50 replies to this topic

[dTraderB]

Last week, as we noted at RIA PRO, we put on a small S&P 500 (IVV) trading position for a potential oversold rally. As I noted on Friday, that trade has left much to be desired as the market simply has not been able to muster a sustainable bounce. On Friday, the market closed right at critical support levels.

Given the Fed meets next week, we are going to give our trade just the smallest margin of movement currently for three reasons:

1. The market is deeply oversold which will contribute to a bounce on any bit of good news.
2. The index closed lower than where it opened for 4-consecutive days. Such selling is often met with a one or two day bounce.
3. Lastly, as noted previously, distributions for mutual funds are now mostly complete and they have to rebalance portfolios before the end of the reporting year. With next week having the highest historical probability for a rally, a more “dovish” than expected Fed could spark a bit of buying frenzy. 

While we are expecting an oversold rally, remember after having reduced exposure in portfolios previously, and carrying a much heavier weighting in cash, we are giving the market time to figure out what it wants to do. Given the consolidation range over the last couple of months, it is too risky to be either overly short, or aggressively long, currently. Cash remains the best hedge currently.

But let me repeat the most important point:

“The expected rally IS NOT the next version of the ‘bull market.’ Nor does a rally mean the ‘bear market’ is over. It will be a counter-trend rally to sell into.”

But it is not just the S&P 500 where this is occurring. As shown, every market is now trending negatively.

As I have noted previously, the weakness in the market continues to be a process that has gripped markets over the last several months as the Federal Reserve has steadily increased their extraction of liquidity. As shown in the chart above, the market has continued to build multiple tops as the 50-dma deepens its divergence from the 200-dma. Currently, downside stop losses are holding, but there isn’t much wiggle room here currently before further actions need to be taken.

While we are certainly hoping that Santa Claus will indeed come and visit “Broad & Wall” over the next two weeks, there isn’t much reason to take on an excessive amount of risk currently.

https://realinvestme...y-list-12-14-18

Last week, as we noted at RIA PRO, we put on a small S&P 500 (IVV) trading position for a potential oversold rally. As I noted on Friday, that trade has left much to be desired as the market simply has not been able to muster a sustainable bounce. On Friday, the market closed right at critical support levels.

Given the Fed meets next week, we are going to give our trade just the smallest margin of movement currently for three reasons:

1. The market is deeply oversold which will contribute to a bounce on any bit of good news.
2. The index closed lower than where it opened for 4-consecutive days. Such selling is often met with a one or two day bounce.
3. Lastly, as noted previously, distributions for mutual funds are now mostly complete and they have to rebalance portfolios before the end of the reporting year. With next week having the highest historical probability for a rally, a more “dovish” than expected Fed could spark a bit of buying frenzy. 

While we are expecting an oversold rally, remember after having reduced exposure in portfolios previously, and carrying a much heavier weighting in cash, we are giving the market time to figure out what it wants to do. Given the consolidation range over the last couple of months, it is too risky to be either overly short, or aggressively long, currently. Cash remains the best hedge currently.

But let me repeat the most important point:

“The expected rally IS NOT the next version of the ‘bull market.’ Nor does a rally mean the ‘bear market’ is over. It will be a counter-trend rally to sell into.”

But it is not just the S&P 500 where this is occurring. As shown, every market is now trending negatively.

As I have noted previously, the weakness in the market continues to be a process that has gripped markets over the last several months as the Federal Reserve has steadily increased their extraction of liquidity. As shown in the chart above, the market has continued to build multiple tops as the 50-dma deepens its divergence from the 200-dma. Currently, downside stop losses are holding, but there isn’t much wiggle room here currently before further actions need to be taken.

While we are certainly hoping that Santa Claus will indeed come and visit “Broad & Wall” over the next two weeks, there isn’t much reason to take on an excessive amount of risk currently.

[dTraderB]

Want To Know The Difference Between A Correction And A Bear Market? Tom Bowley | December 15, 2018 at 12:55 PM

Not a whole lot. I guess there are three primary differences.  First, there's the percentage drop as corrections are generally considered to see a drop of less than 20%, while bear markets tend to see declines well in excess of 20%.  Second, a bear market tends to last longer than a correction as the latter is nothing more than a basing period (that can still be extremely emotional) during a bull market.  Corrections are actually quite constructive for a longer-term rally.  Finally, there's a much stronger likelihood of an economic recession during a bear...

 

https://stockcharts....ear-market.html

[RagingSpartan]

For me time matters most for bear markets. Ignore, the degree and watch time. In bear markets LT investors should not think about going long until we hit certain time levels.

[CLK]

Most people don't look at patterns anymore. I posted this early before cash Friday. Just as clear as day we left the range for good,

but I think it could bounce to 2640 one last time to clear out the shorts before they take it to 2500.

 

 

tvc_055e6c2f27923a38d15f8c91e20b0a86.png

Edited by CLK, 15 December 2018 - 06:17 PM.

[dTraderB]

Never say never.....markets can go up or down anytime, but am not convinced the markets will go much lower now.  I have to 

see what the FED does and what they say on Wednesday.

 

But, in 2019, the bear will take up permanent residence in Wall St. 

 

What about this?

The Great Cheapening of 2018: Global Stock Valuations Now at Five-Year Lows

By 

Mike Bird

Updated Dec. 12, 2018 4:16 a.m. ET

 

The stumble in global equity markets this year has outrun a moderation in expectations for earnings growth, leaving stock valuations at their cheapest in about half a decade by some measures.

[dTraderB]

haha 

 

Our first job as chartists is to identify the bigger trend at work. Once trend direction is established, we can then direct our focus and set our trading bias. I try to focus on resistance, bearish setups, and bearish patterns during a downtrend. By extension, I try to ignore dubious support levels, bullish setups, and bullish patterns. I am working under the assumption that the bigger downtrend is the dominant force at work. A downtrend environment favors bearish resolutions over bullish resolutions. Bearish patterns have a better chance at success than bullish patterns, while resistance levels have a better chance of holding than support levels. It is all about probabilities.

Invariably, there is always another support level below current prices and we could draw dubious support lines all day. Marking support levels in a downtrend is just creating more noise. The chart below shows the S&P 500 with at least nine possible support levels. As far as I am concerned, the trend reversed with the price breakdowns and bearish breadth signals in mid-October. Once the trend turned down, support levels based on prior lows became noise in my book.

There is probably one "critical" support level in this bunch, but good luck picking the right one. The S&P 500 is clearly not "On Trend" and I will not be marking support levels until the index actually reverses its downtrend. In Dow Theory terms, the onus is on the bulls to prove the bears otherwise. Until then, I will respect the downtrend and be a good Grinch. Merry Christmas and Happy New Year!

https://stockcharts....edaboutit-.html

 

[dTraderB]

 

 

The charts that matter: if the dollar stays strong, everything else will stay weak

 

First, the yield curve. If you’ve forgotten what it is, here’s your reminder. The short version is that the chart shows the difference (the “spread”) between what it costs the US government to borrow money over ten years rather than two. Once this number turns negative , the yield curve has inverted which almost always signals a recession (although perhaps not for up to two years). 

The key thing to remember here is this – until it goes below zero, there’s no signal. And this week, it has bounced ever so slightly. So we’ve still not triggered a recession warning.

(The gap between the yield on the ten-year US Treasury and that on the two-year: going back ten years)

So how about gold (measured in dollar terms)? The yellow metal is still trading at around $1,240 an ounce, but the reality is that until the US dollar shows genuine signs of weakness, gold will have to battle for every step.

(Gold: three months)

The US dollar index – a measure of the strength of the dollar against a basket of the currencies of its major trading partners – is still trading in a narrow range. Will we get a dollar bear market, which is basically what we need to reignite bullishness in pretty much every other market?

It’s a tricky one. The problem is that the euro is a key component of the comparison basket, and it is struggling just now as growth weakens in both France and Germany. Unless the US Federal Reserve decides to ditch the December interest rate rise, I’m not sure we’ll see a weaker dollar this side of Christmas.

(DXY: three months)

Bond yields continued to fall, although they approached the end of the week off their lowest points – the ten-year US Treasury bond remained below 3%, the “line in the sand” that it burst through near the start of this year.

(Ten-year US Treasury yield: three months)

The Japanese government bond (JGB) yield hasn’t turned negative again yet but it’s far off from doing so.

