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Hanging By A Thread

Tyler Durden's picture




 

Via NorthmanTrader.com,

The poker game continues as markets finished the week right back in range. Bulls got a magic save on Friday following bad news as both NFP and factory orders came in far below expectations. None of these misses were predicted by either economists or the Fed. Confidence inspiring? Not so much. Yet is bad news good news again? QE4 coming? The fact is bears couldn’t keep price below 1900 $SPX (a key level we had discussed in Technical Charts) and once the level held again it was panic buying on strong volume.

So we’re back in range and both bulls and bears still have to prove their cases. Traders love this environment as it provides plenty of opportunity for outsized gains, but the risks to charts are mounting and frankly markets are hanging by a thread and need a major technical rescue soon.

Let’s walk through some key charts:

Daily $SPX: Back in range, potential for a double bottom, MACD cross, but declining MAs with major resistance ahead:

SPXD

The 50MA is declining steeply and is currently sitting at 2002 and at the top of the daily Bollinger band. Ironically this level represents major confluence with the monthly 20MA. We have been watching the monthly chart and it alone is the chart that should scare the living daylights out of every bull as it has now crossed its key MAs. The historical record is clear:

SPXM

The message of this chart remains: Unless $SPX breaks above the monthly 20 MA price may move lower. A lot lower.

And it’s not only the monthly $SPX that illustrates how thin this thread is. Look at all these monthly charts:

COMPQ

DJIA M

RUT M

DAXM

The message is uniform: They are all barely hanging above key support levels a break of which will invite significant more downside.

More concerning for bulls: Friday’s rally occurred despite a further breakdown in $HYG:

HYG

This divergence is especially notable given the larger context:

HYGW

So someone is lying it seems and next week will likely shed more light on the truth here.

What do bulls have going for them?

Well, for one, the house clearing has been awe inspiring as outlined by the record shift in the Ryder bull/bear asset ratio and hence the boat may lean too far the other way and this alone may help explain the rally on Friday:

RYDER

And of course rallies in October can be formidable, especially if lows come early. Some examples from recent years:

2003:

2003

2006:

2006

2010:

2010

2011:

2011

Notice a pattern? Now none of these examples are guarantors that this October will play the same way and plenty of sell off examples for October exist, but it shows a structural history that suggests at least the possibility of a major rally. And who can forget the big rally in October 2014 following the almost 10% correction then?

As the Ryder chart above shows lots of folks have dumped stocks, not only the Saudis. Hence performance anxiety going into year end may be the next big thing and this may create a FOMO chase. While Wall Street has cut its year end targets these targets are still a lot higher than here. So a lot of people have a lot to prove. Earnings are beginning next week and may shed a light on how justified the deep cuts in earnings expectations have been. But remember: It’s the reaction that matters.

So bottom line: What we said last week is still very much true with now some additional qualifications:

Bears:  You now need to break $SPX 1900 & the neckline and STAY broken below October 2014 lows (that’s about 130 handles lower from here).

Bulls: You absolutely need an October magic show and get back above the daily 200MA (currently 2063) and the monthly 20MA (currently 2003) or the jig is up for a long time to come.

Got a trade plan?

 

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Sun, 10/04/2015 - 16:34 | 6628978 erikaappleihzyjtyeg
erikaappleihzyjtyeg's picture

After the bulls get to 2063, then what?

Sun, 10/04/2015 - 16:48 | 6628997 SafelyGraze
SafelyGraze's picture

OT- book report

https://books.google.com/books?id=HGd9Ix4QKS4C&printsec=frontcover

Avoid Becoming a Ponzi Pyramid Builder. J Morley, 2004

"You don't have much in the way of possessions - perhaps a pig, a goat and some geese."

"You grow crops for a rich landowner and in return he lets you have a patch of land to grow things on to feed your family. You have to work hard for him and hard for yourself too."

"You work from sunrise to sunset, sleep in a crowded barracks and only get one day off in ten."

This book was pretty interesting but in my view it is not really realistic in the sense that alot of the illustrations are hand drawn and not actually photographic. Also the stories in it seem like they are more anecdotal instead of coming from newspapers or tv. But even with its drawbacks and whatnot, this is still a book that alot of people are going to enjoy reading it when you put it under the xmas tree or maybe it is a stocking stuffer. So I am going to go ahead and say that this is three-and-a-half-stars.

