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.
Revised QQQQ Correlation – (by Osbourne Cox)
The correlation played out pretty perfectly on Thursday, with section 22
following 2007 perfectly, gapping up and printing a big green bar that lifted above the previous day's high.
Below is a cleaned up correlation graph. I also broke apart some of the larger chunks of daily bars. They still match up very well. I also added the percentage size of the bigger moves and the corresponding gain to come lines up well with the channel/shoulder line that I've drawn.
Since this is implicitly based on EW Theory, I get to flip flop on my previous call. (HA!) My earlier post about the SPX not reaching 1150 might have been overstated. Well, we still might not hit 1150, but it appears that the recent movements in the QQQQs are all of a smaller magnitude than in 2007. So I'm starting to think it IS reasonable to trace through much of the rise to the right shoulder that occurred in 2007 without invalidating the H&S pattern. That extra time will enable the SPX to at least approach 1150 or 1140.
According to the chart, the expectation for Friday seems to be a slight rise above Thursday's high, only to drop down to Thursday's low without breaching it. Granted, in 2007 this occurred over 5-6 days so maybe Friday we'll just make a new high and sit there all day. After all, it IS the Friday before Memorial day.
But if it all happens in one day, it will be the perfect setup to piss off as many people as possible: Bulls will get trapped in the morning as we make new highs and bears will be caught in a bear trap at the EOD. Notice that big gap open that occurred after the red bars.
At least, this is all what happened in 2007. Let's see if the pattern repeats.
We’re not getting to 1150! (by Osbourne Cox)
This is going to be quick and dirty. Yesterday I posted about what I discovered about the correlation in the QQQQs between now and 2007. And I followed that to go long today. Awesome!
But something has been nagging me. The pattern says we'll get above box 14. But that puts us above the left shoulder. So that can't be right.
Looking back, I see that ONLY the QQQQs reached the height of the left shoulder. SPY and DIA did not. IWM exceeded it.
This is where we are now:
I don't think SPY/ES is the measure for the climb. I think the QQQQs are. And there's about 1 point left.
Based on this, I think it's a mistake to try to wait to hit 1150. That's too neat and clean. It's going to happen before that.
QQQQ Correlation – Today’s Market vs 2007 (by Osbourne Cox)
So I was watching the Paul Tudor Jones video about how he predicted the
1987 crash by correlating current price movements with the price action
from the 1920s. The rationale is straight out of Elliot Wave theory:
Markets are driven by psychology and people’s reactions to greed and
fear form the same patterns that can and will repeat.
And it made me think about this graph that I came up with a few
weeks ago:
So I went back and tried
comparing the daily price movements in 2007/2008 and today. The
similarities in price action are striking and the results appear to be a
very compelling roadmap for the next few weeks.
QQQQ 2007:
Today's Market:
Each of the blue or
pink squares corresponds to a day in the May 2010 market, although a few
of the squares represent multiple 2010 days. Follow the new highs and
lows and failed attempts and everything lines up shockingly well. I
might be guilty of a bit of curve fitting but the main parameters (new
highs and
lows) all match up.
The only divergences that I see that #10 and
#11 broke #9’s high in 2010 while they failed to do so in 2007/2008. In
addition, #14 became a catch all for over 20 days in 2007 and 5 days in
2010. I suppose one can chalk it up to the after affects of the flash
crash. But the end result is the same: The lows from bar #9 are taken
out. Because of the result, I felt that it was appropriate to combine
all of this market action into 1 square.
The first takeaway is that the market will not revisit yesterday’s
lows. If the pattern holds, we are heading higher and it sure looks
like the right shoulder is going to be formed. Here is the big picture:
The most
important takeaway from the analysis is that this market is moving much,
much faster than it did in 2007/2008. We could be seeing a market
crash in the next few weeks. What took months back in 2010 will take
weeks and what took weeks will take days. And likewise, I would expect the drop to be that much faster as well.
UPDATE: Given the market action in the last hour, it looks like I grouped too many bars in the most recent box. It looks like box #16 should only include the 2 green bars. Today would be box #17 and represent the big red bar.