(Ten-year Japanese government bond yield: three months)

Ten-year German bund yields (the borrowing cost of Germany’s government, Europe’s “risk-free” rate) climbed a little, partly because the European Central Bank is planning to ditch quantitative easing, which means no permanent buyer of last resort for eurozone bonds anymore.

The spread between German and Italian bonds changed little though, as the Italians made soothing noises about their budget deficit (not to mention the fact that the French decided to blow through the deficit rules without so much as a nod to the EU, makes it a lot harder for Brussels to get too narky with the Italians).

(Ten-year bund yield: three months)

Again, for all the fears of a growth slowdown, copper is still in a period of suspended animation.

(Copper: three months)

There’s been no Santa Claus rally for cryptocurrency bitcoin. At the end of November there came a bit of a false dawn, whereby it rallied back above $4,000. But now it’s heading back down towards $3,000 and its lowest point since it peaked in December last year.

One thing I am starting to wonder – how much are bitcoin’s woes this year down to attempts to crack down on capital flight from China? That’s one angle I will look into – I’ll let you know if I find anything helpful.

(Bitcoin: tendays)

Here’s an early warning recession indicator that does have me slightly concerned – the four-week moving average of weekly US jobless claims. This week it dipped to 224,750, as weekly claims came in at just 206,000. That was the lowest level since the 202,000 we saw in mid-September which was the best showing since 1969. However, the four-week moving average is still well above the most recent trough.

As David Rosenberg of Gluskin Sheff has noted in the past (and fair warning, this is taken from a small sample size), the stockmarket usually does not peak until after we’ve seen jobless claims (as measured by the four-week moving average) hit rock bottom for a cycle. On average, the peak follows about 14 weeks from the trough for jobless claims. A recession follows about a year later.

So if mid-to-late September was the bottom, that would imply a market peak around late December, or the start of next year. As I’ve already noted, the data is particularly dodgy around this time of year, so I wouldn’t write off a fresh trough yet. That said, US payroll figures were pretty disappointing in November – so this is one indicator to keep a very close eye on.

(US jobless claims, four-week moving average: since January 2016)

The oil price (as measured by Brent crude, the international/European benchmark) continues to struggle (and had fallen hard at the time of writing on Friday night). That said, it isn’t heading for new lows as yet. Again, I think the oil price is well worth monitoring – a recovery would likely signify a turn for markets, whereas a fresh slide would probably mean the same for stocks.

(Brent crude oil: three months)

https://moneyweek.co...-will-stay-weak

[dTraderB]

CARL:

 "I believe we're in a bear market now."

 

https://stockcharts....r-seen-one.html

[dTraderB]

John Murphy:

Two of the earliest warning signs since October that the stock market was in trouble was the fact that economically-sensitive stock groups like small caps and transports were leading the market lower. And they're doing that again today. Chart 4 shows the Russell 2000 Small Cap Index undercutting its February intra-day low today to put it at a new 52-week low. Chart 5 shows the Dow Transports doing the same. Weakness in those two groups is a negative warning sign for the market and the U.S. economy.

https://stockcharts....-week-lows.html

[dTraderB]

This is basically how my take on the market:

 

Here's A Bear Market Chart You Can't Afford To Miss!

Tom Bowley |  December 14, 2018 at 09:27 AM

Yes, I'm still waiting for the S&P 500 to close below 2582 to confirm the beginning of a bear market.  It's the benchmark that I follow to determine what type of market we're in.  The S&P 500 represents 500 of the largest multinational companies in the world and is a great barometer to evaluate the big picture.  A bull market is a series of higher highs and higher lows.  A bear market is the oppposite, a series of lower highs and lower lows.  The crossroad between the two is that February low.  After the early January surge, the S&P 500 topped at an all-time high just shy of 2875.  The reaction low close in February of 2582 was established with surging volatility ($VIX).  The VIX hit 50 (!!!) intraday.  High VIX readings are indicative of extremely emotional markets that carve out MAJOR price bottoms.  2582 is the number for me.  A few days ago, the S&P 500 hit 2583 and buyers returned.  I believe if 2582 is lost, we'll see a spike in the VIX that will likely trump most others during 2018 and further impulsive selling will kick in.  Loss of 2582 will then likely mark the end of the "correction" and beginning of the "bear market".

https://stockcharts....rd-to-miss.html