Tuesday, December 2, 2014

It's December and the Bollingers are in sight at last

the empty suit

I took a couple of weeks off to let the blown-out Bollinger Bands come in from their reaches, before we get back to the important and pressing business of calling tops in equities.

Besides the larger patterns, the key detail for us here is that we reach these extremes and react against them with great force.  The danger is that we do not, and instead follow them up for a while.  Take a look at some of the 3x leveraged ETF charts, and you can see long runs of this -- a very dangerous trap.

But it does open up some fun chaos into the end of the year and then the January FOMC.  We first need to see a key reversal day, say this Thursday, where the SPX swings 30 or 40 handles, with UVXY rising 20% or more.

Christmas crash scenario again

The VIX threw a pin through its lower (oversold) BB but has not reacted yet.  Ideally, it can close outside the band and then back inside, for a "VIX buy" (index sell) sign.

VIX daily 12-02

31 comments:

Christian Gustafson said...

Should also add that we got our 2nd official Hindenburg Omen reading yesterday.

The last confirmed HO gave us the October lows.

You mean to tell me you didn't feel scared when the 10Y yield crashed on October 15th? That was a serious warning to all of us involved in these bonehead markets.

Fetal Position said...

The 10 and 30 both been INSANE lately.

Bryan Franco said...

That looks just right. And you even made it a nonpositive january, which is critical for the yearly thesis.

Christian Gustafson said...

Yeah, Bryan, we would start the year off with one last week of selling, to support down at the lower edge of the megaphone.

Market talk would then shift to, "Well, what's the Fed going to do to fix everything and restore the asset bubble?"

The Fed standing pat (no QE4) in January would then trigger the larger panic. Who knows, if the S&P 500 is still actually up at 1900, they may set the tone by raising short-term rates by 25 bips. Imagine the move in $USD off that.

Phat Repat said...

On a plane headed back home now and have been surprised by action on TLT. I expected a more sustained rise and am seeing, as CG and FP are apparently witnessing, erratic behavior. Very goofy stuff. Nothing actionable at this point, so I wait.

Bryan Franco said...

CG - dollar is "saying" just that.

Phat Repat said...

Quick check of the numbers and 2086.57 confirmed would prompt a long futures position.

Looking only at buy side, still weak but positive. Hope it plays out as CG thinks but iffy for me until numbers tomorrow.

Bicycle said...

@DougKass S&P 500 Index ties 1929 with 48 record closing highs $SPY

Christian Gustafson said...

Of course, as top-callers go, we're always looking for a catalyst to drive a key reversal day on heavy selling volume tomorrow.

But the ECB chatter and the best data are all out before market open.

But.

There are a slew of bill, note, and bond auctions tomorrow, pretty much most of the curve except the 5 and 7 years.

Maybe the auctions are memorable.

Permabear Doomster said...

re: We first need to see a key reversal day, say this Thursday, where the SPX swings 30 or 40 handles,
-

If we see a daily move of 30/40pts before end Jan', I'll light a candle for you, and make a wish.

yours... depressingly resigned to considerable upside (and a retrace to 1980 doesn't count as 'exciting downside')

Phat Repat said...

Back but serious jet lag. So, it looks like we continue to bounce around here for a bit. Gap down again so Santa rally still has potential.

Key numbers:

Buy/Stop 2084.56/2059.91 T1 2176.23/2178.21 (cluster)

Sell/Stop 2050.50/2075.11 T1 1947.97 (minor cluster)

So, in essence, not much expected.

Christian Gustafson said...

As long as we have not touched that upper daily BB on the SPX, or broken support in a serious way, I'm just sitting here on my hands waiting patiently.

If this is an historic terminal pattern in the works, it will be clear enough when it is wrapping up. Catching 10pt swings within it, though, not for the faint of heart. No thanks.

If the larger megaphone, or other ascending trendlines on the chart, if they still matter here, then the longer we drag this out, the higher they creep, toward 2090 and even 2100.

At the same time, the lower trendline of the megaphone also continues lower as we drag this out. If it's going to serve as support, then you can look ahead and estimate where it will be.

Let's say January is a rough ride and we chop our way down to the bottom of the megaphone, bottoming into January FOMC. SPX would be around 1690 in that scenario -- by then we've even traded through the 1700s.

Extend that out some more, and you can get us back to that 1074 SPX level during the entire Spring of 2015.

Phat Repat said...

CG, et al

Interesting observation on "the Elliott Wave lives on" site:

joecthetruthteller says:
December 3, 2014 at 6:21 pm

According to the Almanac, years ending in ‘5’ have only had one down year in the last 13 decades. The average gain is 28.3% for the Dow and 25.3% for the S&P.

Sure, this time could be different, but, statistically speaking (and yes, I know about sadistics). ;-)

Christian Gustafson said...

Yeah, I know about the track record of the election cycle here.

What if a scandal-plagued Obama doesn't make it through the year?

What is the status of and systemic confidence in all of that fun govvy debt we ran up on his watch, if it turns out that he was ineligible for the office in the first place?

Now wouldn't that be something.

Phat Repat said...

