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.

Wedge on a Ledge

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Well, Fed Day is behind us, and that's a good thing. I hate all the noise it causes. Its biggest effect today seems to have been to push the $VIX to ever-lower levels.

I've been working on my latest book (in case you haven't heard, I've written a bunch of 'em, including this one I mention from time to time about ProphetCharts), and last night I finished my chapter on the ascending wedge pattern. I was struck by the SPY graph and the fact that it sports two gorgeous ascending wedges, one of which was gloriously pierced last Spring (ahhh, those were the days, weren't they?) Of course, it was a POMO-free market, so it actually had a chance to go down before Bernanke could shove his index finger into that dyke.

Anyway, the similarities of these moves is pretty obvious. The problem is that the wedge hasn't been broken yet. If and when it ever does, I will definitely make a lot of noise about it here.

0126-SPY

Comparisons to the April 2010 Top (by Runedge)

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We've all been studying charts trying to find any sign of price finally breaking for some sort of a correction. The longer this market rallies without a correction the larger that correction should be. Before digging into the chart below, few points need to be realized in understanding what is underneath this current market:

Leverage is back to LEH levels which can exacerbate selling as margin enhances losses and causes phone calls from brokers.

Bullish ratios have been above historical highs (and bearish below historical lows) for weeks on end now.

Insiders continues to sell at the 100 plus to 1 ratio versus buyers and it's been going on for months now.

Money continues to flow out of domestic equity funds. We are on about 37 weeks with only one minor inflow at year end 2010 (working from memory but think the inflow was less than 1 billion).

The VIX has bottomed and matched the prior lows of the May correction.  Note it bottomed two weeks before the SPX topped.  There was an interesting read on Zero Hedge about the VIX in some sense not being very cheap.  It was based on the fact that realized volatility has been very low (not a lot of volatility when markets just go up and up).

Let's look at the chart of the SPX and see some comparisons to the prior sell off in May 2010 (which seems like an eternity now).

Notice the bearish divergence on the MACD through the entire rise off the Feb low to the April high (lower MACD levels while SPX price was rising).  Very similar divergence to the current rally.

Notice how long the slow stochastic stayed overbought in the Feb to April melt up and how it compares to the current melt up.

Orange horizontal lines on the current melt up are the gap fills that need to be filled at some point. There are seven that I count.

Notice in both melt ups how price hung on the upper bollinger band for most of the move.  The SPX has not touched the lower bollinger band since 8/25 (almost 5 months ago).

The May high was exactly 135 points above the 200MA on that day.  Today's closing price was exactly 135 points above the 200MA today.

Notice the candlestick pattern inside the two orange boxes.  Fairly similar price action.

Screen shot 2011-01-12 at 9.40.29 PM

Submitted by Runedge.  If you want to follow my blog please visit - Ultra Trading

The Analog – Warped Surge or Death Knell?

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It's been exactly a month since I took a look at the 1937-1942 analog.

What's discouraging is that this analog, in retrospect, nailed every single turn in the market for two solid years, but the recent surge made have been the equivalent of a fatal knife wound to the analog. Here's the S&P – – point #20 is the aforementioned wound.

1221-present
Below is the corresponding past…….point #20 was supposed to stop at about the same area as points 16 and 18, which would mean the S&P should have stopped at about 1130. As it is now, it's all the bears can do but pray that the S&P returns to that level, having blasted past it by 120 points and counting.

1221-past
Could the analog get back on track? Sure it could – – – the entire point in front of #19 might be "POMO elevated". But it's disquieting to see my best friend the analog potentially mortally wounded at this point.

Good night…….

A Comparison to Consider

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Let me preface this by saying that my bear mojo has been almost completely drained from my veins at this point. The best positions I have are all long ones, and after 20+ months of hearing (and repeating) Why The Drop Is Going To Start Now, I'm getting close to just focusing on the long side. Call it capitulation if you like; I think I'm past caring.

Having said that, I humbly offer up this interesting comparison between the market top in 2008:

1202-one

……..and our present market……

1202-two
If we get a rally tomorrow (and the jobs report, I suppose, will decide that), the above is rendered moot.

I once again want to thank the gracious contributors to Slope – – – both those who create posts and those who comment. You guys and gals are the heart and soul of this community, and I am more grateful to you than I can express. This is a special place, and I thank you for making it so.

Good night.