Saturday, January 18, 2020

A market crash targets 500 on the S&P

85% off the ~3330 high on the S&P gets us right to the 500 area, finding support from the trendline from the two prior lows in 2002 and 2009.

The beautiful 2008 tape, transposed, gives a good idea of how we might bounce around violently between areas of support and resistance before we finally break down in October and plunge to the 1040 level, eventually bottoming near 500.

The 2008 tape is such a beautiful moment in the markets, it serves as our model.  Again this time, but with more feeling.

SPX daily with 2008 crash tape transposed

Or I guess you could believe that China really is growing at 6%, that they are free to create even more debt, that Boeing won't file for bankruptcy, that US corporate debt is manageable, that real estate prices are reasonable, that the damage from US retail is just a phase shift to online, and the rest.

A crash in October may bring out the best in candidate Trump.  It would be good if he had two more SCOTUS nominations in place before then.

Sunday, January 5, 2020

It's a good time to visit the 200 DMA

The Iran hijinks are the perfect Black Swan, especially when China withdraws from trade negotiations later this month.

Charts have been banging the upper Bollinger Band on daily, weekly, and monthly time scales, dumb stocks like AAPL and MSFT have gone parabolic, perhaps we need to take a breather and visit the 200 DMA later this week at ~2980.

S&P 500 5-min, possible new channel

Friday had an ambiguous close, but if this is our new channel, we could make it back to test the 200 DMA by this Friday.  The 2008 tape suggests that could be a sharp bounce -- a gap fill back to 3183?

S&P 500 daily with 2008 tape overlay

If so, the next support would be 2725, presumably after "China trade" unravels.  Then the next bounce would be the FOMC at EOM -- another sharp swing.