What The Charts Say: "US Stocks Are In Riskiest Position In Seven Years"

Tyler Durden's picture




 

Via John Murphy,

MAJOR STOCK INDEXES ENTER CORRECTION TERRITORY... After suffering the worst start to a new year in history, the U.S. stock market has entered correction territory which is defined by a drop of 10% from its old high. The charts pretty much speak for themselves. All three major stock indexes fell to three month lows in heavy trading. The next downside target is the two lows formed in August and late September.

What the indexes do from there will determine whether the current downturn is just a correction or something more serious. Unfortunately, some portions of the market have already broken those support levels.

SMALL AND MIDCAPS BREAK SUPPORT... Relative weakness in small and midsize stocks gave early warnings in December that the yearend rally was mainly a large cap affair and too narrow to continue. That situation has gotten a lot worse since then. Charts 4 and 5 show the Russell 2000 Small Cap and the S&P 400 Mid Cap indexes falling below their 2015 lows. That puts them at the lowest level since October 2014.
 

That's another important test for them and the rest of the market.  

TRANSPORTS ENTER BEAR MARKET TERRITORY... Chart 6 shows the Dow Jones Transportation Average falling to the lowest level in two years. It has lost -25% from its late 2014 high which puts it into bear market territory. What's surprising is that the transports haven't gotten any help from plunging energy prices. That may carry bad news for Dow Theorists who link the direction of the transports with the Dow Industrials.

It may carry good news for the Dow Utilities, however, which are showing more resilience. Chart 7 shows the Dow Utilities holding up a lot better than everything else.

It was the only market sector to register a gain during the week. Its relative strength line (top of chart) is rising as well. Since utilities are considered bond proxies, their relative strength large reflects the recent rotation out of stocks and into bonds.

BOND/STOCK RATIO FAVORS BONDS... As usually happens when stocks fall, bond prices are rising. That's especially true of longer-dated Treasury bonds. The green line in Chart 8 is a ratio of the 7-10 Year Treasury Bond ishares divided by the S&P 500 SPDRs. The ratio spiked last August when stocks tumbled.

The ratio has spiked again to the highest level in three months. Bond prices are also benefitting from the deflationary impact from falling commodity prices. Two other assets attracting safe haven buying are gold and the Japanese yen. Some measures of foreign stocks (both developed and emerging) have already fallen to 52-week lows. That doesn't bode well for U.S. stocks which are now in the riskiest position since the bull market started seven years ago.

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Sat, 01/09/2016 - 17:21 | 7023087 45North1
45North1's picture

S&P going sub 1867 will give the PPT a chance to show what it can really do... which may be nothing, Is it time to return to the mean pre election so the next POTUS has a clean slate to start the next pump.

Bush took a lot of heat, Obama will too.

Strange days indeed.

 

Sat, 01/09/2016 - 17:26 | 7023106 El Oregonian
El Oregonian's picture

Knocking your stocks... er, socks off!

Sat, 01/09/2016 - 17:37 | 7023145 DownWithYogaPants
DownWithYogaPants's picture

So what you are saying is presidents are combination puppet / pinyata.  

I can get wiff dat.

Sat, 01/09/2016 - 17:42 | 7023169 Scooby Dooby Doo
Scooby Dooby Doo's picture

Scooby's going to win the lotto tonight! I bought 100 tickets with my credit card today. I will win something I know it!

Sat, 01/09/2016 - 18:11 | 7023274 KesselRunin12Parsecs
KesselRunin12Parsecs's picture

Fuck stawks! seriously! The only thing more idiotic would be buying a Powerball ticket (& if you somehow won, I hope you fucking put it all into stocks & the Dow & US dollar go to zero).

 

other than that, HAVE A NICE DAY! :-) lol

Sat, 01/09/2016 - 18:32 | 7023339 Scooby Dooby Doo
Scooby Dooby Doo's picture

Hey be nice to Scooby he's going to win $900 million highly coveted US Dollars tonight!

Sat, 01/09/2016 - 19:44 | 7023580 new game
new game's picture

rewind! i think i saw this show, reruns are boring, not much to enjoy. we know the ending. qe 4-6. 

"whatever it takes"(heard that before?), for the fed to somehow remain in control(and they will). qe, bond buying frenzie. que the bernank II shitshow...

Sat, 01/09/2016 - 17:23 | 7023095 yellensNIRPles
yellensNIRPles's picture

If shit continues down this path the Dems are fucked. No way the country swings left with gun grabs, multi-culturalism being forced down our collective throats and a shit-fuck economy. 

Sat, 01/09/2016 - 18:41 | 7023367 Vlad the Inhaler
Vlad the Inhaler's picture

But you forgot that white males are already a minority demographic in America LOL.  

And that it doesn't matter a shit whether the Republicrats or Demopublicans are elected to office, because they both work for their corporate masters, not their voters.

Sat, 01/09/2016 - 17:24 | 7023096 CHoward
CHoward's picture

So much red - is that a signal for bullish?

Sat, 01/09/2016 - 17:29 | 7023116 El Oregonian
El Oregonian's picture

No, it means time of the month.

Sat, 01/09/2016 - 18:05 | 7023263 KingFiat
KingFiat's picture

Not all red. This article is way too bullish for equties...

Sat, 01/09/2016 - 17:28 | 7023114 Peltast
Peltast's picture

The Jews will just take the money and run for the Rotshchild Sandbox, the NWO Capital will be Jerusalem.

Sat, 01/09/2016 - 17:32 | 7023128 Truth Eater
Truth Eater's picture

I am beginning to think the global controllers are confident they have everything in place and will now let the SHTF.  I see them slowing the crashes but things are still dropping.  This coming week will shine more light on what the devils plan to do. 

Sat, 01/09/2016 - 17:42 | 7023136 DOGGONE
DOGGONE's picture

See the Real Dow, long ago to just now!
http://www.showrealhist.com/recDJIAtoRD.html
Yesterday's close was below that of 1-14-2000, which was the all time high for the next 13 years.
Note MANIPULATED MARKET link here
http://showrealhist.com/RDlnk.html

Sat, 01/09/2016 - 17:40 | 7023157 Yen Cross
Yen Cross's picture

 Most shorted will "Ketchup" to the FANG's, or what ever they call them next week.

 Did I mention, I'm short corporate debt?

Sat, 01/09/2016 - 18:02 | 7023227 two hoots
two hoots's picture

How would one know what companies can service/refi/issue their debt vs one's that can't without waiting for the obvious?  I agree there is potential for lots of default.  Insider selling (not real time)?

Sat, 01/09/2016 - 18:16 | 7023298 bamawatson
bamawatson's picture

this does not directly pertain to your question. is an interesting nugget of which i only recently became aware. we all know caterpillar is in trouble. i did not know that, unlike most 'sellers', they completely in house finance their equipment sales. ouch, talk about mark to fantasy

Sat, 01/09/2016 - 18:45 | 7023391 Yen Cross
Yen Cross's picture

 Any prudent trader. Ex- Lifeguard would know.

Sat, 01/09/2016 - 17:42 | 7023165 khnum
khnum's picture

Doctor Yellen's gonna fix ya

with a bottle of QE4 elixya

your gonna be cured

your gonna be cured

your gonna be cured

Sat, 01/09/2016 - 17:50 | 7023204 Winston Churchill
Winston Churchill's picture

You misspelt Curie.

Sat, 01/09/2016 - 17:50 | 7023203 two hoots
two hoots's picture

Can one sane person convince me how we can recover from this situation (you know the list)?  

If equities continue their slide and the country continues toward recession, Washington/Fed will stimulate, they have no choice (PBGC, banks, etc.).  Even then,  I doubt people will adjust well to, no jobs, low paying jobs, lower pensions under PBGC, lowered lifestyles, lowered expectations.  If we do bottom out, how do we climb out of this without building debt upon debt?

Sat, 01/09/2016 - 17:52 | 7023215 khnum
khnum's picture

Federal Reserve is at 77 to one,its insolvent,maybe you can try the IMF its at 3 to one

Sat, 01/09/2016 - 17:58 | 7023228 Truth Eater
Truth Eater's picture

And that is the game.  They define recession by stock prices.  They fake the stock prices but the real economy is in a depression- so everyone pretends we are possibly going into a recession.

 

Recover?  Hmmm, the body is dead.  No recovery. 

He's dead Jim.

https://www.youtube.com/watch?v=3at_Ev2kOoI

Sat, 01/09/2016 - 18:42 | 7023373 Vlad the Inhaler
Vlad the Inhaler's picture

Control-Alt-Del

Sat, 01/09/2016 - 17:54 | 7023218 stopthejunk1
stopthejunk1's picture

Technical analysis... the financial superstition of our times.

I'm baffled as to how the same group of readers can applaud articles that consider mainstream economic theory ("Keynesianism") to be voodoo, yet also wholeheartedly believe that technical analysis has any predictive power -- in the face of all evidence, scientific and anecdotal, that it is pure bunk.

Animal spirits are alive and well.

Sat, 01/09/2016 - 18:04 | 7023256 ebworthen
ebworthen's picture

It made my week to see the S&P close below 1950.

Ways to go to get back to true valuation of 666, but it's a start!

Sat, 01/09/2016 - 18:26 | 7023328 Manipuflation
Manipuflation's picture

Alright here we go folks.  We have the $900 million Powerball lottery tonight.  To win the lottery takes a lot of strategy.  I have the whole thing figured out you know so they might as well just tax me on the winnings now.  We are all going to be rich I tell you.  I have already sent inquiries regarding the purchase of the Eccles building in some shitty town out East for bulldozing practice.

No, really, I bought a lottery ticket for only the second time in my life.  I picked my own numbers and they are 1,2,3,4,5, with 6 for powerball.  You should see the sheeple getting all whipped up over this shit.  The lottery is for the mathematically impaired.  So is the stawk market.  I just needed that ticket to add to my stacks of silver for some humor. 

Sat, 01/09/2016 - 18:29 | 7023333 Keyser Sose
Keyser Sose's picture

"Charts are marvelous tools for predicting the past."   -- Eliot Janeway

Sat, 01/09/2016 - 18:48 | 7023401 Yen Cross
Yen Cross's picture

 I can't stop laughing... The pinheads living off of >Gov pensions are trying to MILK trading strategies from the " Private" Zero Hedge, trading community.

Sat, 01/09/2016 - 18:58 | 7023432 FlacoGee
FlacoGee's picture

How soon you people forget.

BUY THE FUCKING DIP

https://www.youtube.com/watch?v=0akBdQa55b4

This time is -not- different.  

BUY THE FUCKING DIP

 

 

Sat, 01/09/2016 - 19:00 | 7023436 FlacoGee
FlacoGee's picture

Honestly, I am hoping for a relief rally to short moar.

Sat, 01/09/2016 - 19:03 | 7023440 franzpick
franzpick's picture

The next downside target is the two lows formed in August and late September...

All the sector indices except INDU, SPX, NAZ, NDX, VTI and a couple more have already taken out their Aug. and Sep. lows, and are pointing to new bear market lower lows down another 3% plus. See VALUG, NYA, RUT, MID and SML below for example. 1 or 2 more big down days, or another bad week, and the Aug-Sep lows will be history for everything:               

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=nya&insttype=&freq=1&show=&time=8

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