Sunday, March 25, 2018

It's not 1987 ... yet


We still have gas in the tank.  Quite fine with me.

It's going to take 2 things to kill this market dead:

1. Q1 earnings season badness.

2. The first estimate of  Q1 GDP due EOM April.  If this misses, markets crash and stay crashed, until the FOMC can regroup with a new QE in early November.  A weak GDP read upsets the entire recovery/growth/animal spirits narrative, and the Fed is not yet ready to do anything about it. 

But first we need to touch the dotted blue line one more time.  It has stopped every attempt in this eternal credit-expansion rally.  It's not all that far away, and we are setup well to visit it.

The slope of the recent declines since January point to ominous targets.  Let this run for a month, and we're back at the 1810 lows.  Let it run into the Fall, and we're at scary new market lows under March 2009.

The leverage is there, the crap debts are there, the big players (pension funds, 401ks, ETFs) are all ready to sell and keep selling, at this rate of decline, at the slope shown here.  

And crashes are three-wave ABC affairs. 


SPX touches the dotted blue line and dies

41 comments:

Christian Gustafson said...

Ook ook I've got a nice 1931 copy of Jack London's The Sea Wolf here from Abebooks, close to this one, think I'll start it on the bus tomorrow.

Grosset & Dunlap was such a great publisher for the reading masses back in its day.

Kevin Wilde said...

Trading-wise, playing the trends is the way to go, with the trend on the cusp of turning negative, I will playing the 1987 scenario. If Christian is right and stocks start to rally then I will be trading the long side, expecting a rally similar to the chart shown. I would not be disrespecting the bear potential here while trends are so clearly negative, since that first wave of selling in early February was perfectly impulsive, and the twin - failed - rally attempts since appear classic A-B-C variety in shape, thus we are on the cusp of entering the crash zone (just below the 200 day moving averages) in the mighty third wave position. Trade what you see, tis my advice! and what I'm seeing says Christian chart from late January is more likely to be the correct pattern we face than the current one.

T.Berry said...

up is the trend, has been for 9+ years. don't expect a change for quite a while. good luck trading but longer term we're gonna be fine.

that 2012 crash is gonna have to get pushed back again lol

Hugh Jazole said...

So far this has all the hallmarks of a sucker rally.

rotrot said...

DJIA
https://tinyurl.com/yc7erc2d
S&P 500
https://tinyurl.com/y9fh7je6

Christian Gustafson said...

I'll see your descending bearish triangle and raise you a Bulkowski Big W, with a target of 3070 on the S&P 500.

If we're in a 5th wave now, we want to see divergences -- diminishing breadth, lower RSIs for new index highs, fading volume. Touching the dotted line up there, the channel top of the whole reflation rally, that would be the icing on the cake.

Christian Gustafson said...

We are born into this time and must bravely follow the path to the destined end. There is no other way. Our duty is to hold on to the lost position, without hope, without rescue, like that Roman soldier whose bones were found in front of a door in Pompeii, who, during the eruption of Vesuvius, died at his post because they forgot to relieve him. That is greatness. That is what it means to be a thoroughbred. The honorable end is the one thing that can not be taken from a man.

- O.S.

T.Berry said...

hugh, hope you're all beared up. you'll make a killing.



cg, agree 3070 is coming!

Christian Gustafson said...

Not yet, Mr. Berry! We have got 4 weeks still.

Hugh Jazole said...

"diminishing breadth" We certainly have that.

T.Berry said...

that's about near my year end target so i'm in no hurry cg.


we could be staring at sp 4000 within the next 18-24 months

Depriv said...

Rotrot, triangles are mid-trend corrections. That means that the previous trend will continue afterward.

To take it as 'bear' you need a bear leg before the triangle... But for this one, all you have is a strong bull leg => in this configuration it would be an extreme bull sign.

If you wanna' that bear, then take it as a double (or triple) peak instead.

Kevin Wilde said...

Armstrong out saying next week and end of April biggies. Expects critical support at Dow 22,415 to be tested. If we rally into next week, then sell-off into end of April, then rally with low in. If we rollover here low lands next week, following test of Dow 22,415.

Me here: Dow 22K by next week would be in the crash zone, with a crash a 4 day event below the 200 day moving averages, with the crash day landing on day 4. Any break of last Friday's low puts us into such a crash attempt. The NASDAQ gives the best trend buy and sells, and that remains up for now, though a sell is triggered if we slide hard below 7200, and sell is off the table if the NAZ gets back above 7300. So we are decision-time, flirting just above the crash zone.

Kevin Wilde said...

Trend turned negative at the close today, where last year landed without any change in trend at all. While a bounce wouldn't be a surprise tomorrow, we close today smack on the crash-line, and capital preservation is now more important than capital appreciation. I gave trade instructions to alphaking readers to sell out of the market. Conservative investors should be in cash (or money market fund.) More aggressive investors should be 1/2 in PSQ (which makes money as the NAZ 100 index falls) and 1/2 in cash. I also continue to hold small amounts of TZA and TVIX; letting them run while downside momentum remains strong. Anyone else making adjustments here?

T.Berry said...

no worries, only 20 trading days till 3070! only 450 points away

Christian Gustafson said...

That's the spirit!

All this volatility needs to transform into rocket fuel .. until we get that first peek at Q1 GDP at the end of April.

Kevin Wilde said...

The rocket fuel gets ignited once we breach the February and current lows. One bad day in the red and booooom!

T.Berry said...

yikes where's all this bullishness coming from ??? lol

makes me nervous lol


get those crash calls out!

Christian Gustafson said...

Wait! you buy puts for that!

This market is tired of being tired. $FB, $AMZN, $TSLA, $APRN, and $TWTR are the new value stocks.

Need the dotted-blue line up in the heavens.

T.Berry said...

looks like the ramp up into q1 earnings. since 2009 stocks have very seldom (maybe once or twice) sold off during earnings season. expect it will be no different this time as the tax cuts start taking hold and earnings come in better than expected.

i'm not counting on 3070 by end of april but content to be patient as it will eventually get there as we close out 2018. have to hit it in order to get to sp 4,000!


slight possibility for another quick pullback before earnings kick off in the next 7-10 days but it won't last as too much sideline and foreign money want in.

Hugh Jazole said...

I know where his soul is going.

https://www.cnsnews.com/blog/michael-w-chapman/pope-francis-there-no-hell

Kevin Wilde said...

It is not about correctly forecasting crashes and bear markets. It is about successfully managing the capital preservation versus capital appreciation scales. The trend is currently down, risk to longs is extremely high, the bull/bear cycle shows we have entered a minor bear - at a minimum - or a major bear corrective phase. That says capital preservation is the way to go. The trend turning positive will tell when to put cash back to work, or if we crash, which always offer great buy opportunities (at least for shorter term trades, as crashes rarely mark the ultimate low.)

The 200 day moving averages remain the gateway to a potential crash, and the bulls can relax while we remain above those lines, as all indexes currently do. Unfortunately, anyone looking to sell on a break of that will be competing with a mass of other sellers, who will be competing with margin calls of over-leveraged big money players, all being front run by the algos. Good luck with that.

T.Berry said...

good advice if you trade but no reason to sell if you're a long term investor. anyone who does will regret it like those who sold during the 2009 panic.

Kevin Wilde said...

The only good buy and hold strategy is dollar cost averaging, and even that becomes less good over time till it's also outright bad. When current portfolio is small, and swamped by size of future inflows, forgetting about the markets and keep on buying is the way to go. However, when current portfolio is large, and swamps future inflows, then dollar cost averaging fails in its mission, as large losses cannot possibly be made up without the help of the stock market. Big bears - which are SURE to hit EVERYONE during a lifetime - most, many times over during a lifetime - take decades to recover from. Selling in 2007 - which my AK subscribers did - and buying in early 2009 - which my subscribers did - not only made more money, it also avoided the emotional misery of being caught on the wrong side of that one. While everyone else saw their portfolios cut in half in 2008, our return was +70%. On reflection, that should be many times that, and striving to do much better when the next big one comes. Buy and hold is silly. Trend following is smart. No investment approach is without flaws. It's just that some flaws are bigger than others.

T.Berry said...

nevar fear 3070 is near!

only about 3 weeks away

Christian Gustafson said...

The 1st peek at Q1 GDP is Friday, April 27.

Plenty o'time.

Kevin Wilde said...

Should today end bad then today will day 1 of a crash a 4 day crash attempt below the 200 day moving averages. Such a scare 'em event should provide a good buy opportunity by Thursday. The depth of the selling by Thursday will determine whether we b in a bull or a bear. Hope you all got your hedges on....

T.Berry said...

yep loaded the truck up with uvxy last week
:)

Hugh Jazole said...

Calling the bottom today! Up and away through April then LOOK OUT BELOW!!!

T.Berry said...

hugh, maybe you'll have better luck calling a bottom. lol

ding ding ding :)

rotrot said...

Bonds Up, Stocks Down – The Sinister Truth Behind March’s “Portfolio Rotation” - Lee Adler | April 2, 2018
https://tinyurl.com/y9k98d7y
"This will not be a flash in the pan 6 month, 20% bear market. It will be a more typical 18-30 month affair that will take stock prices much lower."

T.Berry said...

day 2 of the crash not getting off to a good start

rotrot said...

DJIA measured move target: 20,050
S&P500 measured move target: 2,325
https://tinyurl.com/ycwe46eh

T.Berry said...

those buying today are going to be very happy soon. from the looks there's way more buying than selling since the open .

once earnings start rolling in, the next leg us will begin. looking forward to another solid earnings season. q1 will no doubt come in better than expected. time to buy is running out.....

T.Berry said...

the dow jones and sp have regained over 60% of the premarket losses. smart money is buying

don't be surprised if we close green on day 3 of the crash

Christian Gustafson said...

This is just not impulsive.

On to the dotted blue line up there! Bulkowski Big W!

Hugh Jazole said...

I don't think I've ever seen a Spring like this. The big boys are obviously not buying a THING!

T.Berry said...

green on sp. no surprise given earnings are going to be rolling in next week. since 09 the stock market hasn't gone down but once or twice during quarterly earnings. q1 should will be good.

at least day 3 of the crash is going a little better than day 2. LOL

T.Berry said...

sp from -50 to +2. someones buyin'!

T.Berry said...

gonna be sad when this 4 day crash is over . :)


can't wait till the next crash call LOL

Christian Gustafson said...

GDP