Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Broken Patterns Abound

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Well, here we go again. An all-too-brief selloff (parts of May and June) followed by a lurch to new recovery highs. Incredible.

There are broken formerly-bearish patterns all over the place. The head and shoulders on the NASDAQ, for instance, is history:

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The Dow 30 is starting to meet the highest reaches of what I would consider the "tolerance point" for any bearish argument.

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Of course, with the big jobs numbers coming out in the morning, a bit of uncertainty is still in the air. I'm keeping plenty of cash in my account in the interest of caution.

Devil’s Advocate (by Springheel Jack)

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I'm still doubtful about this move up, mainly because I'm skeptical about seeing a powerful new wave up in the absence of more QE. That's something we haven't yet seen in this current bull market and while it could happen, as I said I'm still somewhat skeptical. However today I am going to suspend my disbelief, and argue the bull case here purely from the technical perspective.

First off I'll quickly show where equities are on the 15min charts. The SPX rising channel had already broken down before I did my post yesterday of course, and the rectangle that was forming has evolved into a little IHS that would have a target in the 1350 area. That pattern isn't fully formed yet of course:

On NDX the rising wedge / channel broke yesterday and a little broadening ascending wedge has formed as NDX has continued to inch upwards. The target for that bearish wedge in the 2355 area might well  be a decent retracement target as and when NDX breaks downwards:

On RUT the rising wedge / channel also broke down yesterday and another broadening ascending wedge is forming:

On to the bull case then. Obviously I was expecting some retracement in a number of areas this week and we haven't seen that retracement on equities. However we have seen it on EURUSD and ZB (30yr treasuries). On EURUSD my chart is already somewhat out of date as EURUSD has now broken down to the 1.425 level through the support level it seemed to be bottoming at. However it has now retraced over two thirds of last week's powerful move up, and unless it is on the way to a new low, then there isn't a great deal further it can go while remaining a retracement. EURUSD and equities moved together strongly last week, and equities have merely consolidated while EURUSD has retraced. In the last two years that combination has been characteristic of a strong bullish wave up on equities:

30 year treasuries also moved strongly (inversely) with equities last week, and has been retracing since making a short term low on Friday. Since then the retracement has peaked at a strong resistance level and a strong rising support trendline has formed, which has broken down while I've been writing this. This would be a typical start for a big new move down, which would normally accompany a move up on equities:

Silver is more loosely linked to equities of course, but always worth watching regardless. Somewhat to my surprise silver has broken back up through the broken support trendline from last August, and has now broken up through my secondary target. Looking at that in more detail on the 60min chart, the declining channel from the daily chart is actually a falling wedge, which overthrew slightly at the low and has now broken up with a target at 38.78, not far below serious gap resistance in the 40 area. The rise has stalled for the moment at a potential declining channel upper trendline, but after the overthrow through the lower channel trendline the odds of that resistance holding long are considerably lower. The pattern setup for silver therefore looks strongly short term bullish here, which again fits with bullish equities:

There's also been quite a bit of talk about a reversal here as part of the formation of cup and handle patterns on ES and TF. NQ has overshot the target already. There are some issues with this and they are as follows. There would be no uptrend leading into the cup, which is a problem, and the cup would have two handles, one on each side, which would make it more of an IHS. There may be a cup forming, but if so then the obvious reversal would be at the 2011 highs, which would deliver the uptrends into the pattern, and get rid of the surplus handle on the other side. Once ES and NQ break the February highs therefore, the natural targets are the 2011 highs, and we might not see a retracement worthy of the name before we get there. I've marked up the ES 60min chart with my analysis of this possible setup and my pattern data as usual comes from Bulkowski's outstanding reference site which you can find here: 

Given that oil and copper have also broken up, the outlook for equities on an intermarket basis is therefore looking fairly bullish across the board if EURUSD turns, which admittedly it is showing no sign of doing at the time of writing. I'm increasingly doubtful about seeing a retracement on equities here. If we are to see one before we retest the 2011 highs, we should see it at the retest of the February highs.

A Click, Please?

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No, no, this late-night plea isn't for you to click on an ad (although that never hurts). There's a new directory of financial blogs out there, and Slope is already #3 on its recommended list.

If you like Slope, could you go to this site and simply click the "Vote" link? You don't have to register or anything. You just click to vote. I've put an arrow pointing to it, although the words have changed already here:

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Thanks!

By the way, I just finished reading my proof copy of Slope of Hope Bathroom Reader, and it's pretty cool. I'll be announcing it in the next week or two.

POTW: Internet Abbreviations

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The Peeve Of The Week (POTW) is an occasional feature on Slope which allows me to (a) gripe about something which bugs me, whether justified or not (b) put up a post when there's nothing in particular I want to say about the market. In spite of its moniker, the POTW may or may not shown up weekly. In any event, here's a new entry:

As I am inclined to mention from time to time, I've been online a very long time. I got my first modem in 1981 and have never really been offline since then. Just to drive the point to the obnoxious level, I wrote my first book – when I was all of 16 years old – about how computer communications would change the world (it was called, appropriately, The World Connection).

Given this background, I feel I have some say-so in the following matter: I cannot stand how people use initials and acronyms as a shorthand of sorts on the Internet in a desperate attempt to look cool. You know what I'm talking about – stuff like LOL, IMHO, ROFL, and so forth. Even as a youngster, I thought such things were ridiculous, but now – decades later – I find them strangle-worthy.

Let me let you in on a little secret…..if you find yourself using "U" for you, "R" for are, "LOL" for laughing out loud, etc. you are not demonstrating yourself to be a cool person. On the contrary, you are trumpeting to the world that you are a lame wannabe and, in all likelihood, an incurable putz. Please don't do this. Use normal English. The world will love you a little better for it.

 

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