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

45 comments:

Christian Gustafson said...

Heavy posting this weekend. Beware (or enjoy!) the megaphone.

Hugh Jazole said...

Bullish!

http://www.independent.co.uk/news/business/news/global-financial-crash-central-bankers-warn-back-with-a-vengeance-china-debt-gdp-ratio-a7807811.html


Hugh Jazole said...

Market Cap to GDP. I think we're going to blow right through the 99 high.

https://www.advisorperspectives.com/dshort/updates/2017/06/02/market-cap-to-gdp-an-updated-look-at-the-buffett-valuation-indicator

T.Berry said...

hugh lol! we've been haring these bankers and so-called market experts calling for a crash since the s&p hit 1000 some 8+ years ago. they're in denial of the greatest bull market in history. wonder how many will be left calling the crash when the s&p hits 3,000 over the next 20-24 months. lol

Bryan Franco said...

I love the gifi. Hillarious

Christian Gustafson said...

If we don't selloff ... do we just creep more tightly into this wedge ... to about the 2470 level on Friday?

Bryan Franco said...

They major Central Banks claim to not care about the equity indexes, but instead, watch for signs of "financial instability". So I need creative responses here. What could make the Central Banks either unable or unwilling to support the markets when it has its next 5-10% pullback (of course, in the guise of remedying "financial instability")?

Fed head - Neel Kashkari
https://twitter.com/neelkashkari/status/844206192884940803

Fed head - Fred Mishkin
https://www.federalreserve.gov/newsevents/speech/mishkin20071105a.htm

Bryan Franco said...

and... Fed's Williams from yesterday...note his use of the phrase "respond to"...

https://www.reuters.com/article/us-usa-fed-williams-stocks-idUSKBN19I2B0

"The stock market seems to be running pretty much on fumes," San Francisco Federal Reserve Bank President John Williams said in an interview carried on Sydney's ABC News affiliate and available on the internet on Tuesday. "It's something that clearly is a risk to the U.S. economy, some correction there -- it's something we have to be prepared for to respond to if it does happen."

Hugh Jazole said...

How bout that copper?

Hugh Jazole said...

"The stock market seems to be running pretty much on fumes," Sounds like Greenspan circa 96.

Bryan Franco said...

So Williams basically admits to managing "the market". The paragraph is entirely self-containable, and gives all the information we need to know about their intentions ... Thus, we need to know only what would cause them to either be unable or unwilling to support the market. That is it.

T.Berry said...
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T.Berry said...

between the fed and strength of economy there is zero reason to sell stocks if you're a long term investor. we've heard the mkt is going to crash since oh about the time the s&p crossed over 1,000 some 8 years ago. lol

fully expect to see crash calls when the s&p is nearing 3,000 within next 24 months. : )

Bryan Franco said...

T. Berry. You certainly have been on the right side, and you very well could be right going forward. So you must believe the Fed will continue to do as Williams wishes for them to do, indefinitely.

T.Berry said...

bryan, staying invested for the long term is imo a safe (and simple & easy)bet provided cost average and long term horizon. the stock market will always come back. as for the fed, not sure what they will do but wouldn't ever bet against them. they have a pretty good track record over the last 9 years. without their help the economy wouldnt have recovered as strong as it has. they definitely got it right this time. in 10 years stocks will be at least twice if not more higher than today. that's what i'm looking at

T.Berry said...

yes bryan, i do believe the fed will continue to remain ahead of the curve.

Bryan Franco said...

I have written the Fed asking them for more clarity on just how these recent statements are compatible. I will forward any response I receive.

Bicycle said...

THIS IS IT - THE TOPPING PROCEDURE - BIG BANKS BUYING BACK SHARES AND HIKING DIVVY AT THE TOP - LIKE THEY HAVE BEEN INSTRUCTED BY THE FED - ITS OVER - RALLY TH-FRI TO DJIA 22k - THEN GREATEST BEAR MARKET ALL TIME

Hugh Jazole said...
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Hugh Jazole said...

TEOTWAWKI!!!!

T.Berry said...

