Slope of Hope Blog Posts
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It has been a while since we have seen a Three Day Rule signal fix, in part because the rule requires an initial 2% decline, and those have been pretty rare over the last couple of years, but the Three Day Rule triggers when there has been a minimum 2% decline on SPX and then SPX closes back over the 5 day moving average. That is day one, and that happened on Tuesday. The rule looks at the next two days and if there is a close back below the 5dma on either day then the rule fixes. That close back below happened yesterday, on day three. On this statistic we could see a fairly marginal high over the current rally high this week, but whether we see that or not, SPX should retest the low at 2710 in the near future. The only exceptions to this rule since the start of 2007 were two instances when an overall triangle was forming, and rather than a full retest of the previous low there were marginal higher lows over that low in the next few days.
This is the highest probability stat that I follow, and SPX is very likely to retest the 2710 low in the next few days. (more…)
First, I’m pleased to see so many newcomers join and give themselves cool avatars. Remember, if you don’t have an avatar yet, go to the Profile Page and give yourself a spiffy image there. You’ll instantly be one of the cool kids.
I’m again encouraged by what I see this morning. I beefed up my shorts yesterday (coming into the day with 60 positions and using 200% buying power). It’s red across the board, which is my lifelong favorite color. Below is the NQ, which has gone through some interesting phases lately. We had our top above the yellow tint, a nice drop, and then followed by our monster drop (magenta tint) and ridiculous, required-by-law rebound up to the green tint resistance. My fingers are crossed that there’s no bounce left, since the unsolvable myriad of problems pressing upon the globe are slowly being realized by the more blinkered among us.
The big earnings news yesterday afternoon was Netflix (there was an era when it would have been IBM, but times have changed). I had no position in NFLX, and frankly, I hardly ever touch the thing, but it was an explosive move higher. What surprised me was that, explosive or not, the rip didn’t even get it to its former high. Indeed, as I am typing this, the stock’s gains are shrinking very rapidly. I wonder if we’re at “Peak Netflix” now.
Apparently everyone “knows” that the drop we saw in the first two weeks of October is going to be a repeat of what happened earlier this year on February 9th. I’d like to think of some broader possibilities. There are, of course, practically limitless possibilities for what the market will do next, but let’s consider four distinct general pathways. (Incidentally, it occurs to me that all of these are the S&P cash index, not the @ES, but I’m not about to relabel all of them!)
The first possibility is, again, what everyone “knows” will happen. That, for the 397th time, the stupid bears will be sucker-punched, and new lifetime highs are just a few weeks away. We’ll call this prospect “Alpha“:
I hesitate to write this, but it could be weeks before we see another hearty selloff. Perhaps many weeks.
Listen, there’s not a soul on this planet that enjoys a market plunge more than I do. However, the rapid descent of the market has a flip side to it, which is that the “healing” process require to put prices at appealing shorting levels again can be slow and grinding. After all, the bulls are scared witless during such a plunge, so they are going to be hesitant, cautious, and very measured when they resume buying.
This varies from sector to sector, of course, but what I’ve done below is take a sample of six stocks that I was short (prior to covering them late last week) to show just how far away they are from resistance (that is, a good shorting price). As happy as I was to be short these before, I wouldn’t dare short them at present price levels, because they are miles away from what I would consider a logical stop-loss point.
Of course, one other possibility is that these companies are in such trouble that they simple resume their plunge and they don’t even bother trying to “re-capture” those higher prices. But I wanted to show you some extreme examples to illustrate that even a multi-week rise in equity prices does not necessarily indicate that the first two weeks in October were meaningless.
In my weekend post, What Comes Next, I pointed out 2800 as an important price level. Well, the ES has ripped right up to it (as I’m typing this, the ES is up nearly 50 breathtaking points, just beneath 2800). Does it stop here? Very hard to say. Some sectors (like homebuilders) are incredibly beaten-down and have tons of room to the upside, potentially. Other items are at very interesting shortable levels.
Here are a few key ETFs and what I believe are meaningful resistance points which, if crossed, will mean “leg two” of this countertrend bounce will kick in.
What a day! This was pretty much all anyone needed to follow the markets:
What happens next week? What even happens on Monday morning? (As I’m typing this on Saturday evening, I’m wondering what happens when Sunday opens up). It’s a big question on everyone’s mind, because last week was so out of the ordinary.
Simple chartist that I am, I can merely point out to a couple of important price levels. One of them is 2800, which is, conveniently, a nice simple number to remember.
What a week for #TeamBears!
The Fed’s rate hike cycle finally broke the backs of small caps, as illustrated by BOTH the (#1) break and close below of the Summer low (which is also prior swing pivot) on the daily and weekly RUT charts, and (#2) the break of the up channel formed since Summer 2017.
Our beloved bear leader Tim Knight made massive profits, and Slope traffic rose validating his tremendous efforts to improve the website. (more…)
I was saying after the SPX support trendline touch a few days ago that having a strong three-touch support trendline cuts both ways, in that it is strong support while it holds, but can get ugly fast when it breaks. The strength of this push down after the support trendline broke on Wednesday morning was extremely impressive.
That move may be bottoming out for the moment and, if so, that should be the end of wave A, with a wave B rally in progress now or soon, and a likely wave C down after that to complete this move from the high. There are a number of possible options for the wave C low, but my favorite would be a retest of the 2018 low at 2532.69, just under the annual pivot at 2538. There is a possible H&S neckline at that level. If SPX does a 50% retracement from the current low then the target would be in the 2825 area, though there is impressive looking resistance in the 2790 – 2800 area that may hold as resistance.
Full Premarket Video from theartofchart.net – Update on ES, NQ, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD: (more…)