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

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.

Comments

[slewie the pi-rat]

slewieInSharkskinSuit.BiCheZ!

[mynhair]

Dog!

Nice knees, tho.

[Yen Cross]

 For you and the Little Mrs. Slewie,  http://www.maxand99.com/images/86992.jpg

[Milton Waddams]

is bernanke legally bound to act in the best interests of the shareholders of the federal reserve?

[mynhair]

Depends on what the meaning of 'is' is.

[iDealMeat]

Get to know em..  Some Citi Board members.

Judith Rodin President, Rockefeller Foundation

• President, Rockefeller Foundation - 2005 to present
• President Emerita, University of Pennsylvania - 2004 to present
• President, University of Pennsylvania - 1994 to 2004
• Provost, Yale University - 1992 to 1994
• Director of Citigroup since 2004
• Other Directorships: Comcast Corporation and AMR Corporation
• Previous Directorships within the last five years: Aetna Inc.
• Other Activities: World Trade Memorial Foundation (Director), Carnegie Hall (Director), Brookings Institution (Honorary Director), White House Project (member), Council on Foreign Relations (member), Institute of Medicine (member) and New York City Commission for Economic Opportunity (member)

  Robert L. Ryan Chief Financial Officer, Retired, Medtronic Inc.  

• Senior Vice President and Chief Financial Officer, Medtronic Inc. - 1993 to 2005
• Vice President, Finance and Chief Financial Officer, Union Texas Petroleum Corporation - 1984 to 1993
• Controller - 1983 to 1984
• Treasurer - 1982 to 1983
• Joined Union Texas Petroleum Corporation - 1982
• Vice President, Citibank, N.A. - 1975 to 1982
• Management Consultant, McKinsey & Co. - 1970 to 1975
• Director of Citigroup since 2007
• Director of Citibank, N.A. since 2009
• Other Directorships: General Mills, Hewlett-Packard and Stanley Black & Decker
• Previous Directorships within the last five years: United Health Group
• Other Activities: Cornell University (Trustee) and Harvard Business School (member of Visiting Committee)

  Anthony M. Santomero Former President, Federal Reserve Bank of Philadelphia

• Senior Advisor, McKinsey & Company - 2006 to 2008
• President, Federal Reserve Bank of Philadelphia - 2000 to 2006
• Richard K. Mellon Professor, Finance, The Wharton School at the University of Pennsylvania - 1984 to 2002
• Director of Citigroup since 2009
• Director of Citibank, N.A. since 2009
• Other Directorships: RenaissanceRe Holdings, Ltd., Penn Mutual Life Insurance Company, Columbia Funds and B of A Fund Series Trust*
• Previous Directorships within the last five years: N/A
• Other Activities: Drexel University (Trustee), Drexel University College of Medicine (Vice Chair and Trustee) and Ben Franklin Technology Partners of Southeast Pennsylvania (Director)

*Mr. Santomero will resign from B of A Fund Series Trust's Board as of June 30, 2011.  

Diana L. Taylor Managing Director, Wolfensohn Fund Management, L.P.  

• Managing Director, Wolfensohn Fund Management, L.P. - 2007 to present
• Superintendent of Banks, State of New York - 2003 to 2007
• Deputy Secretary, Governor Pataki, State of New York - 2002 to 2003
• Chief Financial Officer, Long Island Power Authority - 2001 to 2002
• Vice President, KeySpan Energy - 1999 to 2001
• Assistant Secretary, Governor Pataki, State of New York - 1996 to 1999
• Executive Vice President, Muriel Siebert & Company - 1993 to 1994
• President, M.R. Beal & Company - 1988 to 1993 and 1995 to 1996
• Senior Vice President, Donaldson Lufkin & Jenrette - 1984 to 1988
• Vice President, Lehman Brothers Kuhn Loeb - 1982 to 1984
• Associate, Smith Barney Harris Upham - 1980 to 1982
• Director of Citigroup since 2009
• Other Directorships: Brookfield Properties and Sotheby's
• Previous Directorships within the last five years: Allianz Global Investors and FNMA
• Other Activities: Accion International (Chair), AMFAR (Secretary), Columbia Business School (Board of Overseers), Dartmouth College (Trustee), Hudson River Park Trust (Chair), International Women's Health Coalition (Treasurer), Mailman School of Public Health (Board of Overseers), New York Women's Foundation (Vice Chair), The After School Corporation (member) and YMCA of Greater New York (member)

