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Guest Post: The Market's Getting A Wedgie
Via Charles Hugh-Smith of OfTwoMinds blog,
The "risk-on" stock market is getting a wedgie, and so is its "risk-off" counterpart, the U.S. dollar.
The U.S. stock market is getting a wedgie, and so is the U.S. dollar. That matters, as wedges tend to break up or down in a big way. Stocks are a "risk-on" trade, the dollar is a "risk-off" trade, so they are riding a see-saw with wedgies. Yes, I realize this is an unpleasant image, so let's turn to the charts.
A wedge is characterized by a compression of price into a narrowing triangle as Bulls and Bears battle over who will lead the next trend. The wedge is clearly visible on a daily chart of the S&P 500 (SPX). Note the loss of momentum in the recent uptrend as RSI, the Bollinger bands and the 20-day moving average (MA) are all trending down.
We see two wedges on this weekly chart of the U.S. dollar index (DXY, or on stockcharts.com, USD). The first wedge was traced out between May and August 2011, and it broke to the upside in early September 2011, resulting in a 10% gain in the next few months.
Now another wedge has been traced out around the key long-term line of support and resistance around 80. The direction of the break may be telegraphed by MACD, which is solidly above the neutral line and the stochastic, which is also trending higher.
Here is a daily chart look at the same wedge. Even the MACD has formed a wedge of consolidation-indecision.
Since the SPX is risk-on and the dollar is risk-off, then any move in one will likely be reflected in the other. These wedges are nearing the point of decision, so next week might be slightly more interesting than the previous three weeks.
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i just bought golds and silvers, don't like no wedges formations.
Gold and silver have the same wedge formation but extremely negative sentiment.
Financials and treasuries not signaling the happiness of the broader equity indices. Something else afoot. I expect an ugly Monday.
yeah, but i couldn't wait. been waiting for gold to crash for 3 months. i like buying the dips.
Natural gas has had extreme negative sentiment for the last 2 years but that has not helped it one bit.
Everybody is getting a wedgie.
Technically, the Talent Manager for BIS is getting a "cameltoe"..........
LMAO
LMAO
OH Im sure the wedge will break wildly to the upside, why the hell shouldnt it? Hell we've got rumors of QE NEW to unleash to pop it all back over the all-time previous bubble top. Its a celebration, bitchez, etc etc.
Until things come apart for real, I don't see how you can be wrong.
I concur SheepDog. All we have seen for nearly 5 years is the same retaliation of fist fulls of worthless fiat.
Long Oil, Silver and Gold. Oil first and foremost now.
thats not a wedge, its a consolidation triangle, your RSI divergence is invalid without a new.....
Add the HUI and gold to the list of assets doing the wedge...
Check out the aapl insider trading from march. Timmy said "YOURS" at $600
Great, I am traveling out of the country next week. The last time I traveled was last summer when the market was whipsawing 200+ every day.
Time for an edge formation.
Noticed that in the EURUSD at the beginning of the week. On a weekly chart, I've been following the one the DX_F is making since the end of last Aug. Somewhere in the next 2 months we'll see a break-out.
The fix is in fellas. Stocks going to all-time highs. Nominal GDP and retail sales are at all-time highs. Corporate profits at all-time high. Interest rates at all-time low.
Yes it's that simple.
in that case, so is inflation.
You say nominal GDP is at an all time high like it's some incredible accomplishment. This is the worst recovery out of a recession ever, yes worse than 1932 in terms of time to get back to prior peak GDP. What does that say about growth going forward?
It's not just where we are, it's where are we are going and how fast. But I have to say, I'm not really that taken with loaning the government money at 3% interest on a 30 year bond. The fed has totally screwed the entire yield curve, at this point it's stocks or cash.
astoriajoe ----->>> all time highs.
Happy 4/20 everyone:)
yuuuup
my oil prediction chart pretty much tells the story, combined with the oil->dow mapping of prices from high correlations.
OT - Boycott Windows 8! Linux is free and more secure! Ballmer is a fascist monopoly pig! UEFI secure boot is an OS anti-competitive ripoff! Don't pay the microsoft tax!
That was really weird, but yay! and +1 for you.
Ubuntu with MAC OS X Theme. Free Apples!
risk-off
Can someone explaing this term?
yes, it is the opposite of risk-on
It means the market is up, But its just an illusion. Do not attempt to adjust the picture on your Apple display. You are in the Outer limits
Short answer: Risk off is a move away from assets percieved as 'risky' to assets percieved as less risky. Usual meaning is a broad movement away from stocks and into bonds (but there are also many other financial posibilities involving puts and calls and option plays, etc.).
I suspect English is not your first language - for general financial definitions, try here:
http://www.investopedia.com
although 'risk on' is not defined.
Or ask here on ZH - someone will usually pitch in if they know you are sincere, and not just messing with us.
It takes the risk off the billionaires and puts it on the taxpayers.
Wedges typically resolve themselves in the direction of the trend...
So then down?
That's what it's looking like this afternoon...
Well put. But not while on a correction.
Technical chart analysis defined - an obsolete art invalidated by the market distorting influence of central banks.
Algos still trade in channels...
True ... and in thousands of multiples faster than any of us can type in a password, sometimes driving the price of a target stock well below technical support lines and 50 DMAs.
