the benefactor. However, in the general election she'd be the frontrunner for a party that just tanked the economy AND for one party to hold the Presidency in 3 consecutive elections has only happened twice in the last 150 years. Significant headwinds there.
Trump might benefit from a cratering if he's able to convice people he knows what he's doing economically, which remains to be seen. He'll need to stop jawboning illegals and actually develop a precise platform. I guess we'll see...
Assume up all night for the past few weeks re-programming the algo's.............or????
"had held precisely (i.e., respected) on its previous touches the past 6 years"
Since it takes 2 points to draw a trendline, it has touched it one time and held. solid statistical analysis.
It looks like the trend from 2009 to 2011 was broken. I think it was a trend line, 2 points, at that time.
imo, 1975 on S&P is the most important. that is the trend line from 2009. that is the 100 wma. break that, and we have a real drop of 20+%.
The problem with this kind of analysis it doesn't account for QE and the PPT. Therefore it is a coin flip at best to use this kind of data! Simply looking at a set. Of numbers without any insight as to what produced the data set.
No time to get short IMHO. THERE IS A LOT OF MANIPULATION LEFT IN THE Eccles building.
True enough, but that doesn't mean it is valueless. I'm not short (yet) either as I do expect some efforts at levitation by the PPT. But these kinds of patterns suggest they are running out of credibility (and ammo). At some point they will start shooting blanks. And when they do - that's when to get short!
Bullshit math.
Is this really how these people evaluate statistics? I missed my calling.
Fitting the line to that graph might also have led to the conclusion it was broken weeks ago.
solid enough to "PROVE" AGW, right? hahahaha...
Anybody still using legacy technical analysis on these manipulated markets needs a technical knock on the side of their brain housing group.
Just my opinion, but I believe the PPT has been using legacy technical analysis as part of their manipulation
They know what the sheep will do, then they slaughter them
Hoo-effing-ray...
DavidC
One can always hope for the return of true price discovery...
In it's absence I have no idea how to really deploy capital
Arable land, water, cattle, guns, family. Not neccessarily in that order, and if you have to buy your family, you're already in trouble.
The central bankers are merely preparing to rip some muppet eyes out in order to enlarge the Goldman Balsach bonus pool.
Used to be HFT fiber lines were the most important lines in the equity mkt, now it's microwave towers, lasers, etc.
So....my retirement funds are directed by someone who predicts the future with graph paper and a ruler???
Better than a Master-of-Arms at a FEMA camp!
So..... No worries mate. It's Nano graph paper and a teeny tiny ruler with a sub-nano pencil prick. Mr. Yellin.
At least he isn't listening to economists.
Pfft, when GS says buy then I'll be worried.
the maggots set the price
What broke was the realization that the Fed is boxed into a corner and has no ammo to fight the recession that has started.
I know you don't believe a recession has "started" because you've been on ZH long enough.
This all depends if the FEDs will, or are able, to save the line.
I didn't realize Value Line was still in business.
Financial advice from tumblr. Awww yeah.
Odds are a test below this line is just that, a test, and it should be bought. This sucker isn't going lower until it does....and even if it does , it's still not going lower.
How zoon ze fergheten, ze must buy ze fuchen dip, ... dummkhopfs.
Don't need no graph and set points to know gravity works, this is why I don't ski!
I would suggest that the corporate bond market is way more important as a barometer (as noted several times by ZH).
Dow futures down 89 this morning. I expect a brief drop at open followed by fools buying followed shortly by another push lower. This market has a lot further to drop as oil prices leading the way lower.
Technical " analysis" - as much use as pigeon shit on a bucket seat and smells worse.
Wake me at DJIA <= 5,000.
You are hard to please. Wasn't it "Wake me at 17,000" yesterday?
Fuck yo charts, nigga!
https://www.youtube.com/watch?v=JcJkhSUSnek
Aaand unless my screen is wrong s&p is down nearly 1% at the open.
Phhh..., Everything is fine and prosperity will NEVER end, 'cuz I believe in the United Shysters of America!....
....and our vote matters!
Oligarchy/Plutocracy 2016 2+2=5
What utter fucking bollocks .
Fuck it, was going to try to explain why some fucking chartist moron with a straight edge and a fucking pencil and a chart is about as much fucking use as some fucking jungle bunny and some feathers predicting the next reincarnation of a dead octogenarian.
But I figured most here on ZH are far too smart to get gulled by this fucking simpleton
Get ready for about 10 head fakes.
"Market" -- LMFAO!!!
Take that chart at either Oct 2011 or a year later and the same thing happened, but as it is 2015 we can see it reversed and continued to rise.
TA is helpful, but not the be all and end all.
Still need a lot more to happen to prove this really is the start of a big bear move.
Just wanted to tell the Tylers that I like the "new" designations on the post. Makes it much easier to pick up where you left off. Thanks
500 X 1oz Silver Vienna Philharmonic 2015 Master Box €8,242.79 @ EurGold
https://www.eurgold.eu/silver/500-x-1oz-silver-canadian-maple-leaf-2015-...
Did y'all bitchez throw away your Dow 14,000 hats?
Have a fever, a fever for more fear porn! Chartz bitches, IT'S THE FUCKING CHARTZ!! My gawd, the humanity, the carnage, as if millions of Muppets cried out all at once and were silenced when the PPT failed to ignite the rally with a firm control-P, monkey-hammering futures like clubbing a baby seal, its brains spattering in a fine mosaic of trend lines pulling ever downward, gravity and momentum being the irresistible force tanking the world with a sickening thud.
Oh wait, here comes Bullard, nevermind.
Is this the time to buy on the dip?...wait I don't have any money left...I bought on all the other dips...maybe I am just a "dip sh*t"..