Wednesday, August 5, 2015

Charts 08-04: We still need that last touch of the SPX Bollinger

New highs over the next week or two would give us a chance finally to reach the upper Bollinger Bands on the daily and weekly SPX, to put in a proper top like 2007.  The /ES looked great overnight!

Some analysts counted the swoon in late June as a "failed 5th", but this conclusion is highly unlikely, since such an event would have taken us much further south by now, certainly under the 2000 SPX level.  UVXY would have spiked 30% or more in a day, and kept going.  That's what a wave "failure" means -- the tape breaks and we reverse hard and fast while everyone watches. 

The ending-diagonal count off the October 2014 lows is still very much in play, we will have another good opportunity to complete the darned thing and exit the eternal chop zone before August opex.

SPX 08-04 5th wave count

You can also see that the above tape may count as a triangle; either way, more rally is still ahead.

Then we'll see what great deflationary fun this Fall will bring.

SPX 1Y

38 comments:

Christian Gustafson said...

What's the story on the €3,188B 8/19 ECB payment?

Is the Greek story over, or is a surprise still lurking out there?

Reverend Nihilism said...

There is certainly a storm brewing in the distance. Not sure about Sept time frame, but this will be a bleak Christmas for anyone heavily invested in stocks. Hopefully not too many people will double down on stocks like APPL, right at the peak.

Christian Gustafson said...

Your yield curve is not inverted, but it is very very flat lately.

Christian Gustafson said...

And ^IRX, of course!.

T.Berry said...

new highs will be followed by more new highs eventually. that's why being in for the long haul always pays off. the stock market always comes back. i do welcome a 10-15% crash though :)

Christian Gustafson said...

And then there is always this.

Reverend Nihilism said...

"that's why being in for the long haul always pays off" I suppose if you're satisfied with very mediocre returns, passive investing is fine. If you want to do better than 3-4% per year, timing is essential! At least that's been the case since the late 90's.

Christian Gustafson said...

Oh my.

T.Berry said...

reverend isn't the historic average over 8%? that is ok here and the past few years it's actually been much higher. staying the course as i have over 12-15 years before i'll consider selling. the stock market will be considerably higher than were it is today plus all the dividends collected over 12-15 years will add up.sure we could have a crash or two along the way that's the time to add.

Reverend Nihilism said...

If you bought in 99 and held to today, you've made about half that excluding dividends. Also keep in mind these aren't even real returns, when inflation is taken into account.

Reverend Nihilism said...

I just took a look at the VIX going back to 1990. We are indeed at historic lows, I didn't even realize that. The only time we were lower was in 2007, unless I missed something. Even then we weren't lower by much. Yikes!

T.Berry said...
This comment has been removed by the author.
CC said...

CG - I'm in your camp that SPX needs to see higher prices and have a more euphoric sentiment before topping. However, how do you think we can get to new highs with the VIX this low already? This morning the vix had a 10 handle...do you expect a 6-7 handle VIX in the next month? Nothing is impossible in this market but this seems highly unlikely. Just curious about your thoughts on this or perhaps a chart...

Christian Gustafson said...

That 10-handle VIX was a spike low, and a hint at what is ahead. Last I checked, the VIX daily BB is around 9.5 and rising, so we're not too far from that to set up a good situation to short indexes.

UVXY made new lows early today but did not collapse. Its lower daily BB is around 17, or a 3-handle from its most recent reverse split.

The DJIA has been a little heavier and more sluggish than the SPX, and keep in mind the possibility of a triangle on the latter here. Still bullish, right? The tape since the May high is simply not impulsive. I've seen some 1-2, 1-2, 1-2 counts, but unless they're on a steep channel (they're not), they're pretty unlikely.

A 9 or 10-handle VIX is of course a gift from God for the right strike and expiry of "ending-diagonal breakdown" SPY puts.

CC said...

Thanks CG...not sure if it matters to you, but the Vix did touch the weekly lower bollinger.

Bryan Franco said...

CG if the dow Putin a 5f in mid July, would that eliminate the 1-2 1-2 problem you are seeing?

Christian Gustafson said...

Bryan, that count is better than trying to count off the May high, sure.

But it's already running into the problem that the "wave 2" correcting the first leg down is taking more time than the initial drop.

A true "failed 5th" should be off to the races.

Bryan Franco said...

Thanks CG. Will keep that in mind

Bicycle said...

Hell fire is coming.

This is how it ends.

Reverend Nihilism said...

"And look at that 50-200 cross about to happen! Everyone is going to load the boat short and get their head cut off…" I agree Bicycle. The very same "bears" who recently capitulated, and were calling for DJT 30,000 in 2016 have finally turned bearish.

Depriv said...

On the daily SP chart there is a suspected triangle, in a 'b' position (not sure if finished or not).
It has a definitive bearish meaning (well below the edges of that big ED thing), but: as trend does not start with triangles, any downfall should be suspected as (or part of) a correction at this point.

Christian Gustafson said...

Hey, any of you guys in the Seattle, know the Javas, and interested in working at a Fortune 500 company?

Drop me a line.

Bicycle said...

death cross on the DJIA in progress, and we are ripping. Still think we may get one more test of 17k, and then we'll ramp to new ATH.

Gotta throw this out there--what if the September rate increase actually takes place--and ends up being a buy the news event? If we are going to call an end to the public and private debt bull market per Armstrong's turn date, the money has to rotate somewhere, right?

The Fed will be stupidly emboldened by this, and pile on additional rate increases... possibly only a month after the first. Then we'll crash.

T.Berry said...

rate hike or no rate hike (in this camp), there will be more ath's to follow. the mkts will do the same as when qe ended, continue higher. have to admit, one of the strongest secular bull markets in history and just 6+yrs old.

Bicycle said...

San Francisco Tech Pulse, Percent Change from Year Ago, Bear Downtrend Channel.

Christian Gustafson said...

Bicycle, I've got a scenario for that, the partial crash to 1200 SPX, with final Jaws pf Death lows in election season 2016.

In Sekiu, WA, fresh off the trail with my girls. Back on tomorrow, we're headed up to Six Ridge, ONP, to look for berries and bears.

Love the rally this week! Keep the market warm, guys, so I can short on Friday.

Bicycle said...

Alphabet is peak Google

Reverend Nihilism said...

Inverted yield curve looking more proabable by the day.

Bicycle said...

We're getting close to a mega-ramp...

Christian Gustafson said...

Back early from backpacking because the mountain trailhead was washed-out and waaay too dangerous for my children. Apparently God decided to wipe the mountainside clean like Sodom and the Gomorrah.

BTO 20 week 4 SPY 212 call @ .24.

Some skin in the game. Forward, bulls! Forward!

Christian Gustafson said...

Hammer time!

Exterminate the brutes!

Bicycle said...

perfect bounce off the wedge today on the DJIA...

Reverend Nihilism said...

So long fair-weather bears.

Bicycle said...

Buck is here to let you know about some important upcoming celestial events, that may move markets!!

Reverend Nihilism said...

Here's my tin foil hat theory. There will be no hike in Sept and that is when you will get the final ramp.

Christian Gustafson said...

I think the week after August op-ex may be our next window for that topping reversal candle, one like the massive hammer we had this week, but inverted, a gravestone doji.

There is a GDP print 8/27. If it comes in hot, then there may no longer be any question re a rate hike in September.

The market would sell through the actual rate hike announcement, and bottom the following week for a big, big bounce. I'll post the chart tonight. The wave 3 in the series lands in October, of course.

Those calls I picked up are trading at 54 cents, gotta cheer for the little buggers.

Christian Gustafson said...

The wonderful Limerick King posted this on ZeroHedge:

A race to the bottom is on
The dollar, yen, euro & yuan
Global deflation
Will crush every nation
The last 30 years were a con

Reverend Nihilism said...

Nice reversal on copper, could be telling for the next week or so.

http://www.infomine.com/investment/metal-prices/copper/1-week/