  William S. Thompson, Jr. Chief Executive Officer, Retired, Pacific Investment Management Company (PIMCO)  

• Chief Executive Officer, PIMCO - 1993 to 2009
• Salomon Brothers Inc. - 1975 to 1993
• Chairman, Salomon Brothers Asia Ltd - 1991 to 1993
• Head of Corporate Finance, Western Region - 1988 to 1991
• Managing Director and Head of Institutional Sales, Western Region - 1981-1988
• Joined Salomon Brothers - 1975
• Director of Citigroup since 2009
• Other Directorships: Pacific Life Corporation
• Previous Directorships within the last five years: N/A
• Other Activities: Pacific Symphony Orchestra (Director), Thompson Foundation for Autism (Chair), Thompson Family Foundation (President) and University of Missouri (President's Financial Advisory Council)

Ernesto Zedillo Director, Center for the Study of Globalization and Professor in the Field of International Economics and Politics, Yale University  

• Director, Center for the Study of Globalization and Professor in the Field of International Economics and Politics, Yale University - 2002 to present
• President of Mexico - 1994 to 2000
• Secretary of Education, Government of Mexico - 1992 to 1993
• Secretary of Economic Programming and the Budget, Government of Mexico - 1988 to 1992
• Undersecretary of the Budget, Government of Mexico - 1987 to 1988
• Banco de Mexico - Economist, Deputy Manager of Economic Research, Director General of FICORCA, Deputy Director - 1978 to 1987
• Director of Citigroup since 2010
• Director of Citibank, N.A. since 2010
• Other Directorships: Alcoa Inc., Procter & Gamble Company and Grupo Prisa
• Previous Directorships within the last five years: Electronic Data Systems Corporation and Union Pacific Corporation
• Other Activities: ACE Limited (Member of International Advisory Board), Rolls-Royce (Member of International Advisory Board), BP (Member of International Advisory Board), Credit Suisse Research Institute (Advisor), World Economic Forum (Foundation Board), The Global Development Network (Chairman) and The Group of Thirty (Member)

[Yen Cross]

 HEY Link?/ Head back to the Mod Squad.   http://en.wikipedia.org/wiki/The_Mod_Squad

[letitgo]

[post moved to more appropriate article]

[quacker]

I’d close it. What is this giant hamster wheel accomplishing for our society?

Tens of thousands of points in and out of the Dow,  thousands in and out of the S&P only to more or less sit where we sat a decade ago.

In out in out in out in out in out in out in out in out – endless commissions for Wall Street, endless hamster shit for Main Street,

[junkyardjack]

I can't wait to see this week's Short Interest, hopefully a bunch got knocked out last week so this thing can breathe a little bit on the way down

[TooRichtoCare]

But....but... I own Morgan Stanley at $21 !!

Surely you don't suggest I sell it at a loss !!   

Surely you reallse it's a $30 stock !!

[Mark123]

I just love the attempts to put lipstick on this pig of a rigged, manipulated, broken market.

today's rationale for the 1.5% jump -buyers jump back into market after 2 down days.  Wow...how logical and highly technical.

[Jeff the Gorilla]

Discussion of Bill Gross' Recent Comments about the Equity Markets

http://www.tickbytick.co.uk/home/discussion-of-bill-gross.html

[Monedas]

The G-Pap should tell the Merk and the Sirk whatever they want to hear ! Take the 160 Billion Euros and buy 10 million + ounces of Gold ! Panic percipitated, perpetrated and problem solved ! Monedas 2011 Comedy Jihad Solvency Solutions

[Father Lucifer]

Excellant charts and analysis from them Citi guys.

[URZIZMINE]

Have these guys ever heard of Europe?

[mynhair]

No, where is that?

They only know the nearest wastebasket to puke in...

[virgilcaine]

The tbill rate is negative.. you pay the Govment to hold you money.  

[RS2OOO]

I like John Noyce's analysis. I have great respect for his work.

In regards to similarities between 2007 and present time, check out these 3 DOW charts:

DOW 2007 bull market top and subsequent 7 Month retrace to trend line backtest:

http://www.indexswingtrading.com/wp-content/uploads/2011/10/DOW-2007-Daily-Backtest-comparison-30th-Oct-2011.jpg

DOW 2011 market top and subsequent 7 Month retrace to trend line backtest:

http://www.indexswingtrading.com/wp-content/uploads/2011/10/DOW-daily-Backtest-resistance-30th-Oct-2011.jpg

Same chart, 3 days later:

http://s17.photobucket.com/albums/b57/stevevickyl/Charts/?action=view&cu...

[RiverRoad]

Beware of ANYTHING Citi says in conjunction with the Vampire Squid.

[Yen Cross]

 Fast Times at , { Bull shit High}.   Or better yet!   Bueller, bueller, bueller?  

   Thanks for your time. Abe Fromann.

  Who ever calls those charts readable is dysfunctional, or a serious SWING trader! Sticks and candles say that shit is " GREAT WHITE",  Period!

    Ask Father williams himself! Williams curve.  Look it up your selfs.

[midgetrannyporn]

I disagree. Besides, I don't think C knows anything about anything.

[mynhair]

I disagree with you:  C knows what TU stands for.

Cuz they are.

[AmazingLarry]

Failed move, bitchez.

[steelrules]

It's seriously confusing to try and figure out this market, on the one hand we have melt up because of the printing press  but on the other hand we have the collapsing global financial system.

Melt up = DOW 25,000 or Bank and sovereign defaults = DOW 4000.

 Up or down what's it going to be ?????????

[Boston Wealth]

We have been calling for the same with our big picture analysis. 

Caught over 50 ES points on the downside after catching over 100 ES point rally

[cfuligni]

Nice post but these types of overlays never work as expected.   The only usefulness is to remind us what is possible. 

[chinaboy]

"20 year old math Ph.Ds who only know charts" program computers to control the market, plus their professors who mass print money with German machines. Makes you wonder what is happening to the capitalism in the USA.

[chinaboy]

"20 year old math Ph.Ds who only know charts" program computers to control the market, plus their professors who mass print money with German machines. Makes you wonder what is happening to the capitalism in the USA.

[prophet]

What I see tells me we may see 1400 on SPX sometime in next 12 months.  Its fine to short into this but be positioned so its not ruinous. 

Did you realize that one out of every eight stocks in the SPX is APPL?

[luna_man]

Tyler, where were you 15 yrs. ago?...Don't matter, you're here now!

ALWAYS INFORMATIVE!!

[msmith]

An interesting look at the DX shows that it may be set to push much higher.  http://bit.ly/stwICI

[Cat On A Ledge]

Well, you'll know a true bottom* is in when the good news trickle in and yet nobody moves a finger. Until then, i'd much rather take the risk of missing a rally than get trapped in a crash.

P.S. Last i checked, ravens were black (avians).

P.P.S. This whistleblower makes a great x'mas present for kids! http://www.birdy.nl

* Or when they start restricting account functions. See you next year!

[Milton Waddams]

Luxury job-   jealous, i can produce charts with 12 month MAs and Fibs too.  CHEAP!

Not really, you pennance is checking into the most  soul crushing jobyou could ever experience, and assume this is ir, for the rest of your life.