Saturday, April 12, 2014

Charts 04-11: What would a fall crash look like?

I really want to be more excited about the violence and carnage we have seen in the tape lately, but the evidence is there for any honest bear -- VIX is restrained and we are just not seeing the fear and damage we need to at this point.  Wave 3 is wrapping up ... and it should have extended 1.618x the 60pt W1.  This is telling us something important, that it is "corrective".

Yes, new highs are ahead -- I like 1918 SPX in mid-May.

But take a look at the tape for the past week and get used to what a no-bid market looks like.  Sure, it's the shitty beta momo stocks getting hit now, but this is what will happen to the broader market later this year.

We should head a bit lower this week, to trendline support in the 1790s, after we fake north on Monday and early Tuesday.  I'm looking for a bottom just after the April Full Moon, followed by a sharp rally.

We are entering a period of numerous turn dates, both Bradley turns (if you believe in these things) and even a McHugh phi mate turn next month.  The last Bradley turn, April 6, was a direct hit.

About that "fall crash" -- here's the problem.  If we are indeed in an ending-diagonal pattern, with one more good rally ahead of us, then the completion of the rally, the reaction from it, will quickly retrace us back to the 1560 1646 area on SPX.  I think this will happen into the 7/16 Bradley turn date.  It looks proportional.  This would most likely be a 5-wave "A".

SPX 04-11

The retrace from this steep drop sets us up for a panic plummet hellish historic meltdown in the fall, all the way back to the 1000s SPX.  It would key off the September FOMC.

SPX 04-11 3Y

Should this play out, I think I will exit the markets after November.  They will go lower, I believe, all the way down to the trendline between the 2002 and 2009 lows, but I don't know if I wish to trade that late cycle.

I will be more interested in finding good farmland in western WA and securing the safety of my extended family (solid Chicago Czechs) in early 2015.

Thursday, April 10, 2014

Charts 04-10: Here come the bears!

Well, I certainly hope we can get more of a bounce here, on a ii of 3, before the next downdraft hits.  The chart has room for some more retrace.  I'm looking for another short entry.

[equity] bears on the march

So far, so good.  The bullish blow-off top scenarios are less and less plausible.  As seasoned (scarred and scared) bears, we must acknowledge that they are still possible.  Imagine an overnight announcement of Eurobonds or Euro QE, what that would do.

The tape so far is very promising.

Note that the 1790 bottom on Monday would smack a long-term trendline going back to the 1560 lows.  We need to bounce off this line before breaking it later in the wave series.

SPX 04-10

YES YES YES YES

Savor the destruction! 


Monday, April 7, 2014

Charts 04-07

The reaction off the top in 2007 resulted in a 30pt selloff on the S&P 500.  We've exceeded this so far, and yet we have barely stirred the VIX and volatility ETFs.

Reviewing the chart, I'm looking for a channel or trendline kissback of some sort, the rejection of which would send us into a proper wave 3 selloff.  The 50% retrace of this 2-day decline is around SPX 1870, which is the lower edge of the old channel, right about the time of the FOMC notes release on Wednesday.  If the meeting notes suggest strong support of the end of QE, and/or regret for having pursued it in the first place, we will roll over and continue the decline, piercing the 1800 level.

The bottom for this first leg should then be around 4/16, before April opex, and after the April Full Moon.  This would give us plenty of time to rally back for the next Bradley turn date due at the end of the month -- right before the next FOMC.

SPX 04-07