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A Pause at the Edge of the Cliff


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#1 dTraderB

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Posted 04 December 2018 - 04:52 PM

The good news for the Bulls:

- markets closed tomorrow

- SPX closed just above a strong support zone

 

It is possible there will be lots of bullish talk until the cash market reopens on Thursday and this will avert further declines. 

Also, after this huge red candle, there could be one or more inside daily candles with lower lows but higher close.

 

Or, the markets repeat the January decline.

 

Note the 50ma is just 6 points away from crossing down below the 200ma, that soc-called death cross which is meaningless to me but scares the hell out of many. 

 

Had a great 2 days with NQ longs & shorts.

I closed my VXX longs today. 

My only holding in the risk portfolio is GE. 

 

 

47291587_1180029418802141_20720908271731



#2 dTraderB

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Posted 04 December 2018 - 04:53 PM

in chart above, YELLOW is 50 ma

magenta is 200ma

blue is 20ma

cyan is SPX close

 

pan across the chart to see the fairly good support at and near the SPX close at 2700


Edited by dTraderB, 04 December 2018 - 04:54 PM.


#3 dTraderB

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Posted 05 December 2018 - 02:01 PM

Mid-week rest is quite refreshing.  Let's advocate to do this one per month: no Wednesday trading, close markets.

 

Despite some bullish calls from various market commentators recently, Steve and I have always viewed the latest market rally as a corrective bounce in a longer term downtrend.  If you listened to my weekend newsletter I stated that a gap up on Monday in response to the G20 Tariff pause would be a good opportunity to sell and lighten up on long positions.  On Monday morning just after the opening bell I sent out an alert on the SPY system re-iterating that the big gap up on Monday morning would be a good opportunity to trim/lighten up on SPY and other longs.  Boy has that played out especially with today's huge sell off.  Also on the weekend I said to watch the VIX indicator, I said that the lower Bollinger Bands would likely act as support and that's exactly what happened, the VIX tagged the lower Bollinger Bands yesterday morning and that was the low. All year long each time the VIX has tagged the lower Bollinger Band it has rallied - this is something we also discussed early this year.  See VIX Chart

Today of course the market was scared by the move in bond markets, the yield curve (10 Year / 2 Year) fell once again and is getting close to par.  It won't take much for it to go negative now.  Remember I discussed the Yield Curve on the weekend and in Monday's newsletter.  Early this morning Banks/Financials and Transports were extra weak in response to the bond market as the flattening yield curve hurts their profits.  

One chart that someone pointed out to me earlier today was the FLOT ETF, which is Investment Grade Floating Rate Bonds.  HERE's a Chart, as you will see below there was a HUGE move in this instrument over the last couple days, even yesterday, this was a pre warning for the market of the issues underneath the surface in the credit markets.  

As far as the market, you know our bigger picture is one of caution/bear market.  

https://breakpointtrades.com/

 



#4 dTraderB

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Posted 05 December 2018 - 02:06 PM

I am leaning towards this scenario: bounce, to at least the 200ma or 50ma, or even as high as Monday's daily HIGH.

 

$SPX - Chart Link - The second chart shows how the 61.8% Fibs have been important lately, on Nov 7th price stopped at the 61.8% Fib of the Sept high to the Oct 29th lows.  Today price closed at the 61.8% Fib retracement of the Nov 7th high to Nov 23rd low.  This could be a logical place for yet another bounce.



#5 dTraderB

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Posted 05 December 2018 - 02:09 PM

Are we setting up for Bear Trap #2? After a 10% rally in $NDX in as many days a pullback was in the cards. From the Weekly Market Brief:

“We’ll be reaching short term overbought readings into early December just ahead of traditional short term weaker seasonality. There likely will be some fade/retest trade opportunities. Indeed bulls need to avert a sell the news scenario. A renewed drop below 2700 would constitute a major warning sign for bulls. A drop below the October/November lows would fully open up the lower risk zone again”.

Hence it made sense to close the $ES long setup on the aggressive rally.

Yesterday’s 5th 3% down day in 2018 certainly has now brought the bull case into question. Was it a bull trap? After all the weekly charts show potential bear flags with much lower price targets i.e. 2460 on $SPX:

spxw1.png?resize=639%2C379&ssl=1

And the action was relentless on the heels of multiple headlines and structural events that drove the selling:

Tariff Man soured sentiment by admitting he had no China deal, Brexit had a major setback in the UK, Saudi and Russia’s oil deal became a non deal it seems, and then, once $SPX dropped below the 200MA, quant funds commenced relentless electronic selling of over $50B in notional exposure and once stuff like this happens you can forget about support levels. Absolute relentless selling across the board:

https://northmantrad...05/bear-trap-2/



#6 dTraderB

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Posted 05 December 2018 - 02:11 PM

BREXIT, ITALY, the pot is bubbling across the pond.

 

l@Schuldensuehner
Follow @Schuldensuehner
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#Eurozone growth set to remain weak as #Italy recession looms. Composite PMI falls to 52.7 in Nov from 53.1 in Oct, bringing the leading indicator ever closer to the 50-Make-or-break level. IHS Markit sees downside risks for region’s economy in 2019. https://www.bloomberg.com/news/articles/2018-12-05/weak-euro-area-growth-is-here-to-stay-as-italy-recession-looms 

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4:22 AM - 5 Dec 2018


#7 dTraderB

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Posted 05 December 2018 - 02:16 PM

As I mentioned on Monday, it appeared as if the algos were selling the rallies instead of buying the dips:

 



#8 dTraderB

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Posted 05 December 2018 - 03:04 PM

" The current U.S. stock market action reminds me a lot of late-2014 through early-2016.  Many technical signals were lined up for a bear market, but price support from that initial high volatility drop in late-2014 was never violated.  That's the critical piece that the bears were missing.  In my view, we're at a very similar stage with S&P 500 price support of 2582 still holding.  Otherwise, technical signals are very weak.  Volume trends are awful.  I am still looking at this current market environment as a correction within a continuing bull market, but I'm trading with extreme caution because of the bearish conditions.  The Volatility Index ($VIX) soaring off 16 support is yet the latest signal that we need to keep in mind.  I am 100% cash at the moment and plan to stay that way through the early action tomorrow and then I'll re-evaluate.  If I do trade, it'll likely be more defensive areas and with fewer shares.  There's no shame in avoiding risk when the market warrants it."

 

15440179446641499355427.png

 

https://stockcharts....es-it-mean.html



#9 dTraderB

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Posted 05 December 2018 - 03:08 PM

Cramer disses TRUMP:

 

 

Uncertainty might've worked on "The Apprentice," but it sure doesn't work for stocks, @JimCramer says

 

Money managers are realizing that Trump isn't 'dependable enough' for the market: Cramer
  • CNBC's Jim Cramer attributes part of Tuesday's marketwide collapse to political uncertainty brought about by the Trump administration.
  • Money managers are realizing that the president doesn't take his economic policies "seriously enough to be considered dependable," the "Mad Money" host says.
  • And when money managers are faced with uncertainty, they tend to sell, Cramer says.

 

https://www.cnbc.com/2018/12/04/cramer-money-managers-are-realizing-that-trump-isnt-dependable.html  


Edited by dTraderB, 05 December 2018 - 03:10 PM.


#10 dTraderB

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Posted 05 December 2018 - 03:11 PM

Markets sold off today as people realized the President was merely blowing smoke about a trade war truce. (below). POTUS's causal relationship with the Truth just cost him the confidence of the markets. Best of luck trying that again, Mr. 1 Termer.

 


Edited by dTraderB, 05 December 2018 - 03:12 PM.