Wednesday, March 26, 2014

Let's go visit the 200 DMA!

Four days in a row of pump pops in the overnight /ES futures, followed by selling-off, has accomplished a few important things:

it has established a significant reversal pattern
it has dropped us 31 handles off the current all-time high
it has not left any gaps in the chart. 

A gap down in the morning on GDP becomes an important target for a wave 2 retrace in mid-April.  The 200 DMA is within reach now, and I think we can tag it next week, which is an important technical development.  Please note that the McClellan oscillator is already very negative, so that a swift drop to the 1760 SPX area will send it into sorely oversold territory.  

The bounce off the low should be truly special.  After that bounce tops out, we go after the trendline between 1074 and 1343 SPX.  We will bounce off that and pierce it on a 5th wave.

But first let's see if we get our morning gap down here.  The first goal would be SPX 1815, the target of the obvious head & shoulders with the 1850 neckline.

Hey, you noticed the death-cross on the 10Y Treasury yield that is now imminent, right?  With QE out of the picture, the only way rates can get to my sub-1% target is by PANIC and TERROR in the equity markets.  May it ever be so.

SPX 03-26

10 comments:

Permabear Doomster said...

I can go with that outlook, although it sure is the 'best bearish case' possible.

The 1770/50 zone would indeed offer a great bounce level...and I'd also look to the 1850s level to get stuck.

However, I don't see downside beyond 1625/1575 this year.

What do you think the Fed will do, when the cheerleaders on TV are screaming for 'action'?

The QE will be ramped..and the market will likely soar..to new highs... in 2015.

Oscar Carboni has a target of sp'2100s..this year, although I think that is no longer viable..if the Fed keep cutting QE.
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Regardless...each day forward..and the bulls are weaker.

Christian Gustafson said...

The chart had room for today to be a stall day, or wave ii of 3.

So the gap down I mentioned last night would need to come tonight, presumably on news from the East.

Here are two inverse H&S on the JPY (where up == Yen appreciation and carry-trade squeeze):

short-term

long-term (since Feb)

Permabear Doomster said...

I will add, I am trying to trade on price action/trend, rather than counts or even formation.

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The recent few weeks have been a real chop fest..but surely the bull maniacs have had their 'share of chances' ?

Hell, I been watching the Transports..day after day..trying to break a new high..but failing.

Yesterday was the day'13 or so, and the daily net decline of -1.7% or so was more than enough to clarify things.

Now its a case of having some patience, and trying to have a good exit.
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As for those currencies, I do see a lot of people mentioning the USD/Yen lately, but really, its not at all my area.

All I know is that the barring a break <DXY 70, the 'dollar doomers' should remain mute.
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Good wishes for Friday...

T.Berry said...

think we definitely hit bicycles 2200+ but not till 2015 (by q2 or q3). can't see anything below 1650 for quite a few years if ever again.

Bryan Franco said...

I will add to PDs comment. The fails that I am seeing are on the daily candles for individual stocks in the S&P 1500. The transports are but one group. At the strong end you're getting these "trapping" candles with closes below "breakout" levels. At the weak end you're seeing nothing but follow-through. There were some (and I mean a tiny few) names yesterday, mostly in the biotech and alternative energy complex, that had bullish candles on the day. Something to watch.

Bicycle said...

There is not gonna be any more QE, not only is that priced in (in that we haven't already ramped to 2200), but there is no way the Fed will double back on that decision now. Yellen has to know that politically, the beginning of her term is her last best chance to unwind QE and if she doubles back on that she will look like a fool and they will lose any control they have left.

The only jawboning they will have left is around rate increases, which is already happening almost every couple of days right now.

They'll continue pushing this idea of a rate increase in early 2015, until we hit S&P 1500s. At which point they will start blithering about delaying rate increases to late 2015 or 2016.

That is what will ramp us to 2250, in an unholy, last blast straight line ramp.

By late 2015 they'll have to raise rates anyways, and we'll throw in some massive intraday reversal on a FOMC day when they surprise everyone.

It will be a frightening world by the time of the next US presidential inauguration. We'll probably be putting in some final wave down to about S&P 210. Putin will have continued reassembling the Soviet bloc, and will be strangling Europe's natgas supplies.

President Palin will be talking about opening a western front against Putin from her home state. Christian will be running from mud slides. Permabear Doomster will be scooping up London real estate at the bottom from Saudi princes. Bicycle will be working 100 hours a week to keep up with the Illinois tax increases. Karl Denninger will have kept losing weight and will be down to an unhealthy 95 pounds, but he will re-open his trading forums, just in time for Lunatic Fringe to call the bottom again.

Christian Gustafson said...

If we reverse again today, it will be truly vicious ... AND ... believe it or not, I actually have a clean count and a firm logical explanation for why the tape has done this.

No, really, you'll see. But only if the market rolls over and dies.

Permabear Doomster said...

...awaiting the dying the part.

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Anon dip said...
This comment has been removed by the author.
Christian Gustafson said...

Very exciting now -- can we make the top trendline up at 1917 by Friday?