One of my favorite Thomas Jefferson quotes is that ‘the tree of liberty must be refreshed from time to time with the blood of patriots and tyrants’. Among other things that’s a reminder that all the powers of the state, however benign or harmless they may seem, are ultimately based on force and the threat of force, and every so often the use of violent means is inevitable either to maintain, alter or curtail that power.
What’s my point? Well markets are similar in the sense that any trend needs to be refreshed from time to time with the extraction of red ink either from those who challenge it, or those who defend it, sometimes both. In a downtrend that often involves a backtest of the daily middle band and it looks like we have another of those coming up shortly. (more…)
My silly little trendline has been doing a yeoman’s job of predicting when these microscopic bear markets are over. Those blue ovals mark when fear has peaked and reverse. The question is how much of a dry spell do we face now before we get yet another dance with volatility.
Note from Tim: I’m back, safe and sound! I’ll be doing a final “eclipse post” when I have gone through the photos from my camera’s memory card. In the meanwhile, I’ll just say that the ES appears to be simply bouncing back toward its broken trendline.
And now, let’s here from Strawberry Blonde!……… (more…)
(SB’s note to Slope readers: after reviewing my charts, this is all I’ve got to say about the markets for the moment…my apologies if it’s not terribly comprehensive…)
Further to all the UPDATES noted on my original post of August 15th, I would note that, as of Friday’s close, the SPX:VIX Ratio managed to stay above the critical 150 Bull/Bear Line-in-the-Sand major support level, but remains well below the 200 New Bull Market resistance level…as shown on the following Daily and Monthly ratio charts.
Next week, we could very well see a re-test of the 200 level (which happens to intersect with the 200-day moving average), in anticipation of any favourable news from global Central Bankers, policy makers, economists and academics attending the upcoming annual Jackson Hole Economic Policy Symposium (August 24, 25 & 26), before traders make a final commitment, one way or the other, as to longer-term direction…Fed Chair, Janet Yellen is scheduled to speak on August 25 at 10:00 am ET and ECB President, Mario Draghi is also expected to speak at some point. (more…)
The daily middle band is a, and perhaps the, classic place for a bear move rally to fail, and after three days of failing to break above the SPX daily middle band this rally failed there into today’s solid trend down day.
Since I capped the SPX chart below SPX has delivered a new retracement low. I’d like to see a move down to the 2405 area next to follow the path that I sketched in on the SPX chart at the end of July. Ideally SPX would then backtest 2450, possibly hitting the daily lower band at a lower level there, and then decline to the 2320 area, very possibly making the main retracement low there and setting up a solid dip buy opportunity into the end of the year. SPX daily chart:
Further to my post of August 10th, the following Daily chart of the VIX shows that the same number of volatility price spikes has already occurred, so far this year, as made in all of last year.
A series of higher swing highs on the RSI, since Q4 of 2015, is hinting that each price spike made, since then, was done so with greater strength. We’re seeing rising wedges form on the MACD and PMO indicators, suggesting that we may see the next price spike break out to new highs this year, with much higher force behind it, sending equity prices on the SPX plunging. (more…)
The decline into last week’s low was slightly over 2%, so the break back over the 5dma, now at 2457/8, has put SPX back on the Three Day Rule. In the event of a daily close more than two handles below the 5dma today or tomorrow, then historically there would be a retest in the near future of last week’s low at 2437. This is the highest probability historical stat that I watch. SPX daily 5dma chart: