Sunday, February 22, 2015

Charts 02-22: Six more weeks of winter?

We're waiting for a top, a final high for the rally since the 2009 lows, and I think it's very likely to be this Spring.  But we know from experience that we need to approach this very carefully before committing to leveraged put options positions on the indexes to play.  The crash ahead is a momentous, possibly life-changing event, but it must be approached with great care and patient analysis.

We want to see:

1. Penetration of the upper daily Bollinger Band on the S&P 500.

2. Penetration of the lower Bollinger Bands and/or new all-time capitulation lows in volatility and bearish ETFs like UVXY, TVIX, SDS, TZA, FAZ, etc.  Bullish wedge patterns are helpful on these, too.

3. A larger "terminal" pattern like an ending-diagonal triangle.  Maybe even two of them, nested (yes, this).

4. Decreasing volume towards the top, as well as any other bearish divergences that rear their ugly head, like a lower high on the McClellan or NYSE A/D line.

5. An intraday-reversal candle on manic panic volume, if possible.

6. Other correspondences to past tops, flattening Bollingers, leveling moving-averages, etc.

7. Unusual astrological events make a nice touch and are always welcome.

8. *your favorite pet indicator here*

I stood by while many bears who should know better, claimed and charted that the dive from the 2093.55 SPX high in late December 2014, was "the" top and an impulsive wave 1 down.  It took some time for the waves to sort themselves out, but I was proven right, that we needed to reach that Bollinger Band, and that it was truly foolish to think that a six-day decline would be "corrected" by a full month of chart oscillation.

2093.55 SPX fell, and the bears looked like jerks again.  Well, yeah.

But the daily upper Bollinger on the SPX took off again this week, exploding up into the mid-2120s, suggesting that it, too, needs to settle down to allow us to reach it and setup the overbought conditions we need.

So ... in a nutshell, we probably need more time.

The good news is, the really good news, IMO, is that the tape since the 1980 SPX low looks like a plausible triplet, a possible ABC leg for wave 1 of an ending diagonal.  This is very encouraging for us true perma-bears, who have managed to survive all this time eating grass and winter-kill carrion, but surviving nonetheless.  We will make it to the waterfall season of the markets when the salmon are running in numbers once again.

Here's the proposed ending-diagonal, in daily candles:

SPX 02-22


Bicycle said...

Yeesh. If the top is 2150 the DJIA is just north of 18500 and that pings a major top trend line going all the way back to 1929. The target from that for the next bottom would be somewhere between Dow 2-3k...

Permabear Doomster said...

re: So ... in a nutshell, we probably need more time.

Probably 2 years or so.

Until then... its the same old QE-fuelled nonsense.

Just a few weeks until the ECB QE-pomo express arrives in the EU. How can anyone be especially bearish with that?

The fact we already have a 'will continue until Sept' 2016'... should scare the hell out of the bears.

Regardless.. have a good week

Phat Repat said...

Nice depiction CG. Perhaps my ideal target will be hit tomorrow at which point I would likely bail and wait for a turn. Recent corrections, however, have been difficult to play given duration.

Interestingly, a new cluster indicating 2214.32 has formed.

Caldaro has projected a target of 2530-2630 by Q1/Q2 2016. Hmmm...

Bicycle said...

Christian--this is what I mean:

Inflation-Adjusted Dow Jones Industrial Average

Christian Gustafson said...

5 up must be the HI crack-up boom.

All I want to / need to get right in the larger picture is the downslope of the 3PDH. Then this blog turns to the raising of geese, orchards, and honeybees.

T.Berry said...

re: "Caldaro has projected a target of 2530-2630 by Q1/Q2 2016. "

puts dow @ around 22000 & nas 6000. not bad for 2 years out. only 10%/year which is reasonable

wonder if all ecb qe has been factored in or how much higher it may be with it

Permabear Doomster said...

wonder if all ecb qe has been factored in or how much higher it may be with it

How can you say that?

QE will juice the market until late 2016 at least.

T.Berry said...

re: "How can you say that?"

s&p is up almost 8% and at all time high since yellen stopped qe in oct. so how much difference does qe really make?

T.Berry said...

yellen repeats "valuations appear elevated" like she did last year. s&p is up 21% since. must be the signal for 12 more good months lol.

after an amazing feb, a 2-3% pullback is real possibility