Friday, May 22, 2015

Charts 05-22: the "Force Janet Yellen's Hand" scenario

Two hours to go before the Memorial Day weekend, and we are hanging in here stubbornly.

We've moved sideways through a couple of support trendlines that have now been slowly, gradually stressed and broken, but the market is not yet ready to head down.

The daily SPX upper Bollinger, the lower daily VIX Bollinger, are untouched and probably unlikely to be tagged into the close today.  So far, these technical indicators have served us well to know that we have not yet reached the end of this.

The two most likely events that can roach the market and bring the return of the bear would be a suprprise hard default and exit from the Eurozone of Greece, and a 50 bps or better rate hike at the mid-June FOMC meeting.  Assuming that the PTB can keep Greece on ice, then let's consider that the equity market hangs in here until the FOMC, all-but-forcing Janet Yellen to declare victory and discontinue ZIRP (for now).  ZIRP will certainly return, but under much more desperate and frightening circumstances.

Here's a proposed ending-diagonal scenario that completes into the June Fed meeting, at the 2145 level on the S&P 500.

ending-diagonal into June FOMC edition

EDIT: after looking at the DJIA for corresponding waves, I added a second count in red that would have us finish up an ending-diagonal after the first week of June, presumably on Greek troubles.

11 comments:

Christian Gustafson said...

No positions on, but I am getting a haircut today.

Just in time for summer.

Reverend Nihilism said...

So close on the VIX, it won't hold these levels for long.

Christian Gustafson said...

11.46 VIX lower BB today. The best indicator would be a close outside the Bollinger, setting up a serious buy signal on it. SPX upper, VIX lower, with a plausible complete wave count.

We have some more time. 1 week into June the next good window, SPX 2140?

I would be eyeing an entry into Q2 SPY puts.

Bicycle said...

What about July 4? Independence day weekend, (2015 - 1776) / 3 = 79.6 year cycles, full moon on July 2, conjunction of Venus and Jupiter on July 1, the whole bit.

ADP, ISM Manuf, Vehicle Sales and Beige Book on July 1, Initial Claims and Manuf Inventory on July 2, Consumer Credit after the long weekend. But no Fed meetings, which is how we should like it, because with this topping process, we need their illusion of control to evaporate.

Can we stretch this out one more month? I think we can. It sure feels like we can.

Christian Gustafson said...

Best development this week is that the VIX is now setting up to visit its own lower daily Bollinger, which ought to give us a solid VIX buy / SPX sell signal when it is ripe.

Bit by bit, we are getting there.

Permabear Doomster said...

CG: ZIRP will certainly return, but under much more desperate and frightening circumstances.
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but if low/neg rates... where do you think the money is going to go?

Bonds? Seriously?... otherwise you know what the answer is, but you can't accept it.
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We ain't going under sp' 2K any time soon... until then... bears got nothing to tout.
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I don't see you ever look at other issues, what about the USD, or other world markets?

Christian Gustafson said...

The USD is probably in a wave 2 correction at the moment, with a rocket-shot coming once the Euro cracks.

Bonds? I've been wondering lately if the bond run from 1980 is over. No breakout yet, but I'm certainly wary.

Where does the money go, Doomie? It disappears. It goes to money heaven. Stocks and bonds could sell off together, as piles of fake wealth disappear.

The financial world is not real. All values are illusions, opinions, transient.

Reverend Nihilism said...

"Bonds? Seriously?" I have a small portion of my portfolio in the TIP ETF (please don't laugh). I'm perfectly happy with its slow/steady performance.

Permabear Doomster said...

re: Where does the money go, Doomie? It disappears.
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Hmm, possible, but I doubt they'll allow it.
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re: TIPS. I actually like... as a partial balance to equities.

sooner said...

The money goes up like a Roman candle servicing bad debt

Bicycle said...

We... them... everyone... is running out of time, and the end approaches. With this current downtrend, there's only time left to set one more major new high--and even that is debatable now. We're now leaving big old patterns behind, to history; we are struggling to regain them, and they are pointing into darkness.