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Guest Post: Before You "Buy the Dip," Look at These Two Charts
Submitted by Charles Hugh Smith from Of Two Minds
Before You "Buy the Dip," Look at These Two Charts
The real economy has entered recession territory, while the stock market is setting up a massive downtrend from QE-juiced highs.
Our Chartist Friend from Pittsburgh recently posted two charts that should give those tempted to "buy the dip" pause.
The first is a long-term chart of the Dow Jones Industrial Average (DJIA). The recent price history has traced out a pattern that looks remarkably similar to the one that presaged the crash of 2008, with one difference: massive quantitative easing and Eurozone bailouts pushed the B leg into an overextension. If this pattern is valid, the C leg down could be a real doozy:
How can we tell the market is ready to roll over on fundamentals? Study the ISM PMI composite readings, which just dropped below 50 into recession territory:
Notice that the S&P 500 stock market index is highly correlated to the Composite. Those who expect stocks to rise despite the PMI Composite cratering will have to explain why "this time it's different."
The "buy the dip" crowd is counting on the Federal Reserve to launch a new round of QE (quantitative easing) that will goose the market higher even as the real economy follows the rest of the global economy into recession.
Perhaps, but for how long? Or even more sobering, suppose this entire "b" leg up was the market pricing in QE3 being unleashed on August 1.
The "buy the dip" crowd may well face a new choice: either sell at 12,500, or sell at 10,500.
Thank you, Chartist Friend from Pittsburgh for sharing two of your many insightful charts
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Well then.....fundamentally sound crash? Youre getting my hopes up.
BTFD! (and sell it in 10 minutes!)
I can do anything....Ive got Dumbos magic FED-ther.
Didnt you all know?
Elliott Wave sucks ass
These charts are raving BS’s and painted like a Picasso. You can infer just about anything from them which makes them totally useless. The equity markets have been goosed up because it’s the only bastion that congress has at its disposal to keep the hope charade going.
Just for fun, allow me to take the other side of this chart argument: this thing ( the Dow chart) looks more like a Reverse H&S with the left shoulder at the mid 2008 period and the right shoulder at around early 2010.
Point being:
Without QE it’s going to be a H&S with a fake right.
With QE^n it’s going to be a Reverse H&S
Be aware that MFG and PFG style events can also happen in the stock market. Think of market closings due to heavy selling in which case your money is locked and at the reopening, the exits will be bottlenecking.
Stop losses are not safe, as they are visible to the HFT and a quick downtrend with a quick uptrend will trigger your sell and then you're out. In a real panic downtrend, a bidless market will wipe you out.
GET OUT NOW.
This chart shows the market is being manipulated by Fed action.
http://finviz.com/futures_charts.ashx?t=ES&p=w1
Since the Fed is basically out of bullets now, guess what happens next.
DK: "GET OUT NOW".
Yes, yes, the endgame is being played out right before us.
DK: "GET OUT NOW".
Yes, yes, the endgame is being played out right before us.
"up" like a tungsten goose
speaking of... the tungsten state has math problems
http://gregor.us/california/californias-employment-picture/#disqus_thread
Well, if you want to be a dick about this, then let's go further on. There is no such thing as a Reverse Head and Shoulders; it's called an Inverted Head and Shoulders or an Inverse Head and Shoulders. Don't expect anyone to believe what you are saying unless you can actually use the correct terminolgy. Anyone that call the pattern a Reverse Head and Shoulders shows their lack of knowledge for all things technical.
One grumpy SOB today
It is also called a Reverse H&S and a H&S Bottom. There are many roads to Rome as there are many textbooks. You may want to read a few.
http://en.wikipedia.org/wiki/Head_and_shoulders_%28chart_pattern%29
http://www.decisionpoint.com/tacourse/RevHeadSh.html
http://www.tradingonlinemarkets.com/Articles/Technical_Analysis/Reverse_Head_and_Shoulders_Pattern.htm
http://www.fxclub.com/chart-patterns-en/#6
Inverted means upside down while reverse means from left to right changed to right to left. It really is that simple. Reverse Head and Shoulders comes from the fact that a Head and Shoulders pattern is a generally, not always, a reversal pattern so uninformed folks have taken to applying reverse instead of inverted to the name. There are Head and Shoulders patterns and Inverted Head and Shoulders pattern. Period. There is no such thing as a Reverse Head and Shoulders.
Just because somebody printed misinformation does not make it true. No matter how many times a lie is told, it is still a lie.
Another common one is Secondary IPO when what is actually meant is a Follow On Offering. The two are completely and totally different. I bet 90% of books, bloggers and "news" heads use the term incorrectly.
Still grumpy as hell today
At this point, what it’s called is not important. It’s just semantics.
You must know the game is rigged! Don’t play and especially not with leverage.
Stack physical and take ownership of your PM shares as a direct registration out of the broker’s hands.
Why be grumpy when you can be happy and most important...be patient.
All The Best
Look at a 2 year chart of the IBEX
God Damn... Dat aint good.
"BTFD! (and sell it in 10 minutes!)"
BTFD, Sell the F---ing peak. Repeat 12,000 times per second.
ZHers always fail to notice the good news. They are obsessed with negativity, especially when it relates to America and the dollar. It's sad that ZH readers choose to sell out their own country by shorting stocks and US treasuries.
Ohhhhh...You got a FED-ther too?
Indeedy he did! Mine's in the mail.
Go troll somewhere else. I hear TMZ has the best message board trolls.
Oh, so by expressing my patriotism I am trolling? Gimme a break son. I also don't take to this constant denigration of our Federal Reserve and elected congress. It's childish and pathetic. C'mmon folks, we know better than this.
You are a troll. look in the mirror. do you feel the need to post "controversial" messages on message boards while not discussing the actual topic you are commenting on? Check. Yep you're a troll.
Supporting the FED = Patriotism?
Your form of patriotism runs contrary to that of the people who founded America.
For instance, Thomas Jefferson said "I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country."
and
"All tyranny needs to gain a foothold is for people of good conscience to ... remain silent."
http://www.usa-patriotism.com/quotes/jefferson.htm
Bet you are one of these folks who thinks we should have been 100% behind the Iraq war not because there was any evidence to justify going there.....but because the President said we should go and real Americans back up their President no matter how stupid a move he pulls.
so the "patriots," first and foremost, always assumed their government was acting in their financial interest?
Nobody said they were bright.
MDB_?
no, he's not another MDB.
Born Patriot is a professional forum spy.
He's just doin' his job.
People respond to the trolls/forum spys and allow them to succeed at their goals. Many interesting threads become almost impossible to follow due to their tactics.
Looking for fish in the treetops -- not smart!
:>D
This post almost made me laugh. The FED deserves much worse than constant denigration. So do the whores in Congress that have sold this great country down the river. If you are indeed a patriot you are a blind one. Time to wake up sleeper, do some research and open your eyes to the evil in charge.
Are you Stalin?
I'm sorry, but could you share this good news that you have in mind? What do you see as pushing the economic situation up into a net positive position?
If you take the time to read the news like normal averge Americans you will realize that there are many green shoots in the economy:
1. Modest GDP growth
2. Housing recovery
3. Stocks holding support
4. Consistently positive non farm payrolls
I could go on and on ...
I'm sure you could. But your comments are neither fun nor funny. Why don't you go on with me on ZH Chat? I'm gonna hang there and wait for you.
Please, do go on, I like a chuckle from time to time you imbecile. You must be watching and reading the comics and Jerry Springer, which is in fact where Americans get their news.
Sorry to say that you are lying to yourself.
You do want to believe what you are saying is true. But it is not. Besides looking in the mirror check the symptoms of paranoia and delusion.
MDB, is that you?
I didn't see the words "Doomer libertarian" in your post so I can't say for sure.
I want to set up an alter-ego troll account on this site too, but I'm afraid I couldn't come up with good enough content.
Some day, I hope I can do it.
No offense buddy (and I'll green you too) but apparently you haven't seen the latest Shaw Report (taken from Entertainment Weekly...but Jessica Shaw decided to humor ZH for a few moments. Listen up)
In: noting how you are making the world a better place
5 min ago: interacting with trolls
Out: mentioning how much ammo you have
IN: Alleviate some suffering: http://www.worldvision.org
OUT: Buy stawks/bonds and try to sell them at a higher p-rice, in the future...
@born patriot
look who just rolled out of MDB's bed.
Out of the bed but...
...MDB is clearly the dom in that relationship. MDB came on born pat's face, slapped his ass and reminded him of how much he loved it.
Obviously born pat watches too much CNBC and has never sat on either side of a trading desk.
Tick Tick BOOM
If your heart beat goes from 70 times a minute, down to zero...and then it creeps back up to 10 bpm....are you going to be the doctor who say's " Thank God...things are looking up."
I guess they would be if you think being in a vegetative state is better than being dead.
Well buddy...its your lucky day.
Im a patriot too. Im gonna give you a wake up call.
To bad noone we pay taxes too is. They are all schills to the international mega banks (AKA Fuck You Taxpayer).
You read/follow propaganda and youre gonna fall right into their trap .....Its a dirty ass trap.
Spouting red and blue bullshit is worse than a dog chasin its tail.
It dont matter.
These Fools are Addicted to Money and they dont care about you. They wanna crash you into subservience.
Try using that thing inbetween youre ears and tell me when was the last time something the government did helped you out? Its not by accident....noones that stupid.
Do your homework off a bank owned network.
https://www.youtube.com/watch?v=20XPmsAK7Rg
A simple analogy.
They are the donkey .... You are your moms ass.
Unfortunately, 'normal average' Americans are asleep wth their head buried in the sand regarding what is 'really' going on in the world. You, my friend, appear to be the new ZH 'Poster Boy' representing the conformist sheep who is unable to see clearly due to the relentless conditioning (propaganda) thrown at you from cradle to grave by the MSM and 'leaders' of our world. Wake up and see the ignorance of what you say.
Rather than "Born Patriot" perhaps you should have chosen "Born Yesterday" as your user name.
You'll be popular around here -- in getting responses to what you post, that is.
5. Unicorn Cloned from Fossilized DNA
Please do.. this is comical..
How much stimulus money did it take to achieve these modestly positive numbers. Did it take over 14,000,000,000,000 or over one year of USA GDP. I love America. Truth is what is going to get us on the right track. What would happen if the Fed declared no more stimulus, would the numbers still be lukewarm positive?
As for reading the news. My favorites are the the Wall Street Journal, the Financial Times, BBC, CNN, NYT, RT, Al Jazeera, Der Spiegel, Indian Times, the Independent, Le Monde, China Times, BEA reports, Ecri, Fed numbers and many others. I want as many different informed points of view as possible.
Patriots cling to truth.
I can think of over $15TRILLION reasons why you're bathing in deNile!
Please gives us a link to this, "good news" you speak of!
don't bother...he'll just link the CNBC site
@Born Patriot
I hate that too. Why do ZH concentrate on all this negativity when there's so much economic positivity that they wilfully ignore - things like...
...erm
OK, nothing hugely positive comes to mind but maybe you can help me out by listing all the positive stuff that ZH isn't covering?
I'm sorry - why would you ever want a username of BORN IDIOT..?!
It's sad that ZH readers choose to sell out their own country by shorting stocks and US treasuries.
Our country has been sold out by "leaders" in government and business looong before any ZH'er. Change your name to Born Lemming, or perhaps Born Brainwashed. We here at ZH aren't "negative"...we're realists who are smart enough to ask "why" and question authority. By doing this we have become enlightened to the truth. Truth being, "America and the dollar" are fucked as they currently stand.
I would suggest to all partiots (of the Human race!) that you google "Mandrake Mechanism" and edumacate yerself.
kindly send an email to the SEC , they will sure give you +1's there.
Short sellers are the truth seekers who expose the BS of the monopolizing parasitic government-finance cartel. Patriotism with closed eyes is like wisdom without compassion. A breeding ground for abuse and exploitation.
The founding fathers couldn't agree on slavery and put it on the back burner to move the independance portfolio forward. They didn't refute the exsitence of slavery with closed eyes, they acknowledged it, spoke against it, and moved on. Short sellers acknowledge and speak against the monopolizing parasitic government-finance cartel similarly. When the opportunity arises we will boot fuck it for the good of the country.
In the meantime we will make money form the idicocy; but, will be more than willing to loose the opportunity forever in exchange for an open, free, and unmanipulated market.
Bernanke is such a MTFer...
Another fool who thinks the stock market is influenced by the real economy.
Every time someone buys a stock, a HFT algo gets its wings.
No Shit.
Remember, a tool listed by clam lips bernanke himself was "communications". Talking up QE is easier than doing QE and keeps BTFD alive.
The city of Fort Lauderdale is going to borrow $300Million and invest this sum in the stock market in order to cover a shortfall in their pension obligations....
What a stupidity!
Good luck to them...sorry for their tax payers.......
why dont they just buy lottery tickets?
That probably is the "stock market" they're planning to invest in.
The residents of Ft Lauderdale are better off taking that 300 million, and betting against the Tampa Bay Buccaneers and Miami Dolphins for the entire 2012 season....rather than invest in a rigged stock market for their pensions.
Both teams will be terrible, it's literally free money!
But, but, sports betting is the domain of scoundrels!!!
Wall Street is soooo much more professional and trustworthy.
Ahahahahah...
http://www.gamblersanonymous.org/
They should start there..
They must be watching Cramer
Were falling, SO, IT'S TIME FOR THE NYFED to start bidding on everything that moves!
For me, it makes so sense to risk capital in this market. If we are all wrong and the market moves higher on hopium or lies or whatever, there is always time to make profits. But, if we are close to correct in our assumptions, why risk our precious capital on a maybe? Makes no sense, being out of this market and in cash is a position. And sure you can short, but what if the head inmate does pull the lever.
Just not worth it to me. Just continue to sit on the sidelines with physical and confetti until there is a trend worth the risk. But not now.
Exactly what I'm doing. Hard to just sit on the sidelines but tired of games and bullshit and the rehypothication of both.
There are no sidelines. We are all long something. You are long the dollar. No place to run. No place to hide. Thank you, Ben Bernanke.
Good point Thomas. I am long the dollar. That is a position, even though I hate it. Will this ever end?
Exactly.....If only there was some relatively safe asset/vehicle for me to park my wealth in...............Oh wait! I just bought another gunsafe, nevermind.
This is the only chart I pay attention too, the triple top on the long term S&P. S&P 400 is where I think we are going.
http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#symbol=^gspc;range=my;compare=;indicator=sma(50,100,200)+volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
Impressive charting skills
Impressive
It's not meant to be a reflection on skills oh arrogant one. Simply put there all the leverage of the 90s will be taken out of the system.
I finished my annual blog with that pig of a chart. It's more than an index; it's Western Civilization if we are not careful.
buy the deep you stupid idiot. just buy the dip. its called buy the deep scheme.
i like ranch dip with carrots..lol
Some of the city unemployment charts that fellow posted are interesting. In particular that DC consistently runs the lowest, sapping wealth from the rest of the country to support itself.
http://chartistfriendfrompittsburgh.blogspot.com/
Direct links:
http://chartistfriendfrompittsburgh.blogspot.com/2012/07/the-unemployment-rate-is-going-back-to_22.html
http://chartistfriendfrompittsburgh.blogspot.com/2012/07/the-unemployment-rate-is-going-back-to.html
Jeez, was it just yesterday that Tyler was talking about the 10yr breaking 1.50??
Now were on the cusp of 1.40? That is fast shit....
Then the 30s are finna break 2.50 soon enough.....
Risk v. Return is SOOOOOO 1980s......
what does BTFD stand for please?
Buy the fucking dip.
Big Tits From Dallas
Bring The Fucking Donuts.
Big Tacos For Dinner.
Like yer definition better! :>D
Buy The Fucking Dip.
sunny
Back The Fuck Down.
Kudos to you for reading chart heavy posts with limited knowledge. If everyone tried to interest themsleves a bit more like you are doing, then we wouldn´t be in this mess.
Ben Throws Fake Dollars
Learn from the bears https://www.youtube.com/watch?v=__GFa_XkuVE
Barrack tried fisting donkeys
Now it should be STFR.
Bogus The Fuckin Donkey?
Whoops I was wrong...my bad.
It was lucky the luckiest donkey I was thinking about.
https://www.youtube.com/watch?v=20XPmsAK7Rg
Appreciate ZH'ers take on the following:
1. Azumi of Japan is threatening to "do something" if yen keeps strengthening. What could he actually do that would stop the flight to safety buy of the yen?
2. What would happen to EUR and to USD if/when the Swiss decouple CHF from the EUR?
Thanks!
What I want to know is what happens with the balance sheet of Swiss National Bank if CHF tries to decouple...
1. He could hold a press conference admitting Japan is 101% insolvent, has no way in sight to fix its balance of trade or dependence on foreign energy imports or the issue of its entire nuclear power infrastrcture being in indefinite cold-shutdown, he could say he's going to sell Japan's gold, liquidate the whole country's pension system, begin nominal GDP targeting, violently contract the monetary base, kill the firstborn, dump all his US Treasuries, and start a war with North Korea, and hire Geithner, Krugman, and Summers as consultants.
That should be good for a USD/JPY of about 82 in this bullshit worldwide casino algorithm market.
(/sarc)
PMI, back into the breach. Recession fully here.
BEHIND CLOSED DOORS: - WE HERE ALL ARE AMAZED THAT THE US FINANCIALS LIKE BOFA, JPM, GS AND IN PARTICULAR MS STILL TRADING AT SUCH A HIGH VALUES WHEN IN FACT THE IMPLIED HF AND ROBOTS ARE EXPECTING DOWNWARD SPIRAL THIS WEEK.....
Most of the people reading this site are behind closed doors. Or least one door.
My robots say BAC isn't going back to $5 anytime soon and the people who scooped it up at that price made a great play.
BAC is probably going to $10 by EOY (and probably won't stay there long). It seems very likely we'll be experiencing another round of either MBS, Treasuries, or both, and that's the core assets base of most of the major financials. Stuff that is causing me to think these things:
1. Not terribly subtle hinting by the Fed.
2. "King Dollar" has been on a pretty damn long tear for a while. http://www.finviz.com/futures_charts.ashx?t=DX&p=w1
3. Stocks have held up pretty well on the dollar ramp, but they're starting to fail.
4. http://www.bls.gov/cpi/ "Concern about deflation"
5. Election cover.
I super, super duper don't want any of this shit to occur, but it's a bit hard to ignore the signs.
Dang no RoboTarder yet? Probably licking his wounds over his 'IBEX bottom' call.
Let's not forget about CMG, which he most assuredly got "blowtorched" on. In his fake trading, that is.
You must always Buy the dip folks!
Beware Ben and his QE money printing chart and reality confuzzler.
Barclay's should go broke.
Speaking of Barclay's, they are at the center of the cabal. Scientific paper regarding how the whole global structure is controlled by only a few.
The network of global corporate control
Why read 'em?
If we look at the daily output of ZH we are entertained with dozens of charts and a deluge of numbers.
Why do we even read them?
These articles are read for reasons other than granite and granular evaluations of the world markets. It's mind pablum. You,me and all the contributors enjoy the congregation,making comments, and venting but reading the articles isn't necessary, a point I have tangentially made in almost every post I make.
No verifiable numbers .... it's all made up. Revision follows revision.
ZH looks at data available to all and reaches ZH conclusions. The fact that the data is all bogus, from private and public companies, from the governments of the world and from every source you can name is now ,or should be, a self evident truth. I mean didn't we just experience the shocking,yes shocking news of Libor? The cascade of crap coming our way regarding "factual data" is never ending. Just how many years worth of articles were written using bogus gumby numbers. GIGO is the term and it matters litttle if it is omission or commission that produces an article with a conclusion totally void of reality.
Yeah, it doesn't matter because we no longer have anything close to honesty in government or finance.
jon corzine is honest enough to stay out of prison. isn't that enough for you?
the gem of big bad bama is, he doesn't know a fking thing, except what they tell him.
so he's honest also.
oh. i forgot about jamie dimon. he's really honest. i have to give blankfein credit, he's keeping he's god's work mouth shut these days.
check out chart of R2K if you want to get even more scared. fasten your seatbelts.
That all said, watch the SnP rally to 1450 or some other absurd number.
When ZHers turn bullish I'll sell. I'll probabably die first. BTFD on the 26th.
A few years ago, I developed a structural mathematical model of the DJIA with data back to 1896 that incorporated both multifractal (time and price) as well as cyclical components. It was not designed to trade in the short term but it did a passable job of giving a picture of long-term trends. It held its own for a few years but about 6 months after "QE1" it began to miserably fail on the reversal time points. It might have been a crappy model to begin with - and the advent of the QE's was coincidental - or perhaps the Fed meddling did indeed change the informational structure. I finally had to work out a new one which did not incorporate interest rates which is now performing somewhat better. I found that a lot of error in the model was due to failure of the recent interest rate data to add information. In fact, it subtracted information by adding a bunch of error. I guess the academic issue regarding the business cycle(s) at this point is whether the Fed can completely negate a strong multidecadal cycle or whether it simply pushes the cycle forward in time. I appreciate Smith's first chart - and it's consistent with the latter hypothesis. http://econocasts.blogspot.com/
this guy is abitually wrong
This clinches it. I am going to buy stock.
A goat.
My observation over the past 50+ years is that close adherence to charts will give you this information.
Explicit and 100% concurrence as to yesterdays prices. Also to prices a few minutes ago. And, prices a few years back. 100% accuracy.
Tomorrows prices? Anyones' guess. Good luck with that.
"More than at any other time in our history mankind faces a crossroads. One path leads to despair and utter hoplessness, the other, to total extinction. Let us pray that we have the wisdom to choose correctly"...... Woody Allen
Extraordinary Strains
http://hussmanfunds.com/wmc/wmc120723.htm
If I post a chart of the shanghai with chinese PMI diverging, does that mean he's wrong? Good luck on trading those yearly charts bub.
Just a thought - this comment thread follows WilliamBanzai7's Zero Hedge Comment Cycle almost exactly
Big Turd Floating Downstream