Tuesday, November 4, 2014

Charts 11-04: Fear off again

I actually began the day all loaded-up short in case we reversed and crumbled, but I exited everything nicely when I noticed that UVXY wasn't too worried about the early tape.  What a fantastic ETF, what a great barometer for fear or, today, for market complacency.

UVXY flipped red today while the S&P 500 was still negative 5 or 6 pts, a sure sign that we were not about to break down.  No, not yet.

Looking ahead to the 11/20 Bradley turn window to finish up the megaphone.  It looks about right.  Take a look at the November options open-interest for puts on the SPY; there are huge piles of Novembers outstanding that this market wants to eat up.  The options sellers will need the money from these profits soon enough.

SPX 11-04

A December 26th Bradley turn date suggests an EOY sell-off that gets out of hand.  It could even mean impeachment hearings for our fake POTUS.  Remember, all we need is for some disgruntled former supporter of this guy to leak old financial-aid papers from Columbia out to the Press, and we may find ourselves in a full-blown Constitutional crisis overnight.

Congrats to the Republicans.  It won't make any difference with respect to the long-term credit cycle (Kondratieff waves) and the end of the 20th Century, but it will at least piss off a lot of liberals and the FSA in this country.  And that's something worth celebrating.

37 comments:

T.Berry said...

“In a midterm election year remember that the six best months of the year as identified by the Stock Traders’ Almanac shows that the November through April period has risen an average of 15.3% since World War II and has advanced 94% of the time,”

dji @20,000 next year..before s&p hits 2400. easier play long market? have to like these odds.

gl to all!

Fetal Position said...

A much wiser man than myself once said, "if copper hits 2.85, the end is nigh."

Bicycle said...

Dunno... We might hit the top of the Dow megaphone today...

Christian Gustafson said...

Bicycle -- are you going to make me start charting the Dow?

Christian Gustafson said...

I figure between now and the next "candidate top", I can watch the copy of Kubrick's "Barry Lyndon" I picked up at Value Village yesterday.

I have plenty of dry powder for the next cycle, just need to be patient and not waste it on speculative ideas until then.

Phat Repat said...

As a reminder, where was the top of that Dow megaphone?

Christian Gustafson said...

Dr. McHugh sees this megaphone now, and has posted his own target for it in his newsletter.

Let's just say, I'm in no rush to go short again until that Bradley turn / Nov opex window.

Bicycle said...

The megaphone on the Dow drawn from early 2014 shows us with a top trendline somewhere around high 17400's today, and definitely no higher than 17500.

We pinged 17481.32 on the open, close enough for government work. Home sick with the kid today, and he puked all over me right at that moment. It's a sign, I always miss the important tape.

Let's see if we can paint a mini-megaphone today.

Remember, the major indices can diverge quite substantially. Just because we put in a top on the Dow doesn't mean we can't take some more time for the S&P.

Bicycle said...

We. Are. Done.

Phat Repat said...

Thanks Bicycle and hope your kid feels better soon.

Been looking for an entry but nothing yet. Entry happens if prices can stay above/below buy/sell points for an hour (sma).

I will post some numbers I am seeing for the Dow to see how that looks.

We very well could be done.

Bicycle said...

Here we have the first testing of a substantially weakened US Executive branch.

Geopolitical risk is off the charts at this moment. Obama is in a corner and nutbags the world over are going to try and pounce on that, along with making their name heard to the new Republican order. I expect Putin especially to make a show of it.

Christian Gustafson said...

Compare the open interest of November vs December SPY puts.

It's a huge gap. Institutions hedged the October volatility with November contracts.

Once these chips are removed from the table, maybe we can see some real volatility again.

Bicycle said...

OMG... we have a potential megaphone on the Dow tape today...

Bicycle said...

ZH is blaming the Saudi Aramco pipeline attack on ISIS.

What if it was Putin...

Christian Gustafson said...

We're not quite there on the DJIA on my chart, Bicycle.

The upper edge of the megaphone has the Dow at about 17,550 on the 11/20 Bradley turn (+-2 days).

Phat Repat said...

Had some trading halts show up in XSP for Puts (Dec 19 195, 197, 201 strikes). Hmmm...

Looking at the Dow, the numbers are a little less cohesive than the S&P.

Buy above 17451 with Stop 17244 and T1 17966 (no cluster)
Sell below 17165 with Stop 17372 and T1 16401 (no cluster).

T.Berry said...

considering exiting longs from 10/15&16 maybe tomorrow. it's only 10% of longs. 13% in 2 weeks don't want to be a pig lol. keeping other 90% for long term. a bit surprised at how well mkt welcomed the gop--thought that was priced in i guess not! should bode well for our secular bull tho we shall see. dji 18k in nov anyone?

Christian Gustafson said...

Well-played, T. Berry.

Hey, 10/16 was a Bradley turn, nailed the bottom pretty handily.

