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Guest Post: The Technical Evidence For A Bear Market Decline
Submitted by Charles Hugh Smith from Of Two Minds
The Technical Evidence For A Bear Market Decline
What is the technical evidence for a Bull or Bear market? If we keep it simple, the evidence is soldily Bearish.
Without getting too fancy, let's look for technical evidence of a Bull or Bear market in today's charts. On a day-to-day basis, the market has experienced huge swings: a nightmare for trend-followers who have been whipsawed repeatedly in the past two months, and a dream for short-term traders:
Is this sort of manic-depressive volatility a sign of a healthy Bull market? No, it isn't. Extended periods of wild swings from euphoria and hope to fear and despair typify markets that are about to break down.
Equally bearish is the market's inability to climb back above the 50-day moving average, which is declining and offering a solid band of resistance, and MACD's inability to regain the neutral line. Instead, this indicator has turned back down.
Without resorting to some very fancy slight-of-hand, is there anything remotely bullish in this chart?
Let's as the same question of the weekly chart of the S&P 500 (SPX):
Once again, keeping it simple, we notice the uncanny power of the 200-week moving average (MA) to provide key support and resistance. The rally off the March 2009 lows bounced off this line as resistance in May 2010; when it finally surmounted it in late 2010, the market rallied solidly for six months.
The SPX has already broken through the support offered by the 50-week MA, and is now testing the 200-week level.
Back in 2009, the market's break below the critical 200-week MA in the sand and its failure to regain it presaged the slide from 1250 to 670.
Also mirroring the 2008 setup is MACD, which is once again solidly below the neutral line and declining.
Here's what markets do when they break critical support: they re-test lows. That sets up an eventual target for this decline of 670, which would be a re-test of the March 2009 lows.
Bulls have to answer this question: once the 200-week MA is broken, why shouldn't this market re-test the recent low? If it's "different this time," what makes it different from every other era and market?
Lastly, for context, let's look at a chart of the SPX from 1965 to the present:
This chart suggests an eventual target around 600, even lower than the March 2009 lows.
It might be a good time to recall that index funds are only "safe" in the sense that they aggregate the risk of all stocks in the index. A market that declines 40% will take index funds down 40%. There is nothing "safe" about long-equity funds that track a market heading down.
Nobody knows what will happen tomorrow, much less 30 days from now or three months from now, but as of this snapshot of the market, the evidence of a Bear market decline is rather substantial, and the technical evidence of a Bull market is rather thin. As the saying goes, keep it simple.
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Six hundred! You'll have tanks in the streets!
Yes, Chinese tanks!:)
Tanks! Bitchez!
You're Welcome! Bitchez!
Bullish for rubber treads.
Environmentally friendly tank treads.
Bullish for nice big bearings! Lots of bearings in tanks!
The sheep are easily controlled by TV. They are too lazy to cancel the TV propaganda tool. They pay $100 a month for branwashing with flickering electrons on a flat screen.
Killer drones are lower cost.
Thank You. Now put the 20 dma in there, and you got yourself a chart. Toggle between daily and weekly to determine your timing.
If only technicals mattered any more. The boat is rocking, stay ahead of the oscillations people. It would be nice if TPTB stopped rocking the boat, but they want their pounds of flesh, so I doubt they will stop.
hedge accordingly (ironic I know).
1100 Support hasn't been broken yet. The jury is still out on the next move. I'm short to the gills but do not be surprised if we power higher here on some bullshit fake move forcing us shorts to cover.
Stay cautious and disciplined. Nothing is a sure thing!
Agree completely... I still think we need a little sideways at the bottom before the next waterfall. Seems like TOO PERFECT of a setup... so was 2008 though, and those were a couple scary weeks.
Awesome! Lets see what happens?!?! :(((
Good analysis. Thanks for the information!
Glad I don't play with paper.
good analysis....doesnt bode well for james altucher's claim for dow 20k LOL. What an ignorant clown....
What do you explect from a guy who styles his hair like Tim Geithner, but sleeps on it.
markets look like a traffic light right now, green, red, green, red.
it's like skynet doesn't even know what the fuck to do anymore...
Elevator operator to the market.
"Going down? Sorry, no choice in the matter. Watch your hands and feet please as I close the door."
Six hundred has been my target. All of the 90s need to be wiped out. It all has been built on leverage.
Take me all the way back to 1977 and disco fever a la 'Saturday Night Fever'.
http://en.wikipedia.org/wiki/Saturday_Night_Fever
http://www.youtube.com/watch?v=FECFb1_YdII
Or at least to 1983 when we were 'Stayin' alive, stayin' alive'.
http://www.youtube.com/watch?v=I_izvAbhExY&ob=av3e
Why not 1963 when a lowly delivery driver could by a house in Southern California for the same price as his annual wage?
Now, those were the'good old days' if you worked for a living. om
Adjust the charts to discount the upside effects of the PPT and it would look a like uglier.
Dont' forget the 80s. Basically, the period when Greenspan was chairman. Greenspan said there was no housing bubble. markets are self-correcting! yeah, self-correct ing your Great Moderation from the history books.
Anonymous declares that it will "erase the NYSE from the internets on October 10."
http://4closurefraud.org/2011/10/03/operation-invadewallstreet-a-message...
Jesus christ, you don't need fucking technicals to confirm we are in a balls deep, bear market, global mega-depression of epic and undeniable proportions--just open you fucking eyes.
Look, while they are still kicking cans down the road, the very ZH readers are getting bored to death sooner or later. So some technical yadda-yadda is at least entertaining. "Told you so!"
True.
Cone of Uncertainty
Jesus christ, you don't need fucking technicals to confirm we are in a balls deep, bear market, global mega-depression of epic and undeniable proportions--just open you fucking eyes.
Yeppers, the system has ceased to function, fiscally the planets economies are 98% in ruins, and people just refuse to see what's here, and when it hits them upside the head, there will be weeping, wailing and gnashing of teeth.
Before the bear market begins we will get a test of the 200 dma before failing. Have to get all the suckers back in while the big boys go short.
Before the bear market begins we will get a test of the 200 dma before failing. Have to get all the suckers back in while the big boys go short.
Before the bear market begins we will get a test of the 200 dma before failing. Have to get all the suckers back in while the big boys go short.
Now I get it.
what'd he say?
The late August bounce up to the 50 and 200 dma bearish cross was that chance... Game over at that point.
I miss a certain: BOOM! in here. Get the hell out of this mess.
Already lost tracked how many "trigger events" are yet to happen - and which first.
Stay safe and let's hope Xmas wont be monetized. :)
better stock up on kerosene we are getting tanks. and they are thirsty
The dollar just sold off, and silver and gold (especially gold) are trending bullishly on the day. In the long run it is still a race to the bottom between the dollar and Euro, but with their back up against the wall not only will the policy makers print, but they will lend.
What if they don't? Then Keynsian policy was wrong all along? System failure now? They will print, and lend, because they have no other option. Will they let the system crash and go to a gold standard now? No, that is in the cards for after the next election. They can not have Ron Paul as President, and if they let the system fail again now, that is what will happen.
The oilgarchs want four more years of the status quo, and then they will go to the gold standard. The still need time to fully implement their Police State
What does this mean for equities? Not much. They may pair their losses in nominal terms, but really, what good is this?
If one cares to preserve their assets then the only real investment, besides investing in self (such as learning a trade) is to own gold/silver/platinum bullion. These assets define monie by monie in definition. They hold value in that they last forever, they are a means of an exchange, they are a unit of account as they are fungible, they are a standard of deffered payment because it is a finite resource.
USD can't go back to gold peg. If it does, and remains the reserve currency, it will always post a current account deficit. Gold will leave the country over time, and none will be in the vaults.
search: Triffin dilemma.
The SDR will be issued to fund the dollar and euro after the fiat fails. The World Bank and the BIS will acccept these loans, and only these loans paid, if paid in SDR. Although the SDR is not audited, it is supossed to be backed in gold. So you will pay your debt in gold back currencie by proxie.
The USD does not have long as the reserve, because the fiat ponzi is about to end. The paper will be thrown into the furnace until there is no more paper to burn in the furnace of Bernanke fiat Hell.
Dorm Room,
You ASSUME that it's still here?.
The Fed stole it long ago.
Why fight this market. Dollar now over resistance at 79, 80 next, maybe 81. That is one mother of a headwind.
When everyone is on one side of the boat.....
Who said that everyone is? ZH is a small % of the population.
