Thursday, December 14, 2017

Waiting for the new tax year

Once the new capital gains rate is in for 2018, no one has any incentive to hold stocks at these elevated bubble levels.


The top of the terminal wedge is at 2715 on December 27th.  I want to propose now that the Fed will pull their strategy to shrink the balance sheet at the July-Aug meeting.  This will stabilize the situation until the end of the year.

SPX May 2018 crash

Sunday, December 10, 2017

Let's say it all works out through EOY

Let's suppose that President Trump gets his tax cuts, whether he has to cuck on DACA or not doesn't matter at this point, but let's say he at least gets it through Congress by the end of the year.  Once we're on the new, lower, rate on capital gains, for nervous sellers, what reason is there to hold stocks a day longer?


December 28 is the first day when stocks sold will settle under the new rules and rates taking effect in 2018.  The upper bound of the E-D on the S&P 500 is about at 2720 on a log-scale chart.

SPX E-D into EOY

The Fed is expected to hike this week, and the 13-week Treasury bill bears this out, and the Fed should reaffirm its policy plans for 2018.  Once the selling starts, however, and does not abate, we will look for the Fed to retreat at FOMC meetings and try to save the situation.  But the dominoes will be falling and they will play out the last, most severe leg of McHugh's Jaws of Death mega-pattern.

SPX Jaws of Death finale

Tuesday, December 5, 2017

How soon can we re-test 1810 on the S&P 500?

I found a real gem in Value Village this week, a signed 1st edition of a classic critique:

James Burnham, Suicide of the West, John Day, 1964
thank you for donating to your local charities

If Congress shanks President Trump (damn, that still feels so good to type) this week, we get a brief market crash comparable to the impulses that took us down to the 1810 lows in mid-2015 and early 2016, a decline of about 12%, to support around 2336.

Congress adjourns for Christmas break next Friday, 12/15, so it's likely they patch things up by then, hopefully without Trump cucking on DACA, but with the result being a fierce rally into EOY.

With the ^IRX at 128 bps, we may also witness the incredible event of the Fed hiking next week during the government shutdown.  The policy wheels are already in motion, so why should they change course due to some infighting over fiscal policy?  What a sight this will be!

But the damage will have been done, and we can start finding our way back to the 1810 level by mid-February, with a bounce into March FOMC.   When the Fed maintains their course, it will set into motion the hellishly-bearish market events for the rest of 2018.


SPX steep decline to 1810 support

Sunday, November 19, 2017

The elusive, mythical leading-diagonal

Off the 2597 SPX high, we actually have a five-wave decline that could possibly be an elusive "leading diagonal", which is similar to a terminal ending-diagonal, but whose triplets and overlapping waves signifies the uncertainty at the beginning of a directional change instead of its end.  Daneric has suggested these numerous times over the years, each time proving to be a bust, so it's achieved something of a mythical status, a chimera, a unicorn, possibly apocryphal Elliott nonsense.  But we'll give it a shot.

the lion in winter

The market lost steam on Friday precisely at the .618 retrace level of the drop from 2597 to 2557, so we have the remote possibility of both a leading-diagonal and an initial channel south, which will reach its low in the week of the next fiscal cliff deadline, 12/8.  Congress will keep the wheels greased at the 11th hour and rally us through Christmas.

Red /ES tonight would mean we are starting a larger 3rd wave down, which will intensify as the Press fans the flames of a fiscal wreck into December.


SPX leading-diagonal and possible new channel

Saturday, October 28, 2017

Fed Austerity will slay the petro-Yuan

China threw down the gauntlet this past week, announcing detailed plans for launching a petro-Yuan, oil priced internationally in their pretend currency, instead of ours.



This will, of course, destroy the $USD and put the Fed out of business overnight.  However, there is a solution to this problem -- austerity.  The Chinese banking system is so overextended and utterly impossible, that the plan ahead for us must be to ruin it, and collapse their economy, before they can destroy what's left of ours.  We must show them who really runs the Empire, or risk losing it all.

The S&P 500 will also be a casualty here, but we have re-capitalized the banks (right?) and FAS-157 guarding them anyway, so we can and will win a brutal war of financial attrition against the Chi-coms.

The current channel, and wave similarity, suggests maybe 2611 SPX into the Wednesday Fed meeting.  Then we will need a very stern policy statement from the Committee to get the ball rolling.  Nominating Taylor as the next chair would help as well.




This builds into larger waves to retest the 1800 SPX area and set us up for wild times in 2018.



The Fed can't fuck around any more with the petro-Yuan on the drawing board.  They need to throw the incredibly improvised and brittle Chinese financial system right into the hopper, their society into chaos, watch Xi lose the Mandate of Heaven, and secure the place of the $USD if for only a few more years.

We can do this.



Monday, October 2, 2017

The great game in the face of Fed deflation hell

The Fed is pulling their chips.  How long will everyone remain at the table?

An American Tragedy

It's all crystal-clear now.  Never say die.

S&P 500 returns to long-term support at 525

Friday, September 22, 2017

Wednesday, September 13, 2017

First support would be the April lows

... at 2322 SPX, which allows for a .618 retrace back up to kiss the old channel, following the October New Moon.


After that, we have 1991 and 1792 waiting for us.  And the mid-term future, as I see it.  The crisis wave down starts with the March, 2018, FOMC meeting.

SPX path to 1000

Saturday, September 9, 2017

Another week, another potential topping move

Lots to be excited about this week as the best ending-diagonal tape in a long time continues to form, ominous like the storms off the west coast of the Africa.  Something very serious is brewing.


Here's the proposed E-D count.  With Irma looking like it will not level Miami, we can expect a gap up on the /ES of at least 10 handles tomorrow night.  That will be a nice start to an extended 5th wave that targets 2509 on the S&P 500:

SPX 9-8 ending-diagonal

If this plays out I'll be pricing week 1 October SPY puts, for retrace of an even larger ending-diagonal and initial low on October 6th.  This begins a larger move that initiates the Bear at long last and finds desperation support in mid-January 2018.

SPX 9-8 doom

Hurricanes aside, the real shit-storms hit in 2018.  And the bounces are going to be as much fun as the panic sell-offs.

Monday, September 4, 2017

On ending-diagonal watch again

From the 2417 low on the S&P, it looks like we are three waves into an ending-diagonal that could make a new high this week at 2491.

Futures are red tonight over North Korea worry, but what we are looking for is a sharp decline to overlap the first leg up at 2454 SPX, so that waves 1 and 4 overlap just enough for a textbook E-D.  The 5th wave would then put in a slight new high ahead of next week's FOMC.

SPX 9-4 15 min candles

Thursday, August 10, 2017

Charts 8/9: Setup now for a huge sell-off

We closed right at the perfect spot for a gap and go in the morning.


We could see a 4-5% sell-off tomorrow, retracing the entire five-wave advance from SPX 2328!  Relief would follow next week, at least until mid-session Wednesday, when we rollover again.

SPX 30D

The big picture, including the debt-ceiling market crash in late-September (and face-ripping rally into January):

SPX 2Y

Tuesday, August 8, 2017

Charts 8/8: Bear sighting

It looks like that diamond-pattern that held up for several weeks morphed into a rough ending-diagonal shape and ... ended.


Awesome price action with a key-reversal day, selling off on heavier volume than we had on the rise.  We are now off to the races.

The next order of business is to drop 200 handles to the 2280 level on the S&P 500.  The sooner we get the VIX up to 20, the sooner that the leveraged volatility shorts will be crucified.

The Fall crash gets going in later-September when the government hits the debt-ceiling wall and commences shutdown.  I am very much looking forward to this waterfall -- will it stop around the earlier lows around 1800 SPX, or plummet all the way to the 2007 (year) high of 1576?

SPX 2Y fall crash

Good luck to all ... bears!

Friday, July 28, 2017

Well. What do we make of this nonsense?

Thank you Bryan for the title.  The reversal off the 2484 SPX high looks decent so far.


If we've topped, then the first order of business will be to retrace -- quickly -- the 5-wave move up from the April lows, followed by a bounce.  If I have drawn the channel right, you can see how the close today tried but failed to regain it.

SPX 60D
If 2484 was a significant high, then it begs the question whether it completed a W3 or a "C" wave.  There clearly is a 5-wave move up since the Brexit lows (1991 SPX) on the chart.  The big question then is whether we can look down from these heights, or if we have another 4th wave correction and 5th wave rally left in the tank.  IMO, all of the major legs since the 2009 (year) lows count as triplets, ABCs.

If 2484 SPX marked the end of C of 5, then we can revisit the Brexit lows this fall like so:

SPX 2Y
If 2484 SPX marked the end of a W3, then the .382 retrace of the 1991-2484 leg is 2295 SPX; we will watch for this carefully, because a 5th wave similar to the initial bounce from the 1810 lows would bring us very close to a final high target of 2600.  We have to keep this possibility in mind -- especially if we find ourselves near the 2295 SPX level (and a pink trendline in the chart below) into September opex.

If we are looking for 5 complete waves up from the 1810 lows, and especially if the Fed rolls over at the September FOMC, then E-W suggests that we could indeed approach the 2600 level in a 5th wave up, as shown here with the heavy blue line.

Bullish alt: Fed flake-out blow-off

Thursday, July 13, 2017

Want to see a strong Friday to finish up

Closing at the highs tomorrow, 2466 on the S&P 500, would be a perfect setup for the weeks ahead.

Bouncing between support and resistance trendlines would draw a beautiful head and shoulders to mark the top up here, finding strong support in mid-January.

S&P 500 3Y

Everyone + mother has been comparing crypto-currencies to tulip bulbs lately, which is obvious enough.  I think the South Sea Bubble makes for a better comparison, as it was a whole collection of scams and ripoffs from Exchange Alley in London, of which the South Sea Company was only the first.  At the end of the day, all the cryptos will be blackened craters, worthless.

Sunday, June 25, 2017

If we get a sharp decline this week

I'm usually not one to post a bunch of alts, because you can come up with scenarios all day if you care you care to do so.  But this one is very important, I think, because if it plays out, it is extraordinarily dangerous.



Let us suppose that we get a very sharp decline in this last week before Q2 opex.  Let's say we make it all the way down to channel support at 2320 SPX, a long ways.  Many will think, with good reason, that this is it, holy fuck, doom is here.

But it could be a 5th wave broadening-top megaphone, which means that this move will reverse sharply once it reaches that support, and that it will immediately rocket right back up to new highs!

Something like this.  It is real possibility, and dangerous enough that it will probably waste a few speculators.  Be careful out there.

S&P broadening top megaphone 5th wave scenario

Saturday, June 24, 2017

So where are we now in the count?

We want to see more pullback in the end of Q2, finding support at the 2400 level on the S&P 500.

a rare U-Haul camper, Crown Hill, Seattle, WA

From there, we hit the next Bradley turn for the final (?) 5th wave up.  Along the way we want to see continued market optimism, with divergences in breadth and $VIX if we can manage it.  A few more Hindenburg Omen days would add to the drama, as well.

SPX 60D E-D count

This next chart is based on various support trendlines and their co-incidence with 2017 Federal Reserve Open Market Committee meetings ... let's call it "policy pinball".

SPX 2Y

Monday, June 19, 2017

What we are missing for tomorrow

We have a Bradley turn tomorrow, the market is overextended up into the daily top Bollingers, but we are still missing one very important element for a durable top -- no breadth divergence!

Deflation Landers ready to rumble

This is an important element in all the big tops, market breadth evaporating into a final high.  But we can see new highs with the recent market run up.  Chart from Tom McClellan.



So while we may get a tradable selloff into the end of June, we should propose a short-term count more along these lines, as we levitate into July.  A divergence with NYAD, etc, by then would be a very welcome sight.

SPX ascending megaphone top

Saturday, June 17, 2017

Looking for that long convexity trade

One of my favorite coffee shops burned last night; I heard it was arson.  At the northwest edge of the city, above Golden Gardens Park, Fiore is a natural stop for a long weekend walk.  Hope they can rebuild and reopen the place.



We managed to make it through a yuge June opex without any fireworks, and SPY was up 50 cents or so after-hours Friday, which bodes well for Monday.  We are in a Hindenburg Omen window (quantitative signs of market instability), and FWIW, there is a Bradley-model turn coming up on Tuesday.

Bradley siderograph 2017, from http://www.amanita.at

I'd like to see us get up to the 2455 level on the S&P 500 and reverse intraday on Tuesday.  The first bounce would be minor channel support back at 2322.  We will then need to break that support before we can head lower to test the channel support for the entire 2009 (year) rally.  If the larger pattern plays out this year, key highs will be at Fed meetings, as they continue to hike their interest rate targets and drain the swamp.

SPX 2017 selloff

Wednesday, June 7, 2017

We can make the case for 3 more Fed hikes in 2017

The Fed promised us 3 more hikes in 2017, so why would they not deliver them?  Here's a 40-handle VIX for you, President Trump!


And now, looking at the chart of ^IRX, the 13-week Treasury bill, we can see that this looks very likely.  Why?  The yield is in the midst of a W3 move north.


^IRX 13-week Treasury yield

Next Wednesday's hike is in the bag, but the market's won't dive on the news -- this hike is expected.  We will see a hard reaction from it, but it will take another week to arrive -- after June opex.  For the next few days, it would actually be good for perma-bears to see a little weakness in the S&P 500, so we can achieve w1/w4 overlap on the chart at the 2398 level, for an ominous ending-diagonal.

SPX 60D

The truth is, the markets realize that China is attempting new waves of magic credit creation, when they have clearly already pushed the limits of rank insolvency.  It's time to give China the smackdown, and remind them who really runs Bartertown.  The Fed won't sit idly by while China purchases what's left of the world's real assets with fake money, and sustained hikes in the USA will end this little charade right quick.  Doom is coming to the Middle Kingdom.

Remember, historically, when things go crazy in China, they can get really fucking bad, something we in the West overlooked since our own nasty wars of the 20th Century.

If the 13-week yield keeps climbing in late August and into September, then the Fed will come under insane, intense pressure NOT to hike again at the September meeting.  But if ^IRX is sitting at 125 bps, they will hike again -- a marvelous equity short.  The larger 5 wave impulse can finish up after ^IRX finishes its larger impulse and brings the Fed to hike one last time in December.

SPX 2Y

However, the damage will be done at this point, as spec-u-vestors and riskloves scramble for safety in the 10Y Treasury.  They will drive its yield well under 1.5% -- inverting the yield curve.

SPX 4Y

An inverted yield-curve here signals the hard recession -- deflationary depression, really -- in 2018.  Stocks, real estate -- smoked.  After stocks hit their low, on the lower bound of the "Jaws of Death" mega-pattern, the trendline off the 2003 and 2009 lows, then bonds peak and join them on the bonfire.

This concludes the 20th Century postwar period.  The Fed has got 3 more hikes waiting in the wings for us -- this year.