T.Berry said...

thx cg. luck 100%. thought we were close enough to the 10% long over due correction then. gl to you!

Phat Repat said...

Good job T.Berry; next time I'll stick with the trend (and the system) until the end. ;-)

No entry was permitted as the numbers rolled in requiring the Buy to be above 2024.74. Oh well, it is what it is.

Until I see a trend change, the numbers aren't meaningful since I will just be irritated by this continued progression and being out of the market (with minor exceptions). :-)

Also, did the megaphone invalidate on the Dow?

Phat Repat said...

In other news, have the transports topped? Hmmm...

Christian Gustafson said...

The Dow touched its megaphone top this morning. SPX? Not yet.

Bryan Franco said...

Getting close... Cant you just feel it in the bones?

Christian Gustafson said...

This is Deflation Land, where we're always topping!

Seriously, though, my favorite canary, UVXY, suggests we have plenty of time to chop around until we get a final top.

Can anyone recommend a futures broker that will allow delivery on an, um, physically-settled contract?

OX won't allow it, neither will IB. DO we have to work with a Fed Primary Dealer for services like this?

Please advise ... a friend of mine is asking ... thanks ...

pb said...

Bryan franco

Could you please put out your thesis
again for the market - I missed it.
I know your expecting a Higher High.

Thanks

Suren said...

From a crash into 11/20 Bradley Turn date, we are looking at a ATH - Top. This is like forecasting sunshine when it is pouring outside - exactly the opposite. IS THIS ANALYSIS HELPING ANYONE????

Bicycle said...

Well.... Its time to go back to the drawing board... We are now firmly back inside the old rising wedge painted since 2011. The October down wave can be part of that pattern if we adjust the lower trendline, which allows us to get to Dow 18k as part of that wedge. Unfortunately, because of that we have to consider jaws of death is not a valid pattern.

We may be simply chasing the larger ascending broadening wedge painted since the early 80's, which suggests...yes...hyperinflation from here.

We need serious confirmation of the bear case, and very soon. If we keep ramping like this thru year end, the nightmare scenario is plausible.

T.Berry said...

decided not to sell october positions just yet. mkt looks too strong besides don't want to miss year end rally which may have already started. i do think we hit 18k this year then 20k next (too close not to hit such big round number). qe free to boot! just my two cents.

gl to all!

Christian Gustafson said...

Sorry, Suren, in the absence of a crystal ball or tomorrow's newspaper, we're doing the best we can here.

Bryan's analysis and model of "one more high" has been validated, so far. Also, the parallel to the 2007 has been noted.

We've got a couple of megaphones, and some Bollinger bands, and a basket of ETFs throwing off their signals.

We've got a reader with a bullish outlook and targets; he's welcome here, too.

The long-term stance of this blog is that there's a real crash up here somewhere, and that it may be tradeable. But you won't get hard advice to take any position on it here.

You are on your own, like always.

Seriously, good luck to you.

Fetal Position said...

The dollar can't keep this up much longer. The correction will likely be triggered by a violent reversal in the dollar.

Phat Repat said...

Just had to get up to watch the close and it is amazing how I am unable to take a position since it is always just on the edge of my system (above 2030.36 with confirmation having mind boggling targets of 2124.67 clustered).

Though we know not to fight the trend, this portends something rather ghoulish in my view. Perhaps what Bicycle mentioned about a hyper event potentially resolving. Now that would be quite ghoulish.

As to the USD, I've seen targets of 89 but haven't updated that view recently.

Christian Gustafson said...

That 89 target is for SPX.

j/k

Phat Repat said...

I can live with an 89 target for SPX. Isn't that what I said? Oh wait... ;-)

Fetal Position said...

I don't buy into the hyperinflation argument at all. It would destroy those on fixed incomes, a group that is growing rapidly. Policy makers will not allow it. The VIX tanked into the close, could be a set up for a blowoff tomorrow?

Bryan Franco said...

PB.. My "thesis" was that this new all time high was needed based on a very specific set of criteria, present in one of the many models that I consider when deciding on market direction. Unfortunately, this model says nothing about how high we go. To answer that question, I can only 1) read this blog, 2) draw up parallels to the '07 tape, and note that a top around mid-November would be fitting. Not the only one mentioning that. 3) point to the long-term deterioration in breadth present in most major indices, and see that many, many names are having spasmotic upward corrections in their now-confirmed long-term downtrends. That's a huge setup on the short side. 4) At the other end, there are an outsized number of high-flyers that are quite vulnerable to collapse. This could be initiated by even the most trivial amount of selling causing a ripple effect. There is no nearby support for any of these high flyers. Think: many of the airlines and utilities and reits, and defensive names.

Phat Repat said...

Policy makers won't allow it.

Remind me where interest rates are again? And what group has been absolutely obliterated by that or pushed into risk-on at their most vulnerable time?

No sir, the policy makers don't serve our people or their interests (no pun). ;-)

pb said...

Thanks Bryan