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I’d keep a close eye on the Russell 2000 Index to see whether it continues its recent downward plunge below its (now-broken) support and influences the other three Major Indices to follow suit.
The following Year-to-date comparison chart of percentage gains/losses shows that the RUT has lost the most recently (because of its prior double-top spike to 11%), but that all four Major Indices are roughly even in percentage gains now for the year…we’ll see if that was just a dead cat bounce and whether the SPX:VIX ratio does plunge below the 100 level, as I mentioned here.
Someone on Quora asked me how I used fundamentals in my analysis. Here’s what I wrote:
The short answer is: I don’t. But let me lay out a couple of points.
First, absolutely at the heart of technical analysis, in my opinion at least, is that all the knowledge that can be had is already built into the chart. The chart represents the perfect presentation of the balance of supply and demand for a particular financial instrument. To assume that you can have some kind of special insight above and beyond what everyone else on the planet has already put into that price chart is, to my way of thinking, arrogant in the extreme.
And how would fundamental information – – even inside information – – be reliably helpful? As I am typing this, the markets are closed, but Facebook got hit pretty hard after hours. From a fundamental standpoint, this makes little sense – – they absolutely blew away all the revenue projections and earnings projections. Their fundamentals were astoundingly good. And yet their stock is getting monkey-spanked. The chart was far more predictive of that than a desk full of fundamental analyst reports could ever be.
As the SPX:VIX ratio approaches the 100 level, once more, it’s time for equity market participants to take a stance one way or the other.
A drop and hold below 100 will indicate that bears are taking firm control and threaten to take the market down, while a rebound and break and hold back above 150 will indicate that bulls are committing fresh monies into equities. The Momentum indicator has dropped below zero again on the monthly timeframe, indicating that bears are currently in control of the SPX.
I mentioned on twitter yesterday afternoon that the positive divergence that was absent at Tuesday’s lows was very much present at Wednesday’s lows. 60min buy signals have fixed on ES and NQ and a rally looks good here, though if bulls lose VWAP at 2093.5 this morning then we might retest the overnight lows. ES Dec 60min chart:
First off, congratulations to the Chicago Cubs for their remarkable victory. This is literally the first time in my life I turned on a baseball program, and I guess I picked a good one. What a game! I see a lot of Slopers had fun last night in the comments section watching it too.
Second, I’m pleased to see crude oil’s little rally last night accomplish just one thing: to give the broken trendline a peck on the cheek before turning downward again. Wouldn’t it be magical if support was now solid resistance?