Citi: "The Bear Market Rally Is Behind Us; We Anticipate A Move To 1,000-1,015"

Tyler Durden's picture

While we are the last to put much weight in the predictive power of technical analysis, lately it has become all too clear that the only thing more worthless than technicals is fundamentals. Which unfortunately means that with the lowest common denominator (and marginal price setter) in the market being robots, in turn programmed by 20 year old math Ph.Ds who only know charts, it may be time to revise our skepticism. Enter Citigroup's Tom Fitzpatrick, who together with Goldman's John Noyce, are the two best sellsiders in this particular field. In short, neither has much good to sayl in fact when it comes to near-term bearish sentiment, it will be hard to find someone as pessimistic as Fitzpatrick, even among the Janjuahs and Rosenbergs of the world. Citi's conclusion from a just released note should be enough to scare anyone who believes that the bear market rally started just about a month ago will persist: "While we respect the October monthly close on the S&P 500, we did not close above the 12 month moving average...we believe the bear market rally is behind us and anticipate a move towards the 1,000-1,015 target over the weeks and months ahead." And while charts will never be a good guide as to what words may come out of G-Pip's mouth next, with so much market action these days being purely backward looking, we would urge caution.

From Citi:

What to make of the monthly close on the S&P 500

  • October 2011 saw the largest monthly gain on the S&P 500 in almost 20 years (since December 1991)
  • We also saw a bullish outside month posted in October
  • Does that mean everything is fine and we are set to go higher? No
  • While the monthly close may seem constructive it alone is not enough. The charts below instead suggest that the downtrend has resumed and a move towards our 1,000-1,015 target area lies ahead

To all who say the market looks like either 2007 or 2008, relax: you are both right!

  • The price action over the past few months closely resembles that seen after the Oct 2007 high.
  • More recently the bounce in Oct reminds us of the bear market rally in the second Quarter of 2008.
  • That 2008 rally could not sustain above the 200 day moving average.
  • The same has been seen this time with the 200 day now coming in at 1,273.

...Throw in some 76.4 Fibonnaci, rinse and repeat

  • Held the 76.4% Fibonacci retracement of the May-Oct 2011 fall on the log scale chart which comes in at 1,294 (it is at 1,300 on the linear scale).
  • Triple negative divergence is now in place reflecting weakness in the bounce and warning of a turn down.
  • We also saw triple negative divergence at the high of the bear market rally in 2008…

  • Triple negative divergence was also in place when we failed to push through the 200 day moving average at the peak of the bear market rally in 2008

In other markets we see:

  • Key pivots holding on U.S. curves suggesting a trend of curve flattening ahead
  • The double top in U.S. 2’s-10’s in particular stands out as it targets 100 bps from a current level of 180 bps. We struggle to see how that target will be tested on the curve with rising yields and instead foresee a bull flattening suggesting a move towards the 1.25% area on U.S. 10 year yields (long term multi year channel base)
  • A worsening situation in the periphery of Europe (as per our daily charts yesterday)

In conclusion:

A worsening situation in the periphery of Europe (as per our daily charts yesterday) While we respect the October monthly close on the S&P 500, we did not close above the 12 month moving average. The charts above, our long term overlays (1910, 1940 and 1977) and the recent setups/developments across other asset classes makes it very difficult for us to abandon our medium term bearish stance on equities here.


Instead we believe the bear market rally is behind us and anticipate a move towards the 1,000-1,015 target over the weeks and months ahead.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Flakmeister's picture

Am I being told to dump my SDS??

NewThor's picture

As Euro markets bleed out, USA markets will rise. Maybe 10% to 15% more.


WestVillageIdiot's picture

Euro markets were up today.  The DAX is now 20% off its October lows.  That doesn't seem like bleeding out to me. 

Perma Bull's picture

That's because the DAX is denominated in PAPER. PAPER is NOT BACKED by ANYTHING. Better get your phyiscal SILVER soon cos that price is gonna EXPLODE! QE to INFINITY!!!

Comay Mierda's picture

look for a Dow/Gold ratio of 1 in the coming collapse that will mark the turnaround

ratso's picture

So, are we to believe that this is like 2008?? No, I don't think so.

Are we getting another announcement that THE SKY IS FALLING?  If all the announcements of impending doom were close to being true, the damn sky would have crashed and burned years ago - 2008 to be exact.

Do Citi and Goldman Sachs all of a sudden become the beacons of truth after having been such utter thieves and liars? No, i hardly think so.  Their assertions  are open to serious question based on nothing more than their all to often impeached source.


Libertarians for Prosperity's picture



While we are the last to put much weight in the predictive power of technical analysis, lately it has become all too clear that the only thing more worthless than technicals is fundamentals.

Hold it right there, partner!

What about Turd Ferguson?  His ability to make 24 hour predictions is, quite frankly, a true blessing in our endless fight against Blythe and the "Cartel."  While I don't actually "play with paper" (I'm a stacker!), I have many friends who have used Turd's technical analysis and have become extremely wealthy. 

I think we all can agree that Tyler needs to be a little more careful in his generalizations. 

Ron Paul 2012  END THE FED!

Shocker's picture

The stock market is going to do whatever it wants, regardless of what is going on in the economy.


Withdrawn Sanction's picture

Yeah, me too. The corpses are wearing Manolo Blahnik shoes and Saville Row suits, the pockets of which are stuffed w/uncashed bonus checks drawn on bankrupt banks....

Perma Bull's picture

These prices are CHEAP. Wait till Bernanke turns on the printing presses - ALL real assets are going to EXPLODE. I predict S&P at 10,000, gold at 100,000 when Bernanke anounces QE3,QE4,.........,QE infinity!!!!!!!! HYPERINFLATION BITCHES!!!

FutureShock's picture

No the market will rocket up on QE and Gold money will move to equities. Great time to buy PM's but expect a dip short term if QE.  Logic would make sense that gold goes up but no, nothing is logical anymore.

Pitchman's picture

Check out: Fibonacci Numbers - The Fingerprint of God & God Within


See how money, created out of thin air has exploded the worlds financial sector and, it can disappear as if it never existed:

Evaporation of Wealth on a Vast Scale: How $Millions - Trillions Can Disappear


Check out the fascinating interview on the evolution of corruption with Ms. Fitts.  And, If you're interested in the depth of the Rabbit Hole and the psychopaths within, see the "Dillon Reed and Company: And the Aristocracy of Stock Profits" link at the bottom of: The Looting of America: Happy Labor Day


Inflection Point

crazyjsmith's picture

Thanks for those links P-Man.  C. Fitts should be our next Secretary of the Treasury, she is amazing.  

Manthong's picture

I can identify with that.

Good stuff.. cover graphic a little risque, though.

CPL's picture

You should apply to the Federal Reserve.  They are looking for smart kids like you.

SheepDog-One's picture

Well how do you figure that, NewThor?

CPL's picture

Shhhh, don't ask that question...Thor has spoken.

NewThor's picture

I ain't the Expert at micro, macro and granular economic happenings in all places.

That's why I come to ZeroHedge. To learn from the best of the best.

O just figured that the Euro Zone looks set to tank first,

and Nostradamus says the same shit. Europe gets smashed, then America.

So with all this liquidity sloshing around, I thought that when Greece tanks,

shit loads of money will be yanked out of there and most of it will end up around the USA.

And that'll last for 3-5 days, then CRASH BITCHEZ! Right?

and seriously, CPL

Me go work for The Serpent?

You should brush up on your Norse Religion.

I die destroying the Beast, not working for it.


junkyardjack's picture

Yes that makes sense, stocks should rally as the dollar gets stronger...

Withdrawn Sanction's picture

As Euro markets bleed out, USA markets will rise. Maybe 10% to 15% more.

Right, because every dollar (euro) taken out of one market frictionlessly shows up in its competitor.  You might want to check your logic there, friend.  Start w/the concept of discontinuity.   Then try studying up on "herding" and "panic."  And maybe if that doesnt upset your priors, consider "illiquidity." 

What happened to Old Thor?  He was more exciting, or at least not trite.

Balmyone's picture

Sometimes this market seems like such a scam. 

Will Greece default already.

Anyone have any clue which direction the market is going to go tomorrow?

Will Friday's employment report make any difference.



WestVillageIdiot's picture

Perhaps we need to develop a new word for this thing.  "Market" doesn't seem appropriate.  Calling this a market is like saying wrestling isn't fixed or calling a bowler an athlete.  I know people like to use the word "casino" but this doesn't seem right either.  if a casino operator ever tried this shit they would be getting the type of treatment DeNiro gave to the guys that were counting cards in Casino. 

pauhana's picture

I keep thinking of the way dolphins herd anchovies.  The little fish swim left, then dart right, but eventually get rolled into a nice, neat ball - the more efficiently to be eaten by the big fish.  Most trading days I feel like the anchovy.

Dumpster Fire's picture

I prefer the Orca's method of smacking the fish ball senseless with it's massive tail and scooping up the stunned sushi.

TeamDepends's picture

How 'bout "fixed barbaric crapshoot"?

J 457's picture

"Anyone have any clue which direction the market is going to go tomorrow?"

Yes, tomorrow will start down, with a recovery into close with slight loss.

Friday, start up with better tha expected BLS report, with sell off late in the day as people realize 9.1% for the last year is not really much progress after spending a few trillion in QE.

Monday, down triple digits after a few EU bank downgrades and more EFSF squabble.

Note, I'm correct at least 50% of the time.

Aguadulce's picture

60% of the time, it works every time......

Mugatu's picture

Agree with you Flakmeister!  I don't like it when the big boys are on the same side of the trade.

Flakmeister's picture

I'll hold my SDS for now, but I do have an itchy trigger finger...

 It is somewhat hedged by selling OTM calls against it... (The calls take care of the NAV decay)

Triple A's picture

this market is a fuggin rollercoaster


Long-John-Silver's picture

99.99% of all roller coaster rides come to a pleasurable end. This one will not.

NewThor's picture

Roller coaster with a Happy Ending!

WestVillageIdiot's picture

Me ruv you rong time.  Weeeeeeeee.

theMAXILOPEZpsycho's picture

yes rollercosters are especially good if you have a thai prostitute jerking you off while you're riding

Let them eat iPads's picture

100% of roller coaster rides end at the bottom.

WestVillageIdiot's picture

Just like so many wonderful nights that end in the gutter or with your face in a toilet.  The Piper doesn't do volunteer work. 

SheepDog-One's picture

Hopium hangover is a real bitch! 

junkyardjack's picture

This roller coaster has been stuck upside down, emergency crews are on their way

Carlyle Groupie's picture

"this market is a fuggin rollercoaster"

It's suppose to be. When they get done with you you'll be begging them to allow you to move what money you have left into their "distressed" real estate. (Which is actually overpriced and always will be).

Get it? The banks always win.

Zola's picture

This market has failed to anticipate major events and major economic development. Its prediction power is seriously weak. I give it a C-    . Probably due to the large population of lemmings out there.

Tense INDIAN's picture

or may be there is just toooo much money in the system

WestVillageIdiot's picture

Or maybe this thing is as unnatural as a woman's feet that have been bound for fifteen years.  This thing has been stunted to the point where it is no longer recognizable.  A free market is when you give a girl 2 silver eagles for a blow job.  That is capitalism.  This is something out of a Vincent Price movie. 

billhilly's picture

2 Silver Eagles !  Holy cripes !  Up here in the hills that'd get you two weeks of sleep overs and some cabin cleaning during the day.  You must be from the big city.

WestVillageIdiot's picture

Say "hey" to everybody in West Virginia.  I've never been with a woman that had 13 toes. 

billhilly's picture

Me either, you don't think I'd sleep with my cousin do ya?