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Risk Windows and FED Up


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#1 Douglas

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Posted 28 November 2021 - 07:43 AM

According to my risk summation system, the days this coming week with the highest risk of a turn in or acceleration of the current trend in the DJIA are Monday November 29th and Friday December 3rd.   

 

Last week the risk summation system got its grove back hitting the turning top in the Wednesday risk window at what I think was the end of a 4th wave and hopefully hitting a low in this past Friday or this coming Monday risk window.  The action Friday was classic risk window stuff with the DJIA down a thousand points during the day.

 

Well, I called the top again and this time it answered the phone, clearly hung over from partying too much and belligerent at having been disturbed.  I know not to get too cocky, though, since I'm sure the FED is spending this weekend gearing up the pumps to run in overdrive to meet its stock-market-always-up mandate, so this may only turn out to be "a" top not "the" top, but that will only be clear in hindsight. 

 

Speaking of hindsight, no one made fun of my Elliott wave count in last week's posts, despite me changing it only hours after posting it.  I don't know if that was pity or just indifference.   This week should clarify if my primary count which is short term bullish after a low on Monday or my alternate count which is very bearish is correct. 

 

My trading system is chomping at the bit to buy, but that's primarily because during this long bull market I've jiggered it to get bullish during any small correction, because of the new aforementioned FED mandate.  IF, and that is a very big if, the FED has suddenly gotten inflation religion, which is now in doubt given the Nu bug variant, like Meryl Streep with a bad accent, out of Africa, I will need to again tinker with my system to cope with a bear market, something many, many newbie traders have never even seen.  Regardless, I'm FED up with waiting for Godot.  

 

Regards,

Douglas



#2 LMF

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Posted 28 November 2021 - 11:24 AM

I think if Biden gets one more hangnail we re all screwed. Theyll have to bring in the PPT. The Friday hammer job had to be the greatest scam in Botswanna history. Who cares if we can believe it.

#3 Douglas

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Posted 28 November 2021 - 02:32 PM

LMF, the stock market is a disaster looking for a cause.  Truck loads of funny money sloshing around and the FED/Treasury amalgamation have made a joke out of the debt market.  The ten year is at 1.48% with 6% inflation even using the BLS baloney numbers.  In what alternative universe does that make sense?  If actual free market price discovery determined interest rates, would anyone lend the US government money for 10 years for 1.48% return a year in current conditions?  Could the S&P have been sitting north of 4700 like it was early last week?   If it wasn't the new covid variant, it would have been something else that caused the sell off to start.  

 

The real problem is the FED began to take away the punch bowl while the party was still rocking.  The fleetest of the market partiers who have at least a modicum of experience must have been nervous and were looking for any good excuse to head out the door.   The question is will the FED blink, crank the music up again and  just start refilling the punch bowl bright and early this coming Monday morning, or are they serious and have the chutzpah to keep draining the party juice, or do they once and for all, unequivocally confirm their new no-dips-allowed stock market mandate.  This is a test, and we get to bet in real time whether they pass it or not. The burning question is whether this was just another buy the dip opportunity, or the start of something more sinister.  Despite my penchant for gazing into a cracked crystal ball and trying to predict the market, in real life in my marriage to the market, I'm just a humble trend follower who lets the market tell me what to do like all wise husbands of finance.  

 

Regards,

Douglas



#4 LMF

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Posted 28 November 2021 - 02:58 PM

Its like my post the other day where TQQQ is going to get close enough to infinity. The long term charts like quarterly show it. Could be the 2033 estimate but the exact time frame is not the game. From here the SPX advance decline would need to transition to the 2008 look, but thats not even on the horizon anywhere. We can only get pullbacks that might appear to be a trainwreck, but they are just shaking the tree. At the 2020 COVId low, all they had done was get the SPX AD down to the 200 day MA for 5 minutes. Try touching the 200 day on and off for 8 months. That takes a lot of stocks going down all the time like 2008. It aint right now thats for sure. Maybe later.

#5 Douglas

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Posted 28 November 2021 - 03:51 PM

LMF, the "the advance decline line has not turned down and diverged so the market can't turn down" argument may not hold water this time because this sell off is not being caused by a slow internal economic deterioration which shows up in the AD line first, but rather a repricing of all stocks based on the cost of money and the reduced availability of FED largesse.  Granted the FED hasn't put the axe to the wood yet, but they have threatened to and that may be enough to get the tree leaning. For it to go timber will take real action, which it is definitely not clear that the FED has the stomach for.  Time will tell as will the FED heads since starting tomorrow they make speech after speech starting with the big kahuna himself on Monday followed on Tuesday by his testimony, aka the economics comedy hour.   

 

So the AD line may not be your friend in this fight, just another victim of the ensuing beating which may soon commence.  The market trend may be your only warning that the FED is ready to throw down, or not, if they chicken out.  I've got gloves and a bag of millet ready to handle whatever they decide to do.

 

Regards,

Douglas



#6 LMF

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Posted 28 November 2021 - 05:36 PM

I actually thought I had seen it all, until they scheduled the 2020 COVId selloff where it went down so fast that it just had to be broken. Actually I couldnt tell if it was broken or not. The excessive velocity totally overshadowed it. All it amounted to was pushing the pressurized beach ball to the bottom of the deep end. And then new highs just around the corner. So the reality is they can organize the selloff however they want to. But I think Ive seen the full range of what theyre up to. There are limits the market will reach when that AD line gets to the 200 day MA. And in the final analysis, its what the 200 day is doing on the AD chart. I found out it depends on what you get focused on. I learned quite a bit from the 2020 COVId thing. They let me see the cat out of the bag.

#7 Douglas

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Posted 28 November 2021 - 06:24 PM

Speaking of the AD line.  Take a look at the 100 EMA of the NYA AD line below.  It has provided critical support for the AD line five times since the 2020 March low.  The market is testing it again right now.  If the AD line breaks through it a la early March 2020, the market might be in big trouble.  If the AD line respects this moving average for a sixth time, happy days are probably here again.  DJIA futures are up 133 Sunday night as I type, so looking good so far, but as you can see in the plot below, there was a brief consolidation at the moving average in late February/very early March 2020 before the AD punched through, so it's not out of the woods just yet.

 

bfIGuny.png

 

Regards,

Douglas



#8 LMF

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Posted 28 November 2021 - 07:24 PM

Friday the VIX stick was completely above the Bollinger band. Thats a bottom of some sort almost every time.