Sunday, December 30, 2018

Let's go nowhere for a while

We smacked an important .382 retrace in all of the excitement on Friday.  Since all that matters now are the actions of the United States Federal Reserve, it would be useful for everyone at this point to slow things down, get the $VIX back under 20 (15 would be great), and have the market get dull until the next word from the monetary gods.  We need to burn off all of that option theta everyone bought this month, to make speculation great again.

Nice shoes, Bob.

Let's consider Alisdair Macleod's macro analysis, which suggests that we see a spike in the CPI by the second quarter, which forces the Fed's hand (to raise again), in my opinion, at the June meeting.

To get there, we would have already had 3 Fed meetings where essentially nothing was announced, at the end of January, in mid-March, and in early May.  Each of these meetings would leave the policy and schedule unchanged, but only the March meeting would be received as bullish, as it alone has the follow-up press conference, the sort of meeting where raises are normally made.  The January and May meetings, although not hiking rates, by leaving the Fed balance-sheet reduction schedule unchanged, would each be received as super-bearish, resuming the selling.

ecce homo

The only thing that matters now is Federal Reserve monetary policy, not China, not Europe.  And if Macleod is right, in 2019 Fed members will find themselves trapped by actual price inflation following in the wake of the flood of loose credit.

All through next year, we will witness a crescendo of calls from the desperate FIRE sector for the Fed to cut rates again and roll out QE4.  But this cannot happen until the markets are wrecked and ruined, deflated, when the Fed finally has the freedom to intervene.  Longer-term, we're looking at a debt jubilee and large-scale refactoring of our late-cycle civilization, wiping out all of the unsustainable liabilities.  Our credit-money system, political economy based on usury, can only stand so many trips to the well before faith runs out.  Maybe the survivors can discover honest money one day.

Even with a month of sideways, we could finish the entire bearish crash cycle well before the 2020 elections.  What a hoot that will be!

S&P 500 daily

Wednesday, December 26, 2018

March FOMC, but not what you think

Conventional wisdom holds that the stop-run from today is another spike that will reverse in a couple of days, so we can finish up a wave 3 down to somewhere around 2250 on the S&P 500.

I want to suggest something a little different, that we are drawing a larger-scale leading-diagonal on the chart, that we are in a wave 4, to correct the crazy crash wave we may have finished today, headed to 2520.  The move up was so strong that it left us only 10 pts away from overrunning the .382 retrace within the wave 3 structure.

We may sell some of this off, but I don't think we will give it all up just yet.  January sets up to let this wave 4 play out, with most of the gains already in the bag from today.  We are still within the narrow channel of the wave 3 dive, but it will only take a few days and a bit of rally to break us out of it.

January then becomes frustrating wave 4 chop, eating put and call buyers alike, since the VIX is still high, until the FOMC at the end of the month.  The Fed is all that matters now in our credit-bubble asset "markets", so why not make all of the significant turns Fed meetings?

The channel puts us right at 2152 into March FOMC.

SPX daily, leading diagonal proposed

edit: adding the classic extended W3 scenario, so we can watch this bounce carefully.

SPX hourly  classic extended W3

Saturday, December 22, 2018

First important low at March FOMC

We're clearly in the sub-waves of a big wave 3 down, which will reach the 1.618 extension level of W1 at 2256 SPX.

If we draw some channels and add some fibs, we can propose our first low on all of this is the March FOMC, which also lands on a Full Moon.

SPX proposed low March FOMC @ 2124 SPX

Larger question is whether the real crash phase that comes in Fall 2019 can break us out of a very long term, important channel.  Losing this channel probably means the end of the long-term economic cycle defined by the existence and effectiveness of the Federal Reserve itself. 

I'll let you draw your own conclusions from that proposal.

SPX weekly

Wednesday, December 19, 2018

If we do bounce

It is still possible we are finishing up a Domed Top formation.

Positive news, oversold indices, short squeezes ... it is possible the market wants to wait to see Q4 earnings before it finally dies.

It would be a variant of the head & shoulders top off this neckline, target 2083 (election lows).  Would only work if we rally today and tomorrow to get over the intraday highs and trap the bears.

SPX daily

Sunday, December 16, 2018

We are close to the Bear

Friday we closed right on the neckline of a head & shoulders pattern targeting 2260 on the S&P 500.

All we need now is a little push, and we'll be in an official Bear (2350 S&P) by the Fed meeting and announcement this Wednesday.  That will be a sweet spec bounce, as well as a final leg down to the head & shoulders target.

v of 3 down is, of course, a US .gov shutdown as Donald John Trump confronts the Bolsheviks.  May we prevail.

S&P 500 hourly

Sunday, December 2, 2018

Competing counts

We're at one of those junctures where we have plausible setups for both bullish and bearish outcomes, on different scales.

can't beat the Chow Yun-fat

The reason is the impulse wave the S&P 500 has drawn since the 2630 low around Thanksgiving (Full Moon).  Is it the c-wave of a long-in-tooth wave 2 up?  Or is it the initial leg of a larger five-wave structure to new all-time highs by EOY? 

Northy thinks the Santa Rally hypothesis is very plausible here and very dangerous (to bears).  The next two days of this week may clarify things: IMO bearish if the market runs higher, and bullish into Christmas if she pulls back sharply.

With POTUS 41 passing, Powell's testimony Wednesday now falls on a day with closed markets.  This adds to the uncertainty.

S&P 500 hourly