CG

Technically, our 'leaders', for quite some time now, haven't been serving the American people.

I do admit, the stench of stupidity of the current stooge, is truly overwhelming. But, and I'm sad to say, that is only a reflection of the American people.

One need only look at Ferguson, orchestrated or not, to see the depths of depravity. And the Caucasian folk had better sit up and take notice. ;-)

So, an event could happen, but casting off (brain) dead weight probably would be more positive than negative.

T.Berry said...

phat.speaking of stats-- may have posted before
***October to October in that third year (of a Presidency), the market has risen 17 of 17 times since World War II gaining an average of 17.5%***

love both these odds :) .

currently not planning on selling anytime soon. bullseye still on dow 20k next year. can feel it.

Phat Repat said...

T.Berry

I hear you and thanks for sharing.

I enjoy following the views of several market participants and E-Wave has always interested me.

That said, the system I use is purely mechanical. There are distinct levels I follow and enter/exit off of. Quite boring actually, but does mesh with E-Wave levels on occasion to make it interesting enough. ;-)

But hey, 3-6% profit per month makes the boss happy and keeps me stocked up with a sufficient supply of Guinness Stout.

Bicycle said...

Prior US oil production peak = 1970
3rd year of Nixon term = 1971
Watergate = 1972
Inflation adjusted return of DJIA from Watergate until 1983 = roughly -70%

There is a reason Hillary has not yet officially declared for 2016, she (or more likely her advisors) are to closely connected with petrodollar finance community and know exactly what is coming for the horse that presides over an oil production peak. She will remain as detached as long as possible in order to avoid the mess and thusly present herself as a solution when the time comes.

The "since World War II" is also statistically suspect as we are clearly approaching a major trend change from the great war.

Phat Repat said...

Bicycle

Thanks for that. Assuming you were just a bull, that would suck. Looking at that time frame, however, shows that there were plenty of opportunities to make significant returns, on both sides.

"There is a reason Hillary..."

There is a reason I don't vote. ;-)

Bicycle said...

note that I don't expect this to play out like the 70's

There will be no OPEC global oil glut to pull us out of it like in our analogue of 1983

We will have at least a whole business cycle's worth of terrible deflation (8-10 years) and massive conservation before we can even get back up on our feet to try and transition to a different type of energy economy.

But yes... there will be peaks and valleys

The problem is that market speculation as takes place today will be made almost impossibly difficult.

Phat Repat said...

Bicycle

I see.

"The problem is that market speculation as takes place today will be made almost impossibly difficult."

Now that's a provocative statement; could you expound on this?

Christian Gustafson said...

Markets?

You mean, like some online electronic system where I can buy and sell shares of BABA or some ETF, and then send the fruits of victory home to my checking account, to purchase groceries?

This is a miraculous, impossible thing. What an amazing thing it is to get food in this way. You truly stand at the pinnacle of human existence here on the Earth.

Markets and "trading" ... we'll see about that. We first have to get through the collapse of the Treasury complex.

Phat Repat said...

CG

:-)

Speculation, as gambling, has always been with us. But I get your point.

Yes, treasury collapse; so many not realizing the precipice we are on. Got gold? Tick Tock.

Won't get fooled again
"Meet the new boss, same as the old boss."

Bicycle said...

What CG said. For example all brokerages only exist as a vehicle for credit expansion to ultimately finance resource extraction growth (read oil production growth).

No oil production growth, no credit growth, no brokerages necessary. Volume in Great Depression fell to what, 5-10% of peak. Trading in its current form will not exist in the future. For the retail investor it will be non existent or very expensive, basically not worth it even if you can get over the fear of placing your shrinking capital into what remains.

Now, let's play around with the 1987 crash and some potential ascending broadening wedges...

....all paths lead to 0 and a couple take both all the bears money and all the bulls money...

Bicycle said...

Note the top trend. If we do not fall apart at current levels and break thru that we are going to Dow 25k or higher before any bear market

Phat Repat said...

Pretty bleak outlook. Sounds like a singularity. While anything is possible, they've been very impressive given all the balls (bubbles) being juggled.

Though I realize predictions are largely a fool's errand; do you have indicators you are watching that would tip the hand? I believe the USD is a good canary. Along with observing yields. Anything else?

Fetal Position said...
This comment has been removed by the author.
Fetal Position said...

It's times like these, I'm glad I live in a tiny coastal town. This country has gone bat crap crazy.

Phat Repat said...

As we inch closer to OpEx (19 DEC), the system pushes me further out. Actionable above 2088 on confirmation. Not likely with gap, but, you never know.

Christian Gustafson said...

Dr. Bob McHugh says ...

"The stock market triggered a new Official Hindenburg Omen Tuesday, December 2nd, and has triggered three H.O. observations over the past four trading days, the third occurring Thursday, December 4th. The last time it did this was on September 19th, 2014, which was followed by a 1,300 point decline in the Industrials through October 15th, 2014. The market finds itself once again at a dangerous place. We will be tracking this latest development in our daily and weekend newsletters."

Bicycle said...

The way this is setting up... seems almost too good to be true.