Saturday, January 3, 2015

Looking for one last high in January

And then it may be time to hit the trenches.  For now, get your dugouts ready, dig them deep to resist heavy bombardment, and stock them well.  Listen for miners tunneling underneath your lines.

An Australian with a Vickers

Friday we retraced .382 of the rally up from 1972 SPX -- clear wave 4 territory.  But if this is a bearish terminal wedge pattern, we have already overlapped wave 1 (which is permitted) and could go a little deeper into next week.  There is plenty of room on the chart.  From this POV, the lower pink trendline is a real line in the sand, it must not be crossed.

SPX 01-02-2015

The good news this week was the top Bollinger Band peaking on the SPX and starting to come in.  A touch of it would set up the next cycle short, and possibly the return of the Bear as well.

Yes, of course the crude oil crash means deflationary hell -- reversion to reality -- is dead ahead of us.

28 comments:

Permabear Doomster said...

re: Yes, of course the crude oil crash means deflationary hell

There are often moments in the past half year when it seems like most are now PR spokespeople for the Fed.

Yes.. YOU are touting lower prices are a BAD thing.

It is PURE federal reserve policy.

Serious question... you think higher rates are BAD too ? Ohh yeah... you do. lol
--

Twisted times...and it seems hardly anyone is left who has ANY memory of pre-2007.

I remember when 5% rates were 'fine'... along with $30 oil.
-

*see my alternative scenario for downside after the spring. It is something that might offer something 'fun' into late summer, but from there... we still go up.

Bryan Franco said...

PB - 5% rates and $30 oil took place under a completely different regime. In THIS regime, the fact that nearly every commodity is plunging demonstrates the FEDs inability to create the inflationary "reset" it so desperately seeks. Only a matter of time before Mr. Market accepts this.

Bicycle said...

You gotta be kidding me.

We have a sector of the economy (energy, read oil and gas) that is responsible for about 10% of total US market capitalization (and also from which *all* monetary inflation flows directly from), has massively outperformed the S&P 500 since the crash and also over the past 10 years, and is now getting monkeyhammered by OPEC and international demand destruction, and we expect that there will be no serious fall out throughout the rest of the US economy through 2015?

Sitting in London I am not sure you are quite aware of the extent that fracking has consumed the United States in the past 8 years. The dumb shits wanted to crack open the entire southern half of Illinois (never mind the water or bread basket) among many other places and that is now GONE. It will *never* happen. Yet the assumptions of oil and gas to be recovered, all rosy, now wiped out in equity valuations, are still all built into all of the rest of the economic models at all financial institutions and the Fed, packaged, and rehypothecated.

There are no clothes for that emporer. The tide has gone out and we are waiting for the 600 ft. tsunami to crash ashore at this point.

As for remembering pre-'07... please. Yeah, let's consider a 5% rate as being fine. Ok. At the current debt service you are now talking about an implied default of the United States. Pre '07 there was no fracking industry as it exists today and certainly not at $30. And that industry has been everything. Nothing the Fed has done since early March of '09 would be possible without that technology.

History will show that nothing depantsed the Fed more than the oil crash of '14.

benjoyce said...

I need BB analysis please. The daily lower BB looks flat and ready to curl DOWN. Having that lower BB go flat like that is unusual.

benjoyce said...

Also, I remember that if the market fails to hit the upper BB and then closes below the 20 day MA then the odds are high that it will hit the lower BB. IF that situation happens it appears that the lower BB will curl down and that is even more bearish. There is a reasonable data dump this week that could provide dump motivation.

Bicycle said...

The coming backtest rip from the 200 to the underside of the rising wedge is just going to trap so many people in so many ways....

Christian Gustafson said...

Middle BB -- 20 DMA -- for the SPX is up at 2049. There's your test for today, we would need to retake that to avoid the likelihood of dropping back to the lower band.

If not, Benjoyce is right that the lower BB is back down in the 1980 area. Would that invite some sort of topping head & shoulders?

There is a Full Moon today (1/5), if you care about astro stuff.

Bicycle said...

If we are going to stay in the rising wedge, we have then already seen the low for today at Dow 17,559.93, and will continue to move up from here. The move in WTI seems... capitulation-ish, doesn't it?

Christian Gustafson said...

Can the Fed control the Moon?

Game on, market challenge is to retake 2049 today.

Bicycle said...

Whoops, my bad eyes on my chart. Should see sub-17500 before bounce but not much further if we stay in the wedge.

T.Berry said...

similar start do '15 as '14 (down almost 1% day one). '14 lost 3.5% in jan but turned out pretty well. year ending in "5" plus 3rd yr pres cycle odds in favor of another up year. plus cheap oil as a bonus will lift consumers spending.

gl to all in '15

benjoyce said...

educated guess again:

So we fail to hit upper BB and now we close below 20 dma. This means we hit (the odds are that) the lower BB. But the lower BB is now starting to drop. This means we go even lower than the lower BB. To where? how far down. This whole week we could get bad news. So the market bottoms on Employment friday, just before earnings season comes out. I would guess we hit 1950 on friday (inverted H&S on the weekly) and then rally. Then rally again for the Jan 22 ECB decision. Then rally again for the fomc late jan.

benjoyce said...

another bearish drive is OIL. Let's not be naive and think that oil will stop at the monthly trend line at 46.62 or so. This line goes way back. I bet they slice thru it and the s&p starts to panic some.

benjoyce said...

Andrew's pitchfork support on the monthly chart at spx 1890 or so this week

benjoyce said...

I'm sorry I ment above to be 1900 not 1950. ok I'll shut up, enough from me

Christian Gustafson said...

If the 2017 low holds, we have a real possibility of an ABC off the high.

2093 -> 2048 "A" 45 handles
2048 -> 2062 "B" 14 handles, .31 retrace
2062 -> 2017 "C" 45 handles

A ~ C

Bicycle said...

I am liking this setup for a rip higher tomorrow. Bottom of the DJIA rising wedge, WTI got to test the water below $50, now we'll pop back above it and carry the market with it.

However, if we gap down tomorrow, things are going to get extremely interesting, really fast.

benjoyce--nice to see someone else here to discuss the oil story. Reading Steve from Virgina's latest, it makes me wonder if the reason for the Saudi's involvement in this latest crash is because they are now seeing their fields in terminal decline--their extraction costs are rising because of it and they need to make up the loss in margin with volume. The way to do that would be to engage in a price war with US shale to the point that US shale is shut in for good. If true that gives us a floor to the current decline (perhaps at $40), but a floor that will steadily be rising because of the increasing inability of the mideast to maintain current production levels at a margin that keeps their societies stable.

benjoyce said...

Inverse H&S at 1900, also it's the lower BB weekly, Andrew's pitchfork support at 1890. I'm not saying this WILL happen but I'm watching it.

I'm wondering will data this week (including oil and Usd/jpy) be used to drive s&p down to above support and then use ECB & FOMC news (print print $)to drive up prices in sharp manner.

Don't you think by the time Greek elections come around, if they do, that they will be already factored in?

Earnings season starts a week from today? I'm told. and will be great earnings. A reason for a rally next week after a big drop this week

Just my thoughts, NOT investment advice. If I were successful, I would not be tending the wood stove here. 7 degrees F on thursday tomorrow

Bryan Franco said...

Pay attention to IYR the reit etf. It might be leading this whole ending wedge thingy. A sharp reversal down would suggest that it finished wave 5.

Bicycle said...

Tuition freeze announced here yesterday. First time in about 20 years. Also happening across the rest of the Big 10.

Bicycle said...

If we don't bounce hard very soon we might be done here. Barely broke through support on the rising wedge with that last dump.

Christian Gustafson said...

Earnings! Opex! RSI divergence on the 5-min SPX! Full Moon!

If we still have one more high, it's into January opex and a long, long week-end.

Bicycle said...

Note we can still hit Dow 18k again on a kiss back, after we go touch the 200 again. Not a new high, but a potentially good place to reload.

US Steel 600 layoffs. More demand destruction.... yikes.

Bicycle said...

Top might be in guys. Next question is what happens at the 200.

benjoyce said...

I was nervous on the "rally" this am. Now lower BB is dropping and at the level now, of a double bottom. BUT double bottoms are a bit rare, so look like we go lower than the lower BB

benjoyce said...

At 10 am the services pmi came out and it looks like a weak #. The bull were embolden, it appears, to rally, thinking, "the Fed will delay tightening" But the rally fissled and the bulls began to shit their pants. A weak number is consistant with deflation?

benjoyce said...

I sold my puts at a small profit. Could a had a double yesterday. doesn't look like a big drop till friday empl figure.

rally today with fomc min?

benjoyce said...

Looks like I may have a abandon my slice thru the Lower BB. Fomc min today and empl figure looks like ok numbers and will not tank the s&p. Crude oil numbers at 10am

but we did slice thru that pink trendline. I'm starting to get bullish