Sunday, May 21, 2017

Is it time to test the 200 DMA?

I think so.  It has been a while since we have visited it -- the November election.  Now that it looks like supply-side tax-cut stimulus is dead, maybe we need to test it again.



The problem is, visiting the 200 DMA on the S&P 500 will have us break through a key support channel, a trendline from the 1810 low through the Trump election low.  This is a very big deal.

S&P 500
Something I noticed this week -- the all-time high at 2405 SPX is precisely the same distance from the Brexit lows last June as the Brexit lows are from the 2007 highs (@1576 SPX).  This suggests to me that the Brexit spike lows at 1991 might serve as a support for a true head-and-shoulders top, drawn above, which targets the 1576 level as a technical target and support for a sharp market bounce (the B-wave) late this year.

That made me think, What if the Fed actually keeps their word, and raises rates three more times this year?  They have given us plenty of warning, so why shouldn't they follow through on their promise?  After all, it's on Trump's watch, and he foolishly adopted the market rally as a sign of his Mandate from Heaven.

So fuck it, how will he like it when the $VIX is over 40?  He asked for it.  And he would get it, as rate hikes, in June, again in September, and lastly, in December.

By then the damage will have been done, to bring out the specter of deflation, and a test of 666 on the S&P in 2018.

An ominous wedge pattern on $AMZN since early 2015 looks complete, with the stock starting to break out of a really tight wedge at its peak.

$AMZN topping
This unfolds as a serious crisis for the mega-company, heading to support at $300 and, eventually, much lower.

$AMZN breakdown
I worked for Nordstrom ($JWN) for a decade, and noticed that they just put up another death-cross on the $JWN daily chart.  The last time they did this, they tumbled hard from their all-time highs.  Now the only thing going for this chart are the two unfilled gaps up above.  Otherwise, if it breaks the $35 level, we start to look at $18 or so as the next support.

This channel is brutal and suggests that the company may have serious decisions facing it next year.  That's all I will say about them for now.

$JWN channel of Doom

31 comments:

Christian Gustafson said...

Value Village on 99 in Edmonds has a boxed set of The Complete Greek Tragedies, edited by David Grene and Richard Lattimore, University of Chicago Press, if anyone needs it. I would have picked it up for resale (already got one), but they actually priced it correctly. No vig for me today.

Bryan Franco said...

You are abandoning $VIX div?

Christian Gustafson said...

Tough call here. The extreme lows of VIX are certainly appreciated.

Bryan Franco said...

Maybe 2351 becomes a 5f and everything is just right, in spirit. There needs to be some doubt, right? I remember thinking we needed a deeper retest towards 666 back in the summer of '09. I held that view for a year!

Christian Gustafson said...

The 2351 is a phi retrace of us meeting the 200 at 2264. The political crisis against Trump needs to build all week until about Thursday, when we can bounce off the channel and bounce a bit into the long weekend.

TSE said...

Took a ride down to Kingston Pike today- and the traffic, people, new cars,and number of Businesses are incredible. I can still see that hot Blonde driving the tricked out, loud, and Red Ford Mustang.

https://en.wikipedia.org/wiki/Kingston_Pike

Where is the $$$$ coming from?

The University of Tennessee, Knoxville enrolled 28,052 students in Fall 2016, including 22,139 undergraduates. 87% of undergraduates are from the state of Tennessee, while 15% of graduate/professional students are international . Demographically, 24% of all students identify as non-white and 50% of all students identify as female.

https://oira.utk.edu/factbook/enrollment

To keep the Ponzi going longer- it's gotta happen....

Bill Introduced Allowing Cancellation Of Over $1 Trillion In Student Debt Through Bankruptcy

http://www.zerohedge.com/news/2017-05-21/bill-introduced-allowing-cancellation-over-1-trillion-student-debt-through-bankruptc

Meanwhile....

‘The world’s petroleum industry has now accumulated $2.5 trillion in debt. That debt is backed primarily by the value of their reserves. Upon becoming apparent that the value of those reserves will rapidly be approaching zero, havoc will break out in the financial sector. There will be $100s of trillions in the derivatives market that will suddenly have no solvent counter party.

https://beforethecollapse.com/2017/03/17/charts-of-us-gasoline-sales-the-us-is-bleeding-out-badly-retail-sales-by-refiners-have-collapsed-by-up-to-90-in-some-states/

The Banksters will remain solvent longer than you can remain sane. Just saying'...

Once the lights go out- that will change everything.

The first epidemic of a waterborne disease probably was caused by an infected caveman relieving himself in waters upstream of his neighbors.

Perhaps the entire clan was decimated, or maybe the panicky survivors packed up their gourds and fled from the “evil spirits” inhabiting their camp to some other place.

As long as people lived in small groups, isolated from each other, such incidents were sporadic. But as civilization progressed, people began clustering into cities. They shared communal water, handled unwashed food, stepped in excrement from casual discharge or spread as manure, used urine for dyes, bleaches, and even as an antiseptic.

As cities became crowded, they also became the nesting places of waterborne, insect borne, and skin -to-skin infectious diseases that spurted out unchecked and seemingly at will. Typhus was most common, reported Thomas Sydenham, England’s first great physician, who lived in the 17th century and studied early history. Next came typhoid and relapsing fever, plague and other pestilential fever, smallpox and dysentery’s-the latter a generic class of disease that includes what’s known as dysentery, as well as cholera.

The ancients had no inkling as to the true cause of their misery. People believed divine retribution caused plagues and epidemics, or else bad air, or conjunction of the planets and stars, any and all of these things.

Ignorance Ain’t Bliss! How else to explain healthy people suddenly falling dead within hours and soldiers struck down with no signs of wounds? What else would cause such excruciating deaths, accompanied by delirium or hallucination, the body wracked by yellow or green or black vomit or excreta; or covered with obscene black boils, terrible red rushes or ghastly blue pallor? Why else would such sickness remain for months, then leave suddenly and not reappear till years later? Or perhaps it was replaced by a plague more deadly.

http://theplumber.com/plagues-epidemics/

I'm not worried any longer about The FED - I'm worried about ComEd.

https://www.comed.com/Pages/default.aspx

TSE said...
This comment has been removed by the author.
TSE said...

Besides, the Earth is like a Jelly Don-ought, or perhaps a Chocolate Layered cake- swimming in Oil. The extraction of said Oil can be financed and used to power Industrial Civilization for thousands and thousands of years- and then, suddenly, and in the nick of time, a replacement will be magically discovered.

https://www.youtube.com/watch?v=RsYA8Gr5NTY

No Peak Oil For America Or The World

Oil is more plentiful than you can imagine. And we keep figuring out easier and more economical ways to get it out of the ground.

https://www.forbes.com/sites/jamesconca/2017/03/02/no-peak-oil-for-america-or-the-world/#7032da774220

Kevin Wilde said...

I remain in the 1998/1987 camp where we rally into August, peak, and then crash back to where we come from. Whether we head to new highs in a larger blow off - the 1998 experience - or struggle back for a while before rolling over again - as 1987 experience battles to prevent morphing into 1929 - depends on a lot of unknowns at this point. SP 666 revisit, IMHO, would take two to three years of sustained bear, similar to 1929. My bull/bear cycle indicator says with 100% confidence we will have a great bear that cuts the indexes in half, though that is just as likely to be over in a year than it is to morph into the 1929-style triple year. Following the trend is the way to go, hedging along the way, with NAZ 6200 my target for selling 1/2 of my QLD position (hedged with some TZA and UVXY.) For sure, volatility will accelerate going forward, offering some terrific trading opportunities, which is welcome after the FED induced market coma over the past three years.

T.Berry said...

whatever the fed does will be bullish. they have been ahead of the curve the past 8 years. got it right this time. cut or raise, mkts go up. no reason to sell if you're in for long haul.

Kevin Wilde said...

"no reason to sell if you're in for long haul" that only works near the end of bear markets, and/or if one is dollar cost averaging (like in a 401K) and the nest egg is very small compared to future inflows. All others should have some method of reducing risk when risk rises as the bull ages. I'm aggressively invested long here via QLD (with a little hedges on) though I know and accept I'm picking up the last of the pennies in front of the steam roller, and I plan to sell 1/2 my QLD if - when - we near NAZ 6200, which is very close.

Hugh Jazole said...

"that only works near the end of bear markets, and/or if one is dollar cost averaging (like in a 401K) and the nest egg is very small compared to future inflows. All others should have some method of reducing risk when risk rises as the bull ages." Well said Kevin.

Bryan Franco said...

Nest egg relative to inflows. Captures a lot of what should determine one's risk tolerance. Yes, well said Kevin.

Christian Gustafson said...

Check out Andrews Pitchfork laid over the SPX.

Christian Gustafson said...

2285 SPX by the end of the week would be the shit. Memorial Day week then retraces us back up to 2322, for a final drop to the 200 around 2270.

Bryan Franco said...

How is it that after an 18% plunge in EWZ (Brazil w/ currency), there was not even an attempt to trade 1 tick lower the next day?

T.Berry said...

investing for the long haul (10+ year) and dollar cost averaging wins 100% of the time. always has. don't forget, the stock market always comes back. in 10 years stocks will be considerably higher than today

Kevin Wilde said...

1929 peak was not eclipsed till 1954 = 25 years, and that was only the surviving companies.
2000 peak was not eclipsed till 2015 = 15 years, (2017 for NASDAQ = 17 years.)
Fundamentals at this lofty levels - along with my bull/bear cycle indicator - says we should suffer a big bad bear period of similar ilk, so better be prepared for some tough times for buy and hold.
Yes, dollar cost averaging helps, but only if the nest egg at the peak is small in comparison to future inflows.

Kevin Wilde said...

Oh, and a simple trend following approach - cash on sell signals - makes 10 times as much money and does not suffer such sideways misery (purple line versus black line for buy and hold)
http://alphaking.com/performance/

Hugh Jazole said...

Breadth suggesting lower prices for the time being. I've seen it turn on a dime before though.

Kevin Wilde said...

XLF clear bear pattern of 5 waves down (1), partial recovery rally (A), double bottom retest (B), current rally to 50 day (C?.) The question is whether C is over, versus a pop above 50 day to complete C of 2 ahead of crash. If we see a four day rally above 50 day, then that would be near perfect rematch of 1987 pattern. Either way, financials are a handful of days away from starting a crash.

Bryan Franco said...

I want creative answers here: What would cause the BOJ and SNB to abandon / have to abandon their equity purchase programs. Even the ECB is considering it. And the U.S. Financial Markets Working Group definitely intervenes with futures. What might cause such interventions to dissipate?

Kevin Wilde said...

I think it's more a question of whether such central bank intervention work at propping up equity prices? I think in bear markets it does not, while in bull markets it does. The difference between bull or bear markets is whether margin purchases are expanding or collapsing. When the latter lands, such forced selling and debt reduction swamps everything else, including central bank buying. That is what we face, once the current bubble reaches its zenith.

Bryan Franco said...

Kevin, what about Working Group intervention with futures? Can't they trigger a buying butterfly effect at key support levels? Certainly they are well versed in chaos theory.

Kevin Wilde said...

It's not whether they will buy or not, its whether it sticks or not, in that they could the open, stocks hold up all day, then crater at the end. That creates margin calls of the overleveraged, and boom we gap down hard and run, flushing out any and all buying. Then the markets go on surging rallies that are breathtaking. Only for the market to crater to new lows again. Google a chart of margin debt and see how scary it looks compared to 2000 and 2007 peaks. I'm more fearful of that than anything the FEDs can do.

Bryan Franco said...

Kevin. Ok, thank you.

Bicycle said...

...here we go... thanks Fed for the coins in the couch cushions... up into the equinox and June hike

then the end is here. of everything

Hugh Jazole said...

"Google a chart of margin debt and see how scary it looks compared to 2000 and 2007 peaks" That's a good catch. Household debt is also back at record levels. It won't end well, but when it ends is the question. Is it 1996, 99, 2007?

"Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?"

Alan Greenspan 1996

Hugh Jazole said...

87% bullish VIX sentiment on investing.com!

Kevin Wilde said...

" Is it 1996, 99, 2007?" I think 1987 versus 1998. Either way is key is to follow the trend in both directions, which means up for now. Then a 15% drop from peak signals new bear start. The target to sell 1/2 my QLD remains NAZ 6200, which is within spitting distance. As I wrote above, I believe XLF finishing its C wave (of a new bear 2) marks the beginning of the crash, and that is best done with 4 day rally above 50 day MA. Hopefully tomorrow we get day 1, t bring NAZ 6200 into play.

Hugh Jazole said...

Wow.

https://www.theguardian.com/technology/2017/may/23/alt-right-online-humor-as-a-weapon-facism?CMP=share_btn_tw