Tuesday, February 24, 2015

Waiting for the Bollinger

If our analysis hinges on the top Bollinger Band of the SPX, then we need to be patient -- it's way up at 2136 this morning.  Since this is a measure of extremes, of standard deviation of our moving averages, then we need to wait for it to calm down before we can reach it.

Of course, with all of this excitement and energy and animal spirits and relentless innovation in the markets, we are still building like mad here in the Seattle.  From my walk to work:

To the moon!

Here you can see the top Bollinger Band on the daily SPX, and how we flirted with it before finishing up the third wave in the series (red 3).  We never did penetrate it, however, so that 2093.55 high was always suspicious.

SPX 02-24

The next few weeks may be terribly dull, I'm sorry.

EDIT: no, well, actually, it could either be horribly dull, or we could see that herky-jerky ending-diagonal play out after all.  That would be both exciting and very trade-able.  Pray for that!


Phat Repat said...

To the moon Alice!

Looking good. I will be out at my ideal, currently sitting at 2119 and then patiently wait on the sidelines until the next signal arrives. The reversal comes in at 2086.01; but that value changes daily. ;-)

Edit: To not Too. Grammar freak.

Christian Gustafson said...

Of course, Bicycle has got the big picture on this.

I always loved those superdupercycle Elliott charts that tracked the DJIA back to the Norman Conquest, practically converting Domesday Book entries into S&P equivalents.

Seriously, for how I operate, there are no trades in this range now, the trade is patience. I looked at the indexes at 1980 SPX after the 1/30 Bradley turn and failed to pull the trigger (long). My bad. Important to speculate only when it makes sense; chasing whims is a good way to waste important dry powder.

I picked up a beautiful Folio Press ed of Theodor Mommsen's History of Rome from my favorite bookstore, and you should, too.

Bicycle said...

One neighborhood here now has a higher population density than Streeterville because of all the overbuilding of luxury student apartment towers. And now the Chinese investors have discovered this as a new source of "safe" yield. Lol

T.Berry said...

i sure hope we get that pullback cg, i have some cash need to put to work for the long term. what a february we've had,,nasdaq only had 3 losing days and appl only 2. pretty amazing . if we can muster up about 20 more s&p points this will be the best feb in history (over 7%)

Christian Gustafson said...

Yeah, I hope we do, too, T. Berry.

A terminal pattern like a textbook ending-diagonal triangle here, with subwaves in triplets, would add tremendous confidence for risklove perma-bears here.

Something like what I posted the other day. It would also be very trade-able, instead of boring sideways action and market fumes.

Shorting too early is suicide. We want all our ducks in a row.

But we short because we must; it is our nature. It would be nice to be correct as well.

T.Berry said...

i give you credit being able to short this market cg. that takes some serious skill and you know what you're doing.
for me buy and hold for long term works best. price average and it's a can't lose strategy. these last 3 have been incredible but i'm ok with about 10%/year for the long term.

Christian Gustafson said...

Too early to say that re shorts, T. Berry. I've been making all my money leveraged long for the last 6 months.

T.Berry said...

much easier making in long cg isn't it. i'm considering trying some margin along with adding some cash to the market on next pullback (never used margin before).

T.Berry said...

what is nice about the market now is volatility is dried up. prefer nice and steady move. nas 5k will be nice but not like dow jones 20k

Bicycle said...

18,225 as I type. Roughly 1.5% away from target.

We're hovering just above Mare Tranquilitatis, ready for final descent.

What a long, strange trip it's been. But something momentous is about to happen.

And in a matter of days, we'll be headed back from whence we came.

Phat Repat said...

Yep, 2117 did it for me. I'll wait for the next signal, long or short. ;-)

T.Berry said...

what's your down target on the dow bicycle?

Bicycle said...

Ultimate downside target on the Dow for next bear market would be between DJIA 2500-4000, inflation adjusted.

I think you should adjust your expectations for long term returns. The next bear market could easily last 20-30 years, and span multiple major wars, before we hit those downside targets. Just look at Japan.

A number of us following this very blog might not even live to see the bottom. And by that I don't mean lives cut short, but rather having lived the average lifespan of a modern western hooman.

If it comes all at once in the span of a few years, everyone here is doubleplus fubar, even the most prepared.

T.Berry said...

do i have time to build a bunker? lol. i can cash out now and start using proceeds. : )

i suppose if we go to 2-3000 on dow jones and chances of not surviving i may just let it ride---what have i got to lose? lol

i do think there will be another bear possibly as bad as the last however probably not in our lifetime. they are once in every 80-100 year events. since we just had one 7 years ago......

Bicycle said...

They are not once in every 80 year events. That is an extrapolation from the trends of the past 80 years. The 20+ year period prior to 1922 was marked by 50%+ crashes almost every few years!

And '08 wasn't even close to being as bad as the last supercycle bear market (great depression). Had it been, the Dow might have bottomed at about 1400.

As it currently stands, a collapse in the DJIA roughly equivalent to the Great Depression crash would put us at 1850 which is even worse than the targets I am calling for.

Everyone thinks '08 was a generational event because they had only spent their lives until then living under the benefit of a stable petrodollar economy. The US post-WWII period is a massive historical anomaly.

But the period was the bootloader for something, that much is certain. Whether for a hyper-advanced industrialized civilization that is technologically advanced enough to prosper without oil, or for one of the greatest mass extinction events in world history, we are about to find out. Those are the paths before us.

T.Berry said...

this market has withstood a lot over the past 5 years, piigs, brics, debt ceiling, govt shutdown,obamacare, strong dollar, inflation, deflation, qe ending, ebola, isis, oil falling 50% and about 184 "the top's in"calls, (probably missed a few too) and has done well more than tripling in value to all time record highs. calling dow jones 2000-3000 would be the call of a lifetime.
i do wish you well! just not that well : )

Phat Repat said...

I personally hope Bicycle's scenario does not play out. I like civilization too much, when I can find it. ;-)

Sitting on the sidelines but might look to take some bond or precious positions as I wait. Tick Tock

Christian Gustafson said...

With the Bollinger Bands suggesting we need more time to get overbought, we also have the Bradley turn around the 3/14 weekend -- the Ides of March -- for a potential high.

The upper pink trendline, the topline in the giant ending-diagonal stretching back into early 2014, is at about 2138 SPX at that time.

On a rough wave count up from 1980 SPX, a fourth and fifth wave could land us right about there, time-wise, and bring that top BB within reach. We are currently finishing up W3 in the series.

And there's the 70s Chicago rock band The Ides of March, of which my uncle is a founding member. I still hear "Vehicle" on the radio once in a while, or on my iPod.

Phat Repat said...

Yeah, kinda boring now. Though TLT (T1 133.79), EUR (FXE T1 117.94), and CAD (FXC T1 83.42) are interesting to me on the long side. Obviously the T1's can change and positions can stop out, but something to do while I wait for SPX (currently NOT a buy) to do its thing. ;-)