Sunday, August 31, 2014

A proposed "Bryan scenario"

Loyal reader and secret doomer Bryan chimes in with a concern about calling another top just yet.

I agree with gold. Separately, our last sequence of 3-5 and 5% plus corrections is one of those that requires another 3% plus correction that does not exceed 20% followed by a new closing high. Can we draw such a scenario?

OK.  Hmm.  I see.  Aw hell.

Bryan has brought this up before.  In the long-term history of important tops, there is always a sequence of new highs and lows just before the final top.  In his analysis, we still need another trick drop before "the pop" here.

What to do?

And I still would like to see a terminal pattern.  And still make use of the turn dates and broader structure of at least the larger (green-numbered) 3PDH.

So let us propose a megaphone, a classic broadening top.  In Bulkowski we trust.  The big 10/9 turn window then pencils out as a top for us, at about SPX 2026.  And we still get our touch of the 200 DMA, just before September FOMC.

Congratulations, Bryan, on following a blog with traffic so comically low that you can still get custom chartwork done for you on a Sunday afternoon.

SPX 08-31 1Y Bryan megaphone(?) scenario

The Goodwills I visited this morning were positively barren, I tell you, stripped and looted of anything of value.  I won't even bother with the big one in Rainer Valley again.

Saturday, August 30, 2014

SPX 2034 as a candidate top

There is a post and some discussion over at Daneric's about 2034 SPX as a possible target for this awful thing.  Everyone has got ideas and charts and technical voodoo on the market, which is the whole point of blogging it all and keeping the conversation going.

What makes the 2034 SPX level interesting for me is that it nails the top of a long-term and very important trendline -- right on FOMC day, September 17th.  This fits with a crackpot theory of mine, that the market will not believe the tightening rhetoric at all from the Fed, until it is forced to do so by having cold water splashed in its face.  Only then will it react -- hard.

Going forward, FOMCs may be increasingly bearish inflection points.  We could see an actual rate hike as early as the January 28th meeting.

We have some time to kill before September FOMC, so I'm proposing an ending-diagonal triangle for the final waves up to the top.  A terminal pattern is badly needed here.

SPX 8-29 30D

From September FOMC, we would return to the SPX 1904 level again for another bounce off the 200 DMA and a final kissback / rejection of the old rally channel (a pink line on my chart).

Here's the move down from 9/17 FOMC to a big turn window around the October Full Moon.

SPX 08-29 60D

I've rehabilitated the nested-double-Three Peaks and a Domed House patterns here as well.  It's good to have them both back on the charts.  Remember, FOMCs going forward are market panic-attacks.

SPX 08-29 1Y 3PDH

This builds up to the January 28 FOMC, where a (surprise?) minor rate hike signals an end to the freebies and crashes the market back to 1074 SPX into May.

SPX 08-29 4Y

And the crash into May ... is only "A" down.  Good times.  Until we get an actual top, I like the shape and timing of this highly speculative model.

Saturday, August 23, 2014

Market charts with the 3PDH and vacation photos

Today I saw an osprey on an early morning walk along the shore of Puget Sound.  As I walked the beach north of Golden Gardens during an ebb tide, I saw a large bird approaching, too large to be a gull.  Bald eagles are a common sight in the north end of town, so I assumed it was one.  Just as the bird drew up even with me, it pulled up, stalled, and dove into the Sound, right in front of me, maybe 40 feet off the beach.  It fell like a stone, revealing itself as an osprey.

We're approaching another "candidate top" here, near the top of a long-term trendline of serious overhead resistance and plausibly-complete wave counts.  The SPX is close to its daily and weekly top Bollingers, while the VIX and volatility ETFs are close to their bottoms.  A decent short-term Elliott structure and pre-holiday break week are an excellent setup for a final run up into the 2020 (!) area on the S&P 500.

As expected, I'm bearish and looking for the right entry here.

Black bear, Bogachiel Trail, Olympic National Park

First, the market needs to move sideways for a few days, pretty much like Friday, biding time with enough space on the chart for an unbroken W2-W4 trendline.  Then we have the second release of Q2 USA GDP late this week into a couple of low-volume pre-holiday sessions.

SPX 08-22 20D

SPX 2020 late this week is long-term overhead resistance and an excellent opportunity for a change in trend.  Note that the timing here lines up for September FOMC to be some kind of bottom.  We sell-off ahead of expected austerity and bounce on the actual announcement mid-month.  From here we start to chop south through the levels of the long-term Domed House.

SPX 08-22 1Y

Here is the larger "Three Peaks and a Domed House" structure and count, with its final target of SPX 1074.  I'm willing to be more realistic now and push this low off until mid-March, 2015, followed by a B-wave bounce.  Still, the descent will be relentless and truly vicious.

SPX 08-22 4Y 3PDH

This model makes sense if you think about it.  By removing QE stimulus, we return to our starting point, the September 2011 lows.  Please note that this will be wave "A" of a larger deflationary depression epic crash.  K-winter, ladies!

VIX and volatilities have room to drop as well; UVXY at $20 or better would be great.

VIX 08-22 9M
UVXY 08-22

Last week I took the girls out to Olympic National Park for a two-part adventure: 3 days on the coast on the Ozette Loop trail, and 3 days in the mountains at Deer Lake above the Sol Duc drainage.  The girls are developing a really solid sense of trail etiquette and now carry their sleeping bags and clothes in their packs.

So first we headed for the beach.

Olympic beach south of Sand Point
Sea star in a tidepool
More tidepools off Sand Point
Hundreds of Velella jellyfish washed ashore
An offshore haven for sea lions

We completed the circuit and spent a night at a motel in nearby Sappho on highway 101.  The town of Forks, WA, is looking really bad again, following the faddish boomlet of tourist visitors from the "Twilight" books and movies.  Now many of the Goth-y tourist shops that had opened up are closed and empty.  Buildings on the main drag are visibly falling apart.  The coastal towns are hurting.

We headed over to Sol Duc and up the Canyon Creek trail, and managed to get the best tent site at Deer Lake.  Here we watch deer frolic outside the tent.

Deer at Deer Lake
Sol Duc Falls

After arriving at the lake, I made camp and parked the girls in the tent for an hour while I scouted the upper basin for bears -- I saw two.  The next day all of us returned to see if we could find them.  We failed to see the bears again, but the girls gorged on alpine blueberries and huckleberries.  We had ten different kinds of berries on this trip.

Picking alpine blueberries
Searching for bears in the "Potholes" basin
Claudia's salamander

Friday, August 22, 2014

Wrapping up a short-term count into Labor Day

Not expecting much from Yellen's speech an hour from now, maybe three days of what would be a wave 4 in the current short-term count.

Looking for 1978 into next Tuesday's close, then a final (as always) run north.



Here's a short-term alt.  What if this last (??) move up here is an ABC triplet?

SPX with ABC alt up here

Thursday, August 21, 2014

Charts whatever, let's hit that top trendline one more time

The markets have backed the Fed into this corner where no partial withdrawal is possible.  Each attempt to warn of tapering or policy moderation was met by a drop, then concessions, then insane rally and a new wave of liquidity expectations.

So the Fed has no choice now but to pull the band-aid off in September.  If equities go no-bid this fall, so be it.  Everyone was warned.

Upper trendlines get us close to 2020 next week.  There is the holiday weekend.  Will be interesting to see if we top just before it as players take a defensive stance.  Weekly Bollingers on the SPX are up there ...

Good news!  The NPS has decided to save the chalet in Enchanted Valley for now.  I visited the site back in January, when the tone was very different and it sure felt like they were going to let the river take it.

Even if they move the structure to another site in the valley, the NPS will likely have to shore up the bank with riprap to protect the new location.  This violates the idea of wilderness and letting Nature's God sort this all out, a significant shift in thinking from the Park Service.

SPX going no-bid after September FOMC

Wednesday, August 20, 2014

Charts 8-20: Shot at 2000?

More of the low-volume, overnight gap-up action.  The channel we're in allows for a shot at SPX 2000 this Friday.  Sure, why the hell not.  The upper Bollinger on the daily SPX is up there, with the lower sitting back at 1900.

SPX channel
From a "Three Peaks and a Domed House" perspective, the question has been for a while now, where is the point #22, the one that precedes the run-up to #23, the final top?

Was it 1737 SPX?  Or 1814?  It might very well be the 1904 low we set the week before last.  That would set us up for a megaphone structure up here that would finish with a kissback off the 1985 level going into September FOMC.

I'm thinking that the September FOMC is the point when the market finally gets it through its thick skull that the QE experiment is wrapping up. 

Megaphone top, please

And here's a black bear I spotted out in Olympic NP last week.

Thursday, August 7, 2014

Saturday, August 2, 2014

S&P 500 Crash and Bleed Out

It's Ebola season again in Deflation Land, so you'll want to pick up a couple of extra gallons of bleach and perhaps some triple-ought shotgun shells at the grocery store this week.

"28 Days Later" documentary

The next big test for the markets may come as early as Monday, at the 1941 level of SPX.  If it fails that test, I think we visit the 200 DMA next week.  See the channel:

SPX 08-01

By all rights, we should bounce very hard up from here.  The market is sorely oversold on the McClellan Oscillator, and the small change on Friday signals that a big move is imminent.  But what if that move is lower still?  This will scare the pants off of everyone.  The interminable pattern has been to bounce to new highs.  But if we reject off this pink line, that will be very very bad.

SPX 08-01 1Y

More interesting to perma-bears like me is whether the lower bound of the current down channel becomes the lower support for a fall crash.  This trendline hits several significant waypoints on the tape, arriving right at SPX 1000 on the next "major" Bradley turn date of 20 November.

SPX 08-01 2Y

The overall pattern for this fall crash would be a movement between two divergent trendlines, with longer pauses between each drop, ending in increasingly severe and eventually terrifying crashes.

I promised my girls they would see their first black bear in the wild this year.  We'll give it a good shot in the Olympic Mountains in a couple of weeks, but I have backup excursions in mind just in case we don't see one.  Or they could settle for a black swan.

Friday, August 1, 2014

Charts 08-01: The big test for next week

The McClellan is now in really-really oversold territory, so we should see a bounce soon.  Remember, we were putting up negative readings on the MCO while we were doing the all-time nominal SPX highs, an important divergence.

The big test for next week, I think, is whether we can get back over the 1955-1957 level -- the orange line on my chart.  This line marks where the market crosses over into ludicrous speed.

SPX 07-31

If we reject off this level, then we get a head-and-shoulders formation with a target of around the 200 DMA in the 2nd week of August.  We should bounce off that, until we reject off the next bit of overhead resistance.