"THIS IS IT"

Top #214 since s&p hit 1000 8 years ago. lol

next top, dow 23k : )

secular.bull.market. 4th inning

Christian Gustafson said...

2472 SPX on Friday would complete a badass E-D since the 4/13 lows.

Hugh Jazole said...

BPSPX over 73. Sheeeeeit!

Kevin Wilde said...

This maybe a quick trade, as in the trend may turn negative as early as tomorrow - in which case I would sell longs and trade modestly on the short side - though at the close today I'm going all in QLD (for aggressive) and QQQ (for conservative) from the current 1/2 long QLD and QQQ. I continue to hold small positions of TZA and TVIX/UVXY as hedges. The game is afoot, and I expect the markets to start to rocket one way or the other later this week. For now, the trend is up and the indexes fighting for their TA lives at critical support. If supports holds, I win big. If support gives I take a small loss on new positions, while locking in big profits on positions I've held since November, while the hedges wake up and start to do their thing.

Christian Gustafson said...

Kevin -- I want to see 2384 SPX tomorrow, and 2438 again in a week.

Then things get interesting.

Kevin Wilde said...

Christian, you can have what you want, so long as the NAZ doesn't go after the close today, as my aaa will be hanging in the wind...

Bryan Franco said...

I just want the CB's to abandon their attempt at the Financial Singularity

T.Berry said...

whats crashing the market this week?

T.Berry said...

looking at 2550 year end. that's if the market only performs half as good as first half. 3000 is still on track within 20 months

Hugh Jazole said...

VIX is yawning.

Kevin Wilde said...

I'm looking for another 10% up for NAZ, followed by a fall crash, along the lines of 1987.

T.Berry said...

that's pretty drastic call kevin. do you really think the stock market could drop 23% in a day? won't the breakers kick in and stop it? I believe the fed would step in the next day and the market would see a vicious rally back up. the fed has been ahead of the curve for the past 9 years. don't see how that changes anytime soon.

on another note, the dow jones hits yet another new all time high this year. lost count actually but who's counting anyway lol. U.S. investors have never been wealthier as of this post. : )

Kevin Wilde said...

T Berry, most crashes are a 4 day, or 4 week, event that takes the indexes down 15% during that time, and comes after the indexes have conducted a topping process that leaves the indexes well south of the highs prior to the crash. Usually, we are talking a 15% drop from the highs, followed by a 10% rally as a set-up to a crash, followed by a 35% drop as the crash part, with lower prices still to come till we near the 50% loss point. As I said, I expect we have a 10% rally to new highs for the NASDAQ to complete the top, and today was a good step in that direction. Note I went back all-in QLD at the lows of last week, having sold at the highs in late May.

T.Berry said...

thanks kevin and congrats on selling at the high and buying at the low!!!!
that is awesome!!!

so you're calling for the nasdaq to drop down all the way to 3200?? up 10% then rally 15% following by losing 50%? i highly doubt yellen would ever let something like that happen. the job the fed has done has been unprecedented. yellen possibly could surpass bernanke as the greatest fed chair in modern day history. the past 9 years the fed has been ahead of the curve and american's are enjoying the most wealth ever. everyone i talk with has record high 401ks and stock portfolios.
i just don't see any catalyst that would lead the markets to drop much more than 5-6%. we don't have a housing bubble crisis like in 2008 and certainly no interest dot com bubble like 2001. and with trillions on the sidelines any pullback (which i believe we will have) will be very short lived. as a long term investor i see absolutely zero reason to sell. why? because the stock market ALWAYS COMES BACK! long term investors do well 100% of the time.

T.Berry said...

sticking with my s&p 3,000 within 20 months! and yes, it includes the 23 crashes and 29 final new highs in between. lol : )

by the time this secular bull is done i expect the nas well north of 10,000

Kevin Wilde said...

"stock market always comes back." Secular bear markets: 1929-1954. 1966-1982. 2000-? And that is for the surviving companies, where many - most? - disappear altogether and investors in them lose everything. I'm in the camp that when we see the next peak, we likely go down to where this rally started, which targets a low of Dow 7000, or Dow 3000, or Dow 1000. With Dow 2000+ the most likely, as a 90% similar to the 1930s (though this is supposed to be a larger bubble implode than then, so could be much worse.) The "stock market always comes back" statement only looks good because we are near the highs. If we were trading anywhere near the trading range lows, then one will easily be able to say stock market participants have not made any money in many decades. We may very well see NAZ 10,000 THIS YEAR, or early next, as we are in a bubble blow-off, and those are crazy fun to watch. What gets into the soup? Bankrupt countries, cities, states, such as Greece, Italy, Illinois, Seattle, California etc, which will be ripped apart financially during the next recession. But for now, no worries, bubble building continues.

Bryan Franco said...

Stock markets aren't guaranteed to come back. There are countries whose markets will never come back without devaluation. The market also doesn't necessarily come back When you need it to.

Kevin Wilde said...

Once this peak lands, I don't expect to see new highs again for many decades. Favorable demographics gave us the wonderous bubble of the 80s, 90s, 2000, 2010s, and now those demographics have turned horrendous, leaving us no where to go but into depressionary misery. Once the repricing hits its max pain, then things improve and we will indeed be all right. However, that will leave us a long way from the highs.

T.Berry said...

been hearing about the market crash since 2012!!!!! that was back when s&p 1500 was the top. lol i give up . lol

and yes, stock market has always come back 100% of the time. not sure if you can compare 1930's to now. the fed has plenty of tools to keep the market from an all out crash in my opinion. they have proved their effectiveness over the past 9 years on both the economy and the stock market. both of which are doing remarkably well.

if the market doesn't crash again this year, well, there is always next year : )

good luck & i hope all are doing well in the markets, both longs and shorts!!

T.Berry said...
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Kevin Wilde said...

It is the FED, along with naivety of investors who get convinced risks are minimal in the stock market - with "it's different this time" overcoming any fears of excessive valuations, or bubbles, or excessive margin - and, no, this time is not different, and, no, the FED can't save us, as they are PROBLEM. Yes, the crash could have landed in 2011, 2011, or any year since, though the history of the stock market shows when a crash is put off, it leads to an even more extensive bubble, and thus the follow crash is even larger and more devastating. Just as surviving the 1998 crash attempt led to the stupidity of 1999 and early 2000. My goal, and strategy, is to accept such realities of bubbles and busts, and trade them in all phases, which means bubble for now, crash later. The higher she goes, the harder she falls. And let's not forget the fundamentals are getting more dire by the day, as aging populations put increasing strain on governments around the world, who themselves are on the cusp of bankruptcy. Thus, when central banks had small balance sheets, and US debt was a mere 9 trillion, there was some wiggle room to help out the economy during the great recession. Now, with central banks maxed out on debt, and US debt at 19 trillion and counting, that wiggle room is gone.

T.Berry said...

i don't believe the risks are minimal however my time horizon is just over 10 years and should there be the crash soon that so many have been calling for since 2012 the markets will be considerably higher in 10 years than now. if you're a short term investor that's a different story as stock market always comes back in the long term. never once did it not nor do i believe it ever will. i'm an investor that price averages in not a trader.

as for the fed, they saved the economy and stocks back in 2009. i wouldn't be betting they don't have the tools to do it again although i doubt things would get as bad as in 2008/09. the economy is on much better footing these days.

Bryan Franco said...

Japan is printing money to buy stocks via ETFs. There is no borrowing per se. I suppose a central bank could keep this up until there is an undue strain on wealth equality.

Kevin Wilde said...

Bryan, their balance sheet is real money, in that if they take a significant loss they lose trillions, and that has consequences. Japan is buying stock etfs because they have run out of bonds to buy, same in Europe. Central banks can't keep it up since there aren't enough assets to buy, and the one holding the bag when the music stops are the ones to suffer the losses that collapse the system. It's easier for a central bank to buy trillions of assets, near impossible for them to sell them, and once the losses start they are the ones taking it on the chin the most as they are trapped - while you and I can take our money and run away.

Kevin Wilde said...

T.Berry, are seriously going to hold onto your long positions when the stock markets goes on its next bear run and faces a 50% to 90% loss?