 

Sun, 10/04/2015 - 16:59 | 6629028 Haus-Targaryen
Haus-Targaryen's picture

Trading plan?

Buy moar AG & AU.

Mon, 10/05/2015 - 02:50 | 6630107 DutchR
DutchR's picture

22lr and tampons

Mon, 10/05/2015 - 04:33 | 6630188 kiwimail
kiwimail's picture

And dont forget the Spam and Tabasco!

Sun, 10/04/2015 - 16:36 | 6628984 billbengen
billbengen's picture

Yes, well, now i know exactly what's going to happen. If the market goes up, it will go up, and if it goes down, it will go down. Who could have suspected anything so simple?

Sun, 10/04/2015 - 16:45 | 6628995 BandGap
BandGap's picture

I bought a small amount of gold and silver with this paycheck, as I have done in the past. The simplest thing to do is not care at all.

Happy investing!

Sun, 10/04/2015 - 16:38 | 6628988 r00t61
r00t61's picture

In a world where central banks can both secretly and openly purchase equities using digits they conjure out of thin air, technical analysis is meaningless, a tale told by an idiot signifying nothing.

Sun, 10/04/2015 - 16:48 | 6629003 Kaiser Sousa
Kaiser Sousa's picture

yeah ur absolutely right...

and what "markets" is this talking about...

there r no more fucking markets...just fraud and manipulation......

Sun, 10/04/2015 - 17:38 | 6629107 Roguebeekeeper
Roguebeekeeper's picture

All the more reason to stop relying so heavily on their system. Has anyone here tried to gold dollar thing with UPMA? 

http://www.zerohedge.com/news/2015-09-20/going-back-what-works-gold-mone...

Sun, 10/04/2015 - 16:49 | 6629004 buzzsaw99
buzzsaw99's picture

bulls and bears. lulz. stopped reading right there.

Sun, 10/04/2015 - 17:01 | 6629029 Slowdrip
Slowdrip's picture

'It's only a paper moon, over a cardboard sea'....

Sun, 10/04/2015 - 17:02 | 6629036 arbwhore
arbwhore's picture

"need a major technical rescue soon." Girl, that's the Fed's specialty.

Sun, 10/04/2015 - 17:22 | 6629069 khnum
khnum's picture

A nuclear device could go off in Manhattan and all 3 major indices could be green by close if they wanted them to be,the turd will only be flushed when they are ready to press flush

Sun, 10/04/2015 - 17:24 | 6629072 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

And the bulls laid down with the bears whilst the extend & pretend Central Banksters shilled for dollars without a hope and a prayer into the Final Chapter of the History of Central Banking Exceptionalism from the Seventeenth Century to Contemporary Times.

 

In terms of historiography of the mismanagement of Civilization, as we know it in recorded history, what we are witnessing now must have been theoretically obvious to every Economist that ever graduated from any university in the entire world.

 

Play time is over for the so-called 'academics' in the Ivory Tower. Columbia University, MIT, Harvard, Princeton, Oxford, and University of Chicago, et al, can now worship the ground I walk on, and kiss my feet, for I, for one, rule over them in contempt. The Bible was right, they are my footstool.

Sun, 10/04/2015 - 17:45 | 6629125 ebworthen
ebworthen's picture

Talk to me about "markets" when we get back to S&P 666.

Until then it is nothing but FED/Treasury spun cotton candy.

Sun, 10/04/2015 - 17:48 | 6629135 Peak Finance
Peak Finance's picture

OIL OIL OIL OIL

Russians are running around the desert

Iranians are soon to be running around the desert (outside their borders I mean)

Saudies are soon to be running around the desert (outside their borders I mean)

IF ISIS is real, expect oil well fires as they relinquish territory scortched-earth style

NO future pipelines in the area

The snap-back in oil price is going to be head-spinning. I can't believe it's not 75 a barrel now.  WTF right? 

Going longerer oil on monday.

Sun, 10/04/2015 - 19:29 | 6629345 Flying Wombat
Flying Wombat's picture

How Come No One Will Attack The Comex Gold Short?

TND Guest Contributor: Dave Kranzler

http://thenewsdoctors.com/?p=516426

Sun, 10/04/2015 - 20:17 | 6629462 honestann
honestann's picture

Correction:  Markets no longer exist, only manipulations.  That pretty much explains everything.  Central planning always leads to mass destruction and little production.

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