Looking like BAC has plenty of support....around $5
BAC and MBIA both got hit today on news that they are meeting in court next month. I am some glad I held onto my April BAC puts to the last minute.
Bang the futures higher in the morning on nothing fundamental. Sell the hype to the sheep all day long. Same story different day.
Not to worry. Turn the charts upsidedown and everything looks great.
close to possible h&s confirmation in aapl, pcln, others
I am long junior gold and silver mining shares and i am thinking about taking a position in USD with cfd's once it breaks out of the wedge.
So are you saying that the dow and the dollar will go up or down? Wow.
Going up or down in the same direction would be the Wow.
or down and up in different directions leading no where would be pretty cool too.
nothing worse than receiving an atomic wedgie when you've got a bad case of bleeding hemorrhoids!
Anything on the Greek Banks yet?
http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_30778_20/04/2012_43...
Just a thought, but with Facebook IPO coming along in May, will the banks et al let the market fall before then? They'll want to suck as many 'muppets' as they can in to it.
DavidC
What if it forms a wedge inside a wedge inside a wedge? Which wedge wins?
the biggest one
If you are reading Ekathimerini, you will probably get the word first...
And the picture of Greece Fin Min and now PASOK leader Evangelos Venizelosin heading the article you cite is interesting. This is the man that has been preaching 'austerity' to the the Greek people for at least the last 8 months - tirelessly, day in and day out - austerity, austerity, austerity - to get the bailout(s) from the Troika.
So how much 'austerity' has this obese sob been practising? Just take a look:
http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_30778_20/04/2012_43...
How any Greek citizen can believe a work of 'austerity' out of this guy's mouth is totally and completely beyond me.
BUY everything in advance of the Obamarama landslide. The Planner-in-Chief is going to heal the middle and working classes by stickin' it to dem rich Wi-Fo's! Yee-hah!
That's a triangle to me! Wedges look different! Downward wedges are bullish and vs! Triangle shown can be anything, up, down or more sideways!
I "predict" a sideways to DOWN move, in a "big"way :))!
The ol' pump & dump is looking more plausible every day.
If, and it's a big if commodity demand is in fact slowing in china, this does not bode well for the aussie dollar, the loonie, or the real-all commodity based currencies.. further, if the BOJ does in fact expand it's balances sheet the yen will resume it's down move vs. the dollar. that leaves the magical euro and the equally magical british pound to keep the dollar basket from rising. sentiment on the dollar is pretty lousy, so a break out to the upside would probably surprise more than a bigger sell off. i don't think i'd want to be short the dollar here, but figuring this is like an algebra equation with 50 variables of which maybe 2 are known-sorta
I really fear that WB7 is going to go to town on this wedgie thing. Hopefully he keeps Merkel off the rolls...
This wedge will relieve itself in whatever direction the Fed, other CB's and their profit puppet PD's decide...period.
DOW 50,000 bitchez! By mid summer!
Question: What investment is currently in a 9 year bull market, doesn't pay a dividend and never will, has a NPV of future cash flows = $0 and has an infinite p/e ratio?
Tyler,
Since you have no Eurozone story near the top of the queue, I may as well post this here.
My take on the French elections. I think this is a real possibility and welcome comments from thoughtful - not BOO! BOO! BOO! - posters:
The situation is really very interesting.
Since a substantial portion of the French media, which is still somewhat left-leaning, wants Hollande to win, their coverage may now be much more biased than the actual facts would warrant.
For one thing, detest her jingoism as anyone sane must - (although we blithely embrace similar jingoism in the US!) - Le Pen is said to command as much as 20 percent of the electorate, maybe more in influential rural areas and among voters over 50, who tend to flock to the polls in higher numbers than the young. These voters detest Hollande and will vote for Sarkozy in Round Two, even though they dislike him, too.
Second, Melenchon has made some extravagant and off-the-wall remarks. He is not a boon to Hollande at this point, but rather an albatross around his neck.
That leaves Bayrou, the candidate of the intelligentsia, including much of the financial and media intelligentsia. (I would suspect he will get a large portion of the college professor vote.) And while both Hollande and Sarkozy have cozied up to him, Sarkozy has said he would name him Prime Minister if elected to a second term. Maybe between Round One and Round Two, he will go even further than that, offering Bayrou and his moderates a number of key government positions - the Finance Ministry? the Foreign Affairs portfolio? Labor?
This all affects the Markets, because if his fellow Europeans feel Sarkozy can pull a rabbit out of the hat, they may very well mobilize their PPTs to support him the next two weeks with higher European markets across the board and a higher Euro.
So they might go all-out to support it for 2 weeks, for a rigged election, and then what?
Bearish formations are bullish. We are in bizarro world, remember.
It took a lot of fiat and algo time to create that technical signal...
The trap is set
The clock is ticking.
What will the sheeple do?
Nothing new. Sell in May and go away.
Elliott:
It's impulsive 5 waves down from early April.
From April 9 to now ist corrective overlapping waves.
Next should be a the biggest impulse wave down (wave 3).
“Simplicity is the ultimate sophistication.”
Sell in May and go away? How poetic? Where have I heard that before? Usually from the LameStream Media in August on any given year.