Thursday, October 30, 2014

The Christmas Crash Scenario

When he's not scoping out moldy old sci-fi in the local Goodwill, the modern Elliotician spends most of his time war-gaming various scenarios, some of them extreme, about the future.

It's a little like those great old Avalon-Hill games we played as kids on the giant hex maps where the Soviets were pushing through the Ruhr Valley with the Czech mechanized units, and, well, could you counter it conventionally, or does it need to go nuclear?

If we can make it to the top of the megaphone -- an insane 2040 SPX -- by, say, Monday, then I can get us a crash by Christmas.  It would be triggered by a rejection off the underside of the 200 DMA, and then ... nothing but air for 700 handles ... a true historic panic.

So here it is, mechanized units thrusting into the Ruhr.

SPX - Christmas Crash scenario

But we gotta finish the rally and -- hopefully -- make our new highs first.  Bicycle is worried about us hanging around up here for a while like a bad canker sore, and so am I.  We are bold men of action, eager for the future!

Wednesday, October 29, 2014

Charts 10-28: Speculation on the future

After a week of watching this meteoric squeeze, which puts Bryan's idea of new all-time highs very much back on he table, it's time to throw up a pile of speculative chart rubbish to match.  The gibbons at the Lincoln Park Zoo in Chicago really do try to defecate on visitors, all day long.  Please allow for plenty of room between you and their enclosure.

First, let's take a look at the VIX, whose breakdown through an important support yesterday supports the idea that this will continue in the short-term.  Next support is down in the 12s.

VIX 10-28

VIX dropping back to the 12s would power us to new highs, per the channel we have carved out since the 1820 lows.  2038 SPX marks the top of a megaphone-like trendline coming over from the previous highs.

SPX 10-28

After this presumed top, crash models are very much back in play.  An important deflationista theme is that when things do finally start to move, they will move so fast that everyone who is still playing by the old rules will miss it.  So even bearish shorts will cover too early because some responsible technical indicator told them to do so, and they get to sit and watch the rest of the crash play out.

SPX 10-28 6M crash

Deflation.  What you imagine is money is not, and it is a lot less liquid than you think.

The hour is late.

Sunday, October 19, 2014

Eerie similarity between the 2007 top and now

Posting this chart again, just to drive the point home.

A false break of the 200 DMA, followed by one last high ...

2007 top and today

My daughter and I saw two river otters out in Puget Sound on our walk this morning.  Then I went completely Hobbesian on a couple of Seattle idiots whose filthy unleashed dogs came over to visit us.

"Oh, but they're nice dogs."

And yet I will kill your dog if it bites my kid.  Right here on the beach.

This sort of primordial psychotic intensity scares the living hell out of your average passive-aggressive New York Times-home-delivery wussy Seattle people.  It's great fun, it should be a sport, really.