The move in the DXY has been a relative modest move from 74 to 79 considering the move in interest rates and equity. But still, there was a move into dollars, even though it was saddled by a move into gold. After the gold move happened the Federal Reserve leased gold to fund the fiat ponzi- this is their standard practice. So gold demand got quelled momuntarily, and then those that like to lease the gold got smacked by the CME and China. Thus putting the price lower.
In the melee people were caught in the shitstorm of finance and they crawled into the dollar and USTs. I would say that there are many still holding these positions.
Will they be safe hiding from the storm with their only shelter being the fiat ponzi? No.
monopoly
Go here to read the blog. Does the dollar at 100 mean shit?.
http://www.jsmineset.com/
1.) JP MORGAN CHASE BANK NA OH
$78.1 trillion OTC derivatives
2.) CITIBANK NATIONAL ASSN
$56.1 trillion OTC derivatives
3.) BANK OF AMERICA NA NC
$53.15 trillion OTC derivatives
4.) GOLDMAN SACHS BANK USA NY
$47.7 trillion OTC derivatives
anybody wanna go halv-sies on a banana split?
Very simple method to see the long term trend. Use the 50 and 200 day EMA on the S&P 500. Yahoo finance has a handy way of looking at this on their interactive charts. When the 50 day moves under the 200 day EMA, things are headed into negative territory on a long downward slide. We're pretty much screwed.
check out the 500 day! it has never failed to call a recession!
Show ur chart to Brian Sack - he might care
Here i did some checking on patterns to make some sense in future events predicted by some of my charts:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&start=580#p34357
By comparing the interesting way DJIA follows Greeces Athens General index with a 1,5 year delay, including current drop ( august/september) . The patterns match almost exactly, and also compare well to my own prediction of DJIA 2011-2013 ( see in the post I referred to).
Briefly: First, have a look at the pictures :
DJIA/Greece comparison April 30, 2011:
DJIA / Greece comparison October 3rd, 2011:
Longest DJIA prediction I have made on April 26th, 2011( not from Greeces graphs, from other patterns I use) :
Since both currencies are pegged ( Greece to EUR, USA to being a world reserve currency) , at the moment where the predicted DJIA stops falling like Greece but becomes stable or even grows due to inflation, the USA DEFAULTS and deflation is replaced by inflation. By looking at Greeces graph that takes a sharp downturn(on Greeces graph, April 2011) into levels DJIA will never reach, and calibrating the time axis of DJIA graph forward, the day of inflection point is Jan 1st, 2015, or roughly, H2 2014. That is the day when USD will be unpegged ( as Greece is still pegged) = meaning the USA will default VERY soon after that or at that time, and USA deflation will change to inflation.
That gives some time for silver stackers, I guess, since as long as USD stays as a reserve currency and deflates, and the price of silver in USD goes up at the time deflation begins, it will allow them to purchase more other things with this silver. This period will last for 2 years-long enough to prepare for what comes next. This crisis is much more stretched out than 1929 crisis.
The question still remains, why at deflation start, silver will move up 3 times while gold only 10-20%. But now its more clear where to look for answers as the scope has been narrowed.
When you go back and look at historical charts you can see that the '80s were really based on sustainable growth in equities. It wasn't until Bush came in 88 that the globalist track really started. The kiss of death was Rubin and Clinton. The great confiscation began then. The second Clinton was reelected in '96 all bets were off and the elites had free reign to destroy capitalism once an for all, corporate socialism was enacted on its way to corporate fascism.
Well home prices and incomes are on their way back to 1977 levels so why not stocks? Only makes sense.
In a perfectly rigged world-
On a daily time frame the markets moved too far in one direction and some people made money.
Floor it at 1100 and churn it sideways to take it back.
I agree with all of this EXCEPT for the call of 600 bottom. I think a more realistic scenario is a bounce from 800 again which would really be a "Diamond Bottom". This is obviously a longer say 12-24 month scenario...
hahahahaha....! no f'ing way anyone is going to predict the collapse with TA or any other method. it will be a black swan out of left field and no one will be prepared.
my prediction (guess?) is that the fed does a massive QE3 and we go back up past 1200 before we crash. the fed isnt done yet....
I remember passing some death cross bullshit in 2009 and again last summer. If all HFT programs are set to react to the same technicals, I doubt the technicals predict much of anything.
Flying tanks?
We are screwed.
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