Well that was an impressive trend down day yesterday and a lot of technical damage down. I am now officially impressed, and while I had been thinking we might put in the retest high just before the holiday weekend, Greece has pulled that forward a few days and in all likelihood both the 2015 high and the retest are now in the review mirror. This would be a good time to pull together a few reference posts to show where I think we are here.
The first post is from Monday 2nd February where I confirmed that the January close on SPX met the criteria for some very bearish long term stats suggesting very strongly that the best case for SPX in 2015 would be a flat close, and the worst case a large decline. You can see that post here.
I decided to look at some very long-term index charts today, and all I’ve got to say is this: anyone buying equities right now is out of their freaking mind. It’s as simple as that. Our friends in Gainesville have been so battered the past six years, even they are firmly clasping their hat in their hands, saying we might be set for lifetime highs. Not me. Stick a fork in this rally. It’s done.
I’ve been reading a lot of talk this morning about how there is no real chance that SPX will make any kind of high in the easily foreseeable future and that’s natural. This wave up from October 2011 has been so long and so powerful that it has left many with the strong impression that TA is valueless and that the only possible road to success is buying the dip and holding on at all costs. An extended wave 3 up will breed bullish complacency.
In all honesty that may well be the case for another two or three years, depending on the individual trader’s tolerance for pain, and over a timescale of decades the long side always wins through. However the current setup on equities looks VERY toppy, and the level of denial that I’ve been seeing from some quarters about this just beggars belief.
Apologies for the very late post today. I had an appointment that overran badly & missed the open. That was annoying as I was short from the globex highs and missed the very well signalled low, but that’s the way it goes.
Was that the low for this retracement? Well it made the little double top target left over from yesterday, but fell well short of hitting rising channel support. That looks like unfinished business unless we see a strong break back up, and if that support is going to be hit on this retracement, then the ideal fib time/place hits would be the 2088 area at lunchtime today or the 2094 area tomorrow morning. If SPX breaks back up hard then this rising channel has evolved into a rising wedge and the next upside target is the same pattern resistance trendline, currently in the 2125-30 area, so already in the right target area to make the IHS target there. SPX 5min chart: