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".


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

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.


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.


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.


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.