Most commentators agree that we are due for a 7-10% correction in the stock market. Bearish divergences abound. Yesterday, we got a Hindenburg Omen.
However, from a seasonality perspective, it's difficult to imagine getting much of a correction before year end unless the tax deal somehow falls through. Practically speaking, this is the last trading week of the year. The second stringers will be in control from December 20-31, and the market usually doesn't show much volatility during that time. Certainly it would be odd to see a major dump during the holidays. If we don't get any serious downward movement by Friday OPEX, I would not expect any correction to start before 2011.
Terry's midweek update suggests a T with a top in mid-February with a 75-day selling climax in mid-March. This confirms the Money Flow Ts I have showing an early February top date for gold, junk bonds and stocks, and bottom date for volatility and the dollar.
However, there are some cyclists who show a late December turn date. They expect a correction to start in early January.
What are your thoughts? When does this stock market rally end and the next serious correction begin?
Personally, unless something major happens over the next couple of days, I will be positioning myself long with the expectation that equities and gold will rally through January.
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usd rally after fed announcement has to get your attention -
ReplyDeleteBKX is still struggling
http://www.smartmoneytracker.blogspot.com/
http://principleanalysis.blogspot.com/
http://blog.kimblechartingsolutions.com/
Parker, thanks for sharing your list of stocks! Looking at them, and also JJG-grains ETF as someone suggested, I see only numerous divergences in RSI14 (even double divergence) and in volumes/MFI, AccDis, etc. This combined with extreme readings in sentiment makes me think that a correction is imminent, either just before or just after New Year. After this correction I agree that those bullish T's are definitely something to watch, UNLESS their pattern will have been destroyed/cancelled by the upcoming correction. You also seemed to agree that it is not wise to buy before a pullback here, right?
ReplyDeletehttp://carlfutia.blogspot.com/
ReplyDeletethe problem is one of timming of course -
fxe has a gap just below that will either get filled or make for support. Corresponding gap on UUP just above 23 so we are in limbo until on breaks or breaks out! 132 is FXE breaking point -Euro and Europe looking beaten - riots and strikes have cost at least 5% of GDP already.
a slow motion collaspe...?
my most reliable chart indicates a top any time but timming could extend out to Feb-march-april as per all the other estimates around here.
very hard to time this crap with the currency wars and very expensive to be short!
I
marketlive - I'm your new whipping boy! great, Terry could use a rest...! lol
ReplyDeleteLook over http://www.smartmoneytracker.blogspot.com/
this guy has been VERY bullish and his post today is a complete reversal of his view...
thanks for your kind attentions Marketlive - alsways nice to know who won't be adding me as a friend on their facebook page!
Parker…………..
ReplyDeleteI am looking for a correction with the dates I have posted……..but I am not looking for anything serious until a topping in June which should lead to a higher top in Aug! This is the cycle picture at the moment and the only thing that will change it in my work will be an inversion along the way…….but at this time it has been true to form!
One other note.......my suggestion with JJG was to review the T's there if that is what one is using as they might be clearer as I have been following T's for a short ime but find them to be all over the board when the cycle is not obvious to them! Gann used a similar approach but simpler!
Everyone I follow is torn between the divergences and their gut...Another bull thinking a "significant top" may be in at 1246.
ReplyDeletehttp://pugsma.wordpress.com/2010/12/14/dec-14th-2010-update-4-eod/
Marketlive - the data on the santa rally is very inconclusive and I don't think anyone has a handle on it as yet
8:15 pm EST: I don’t really like the alternate count that yesterday’s high was only minute wave (1) of 5-[1]-P3. The market is starting fracture here and the negative divergences on the McClellan Osc, Daily RSI, and Daily MACD are really weighing on the SP-500. That is why I like the primary count that major wave [1]-P3 peaked at 1246.73 on Monday 12/13 and major wave [2]-P3 is headed lower to test 1129 (50% retrace of major [1]-P3) to 1153 (38% retrace of major [1]-P3) over the next two months. However, in the back of mind I can’t ignore a potential rally into the end of the year and early 2011 for Q4 earnings season.
Divergence in the News: I watched CNBC World and CNBC US this morning. What a difference in outlook. World was reporting violent riots in Greece and Britian and job loss in Britian etc. All Doom and Gloom, Meanwhile CNBC US was hyping the best sectors for 2011, wondering if you shouldn't be in Big Caps, talking about Obama's meeting with business leaders, etc. All Godlilocks is back stuff. Even saying buy a house now before Mortgage Rates go up. WOW!
ReplyDeleteThe take away was debt (gearing in Britian) got the world into this mess and it is adding more debt to get itself out. So there is going to have to be austerity by Govts. Europe is to be hit first and then it will come across the lake to the US.
The "WHEN" seems to be in the 3rd or 4th qtr 2011. So if the market anticipates by 9 mo. we should see something between now and March.
Sorry that's not very percise but this stuff isn't science yet either.
marketlive - USD above 80 will be interesting
ReplyDelete1129 by Feb then a bounce until may/june and then new downtrend into 2012
I deleted marketlive's personal attack on Scott.
ReplyDeleteScott - please refrain from addressing marketlive specifically.
Let's keep this cordial, not personal.
Marketlive, if you continue to break the rules, I will ban you. Not because you are a bull. But because you cannot refrain from making insults and personal attacks.
Grow up or get banned. Your choice.
Parker - Will do! I just thought of it as merry prankster fun - my lips are sealed!
ReplyDeletefxe filled the gap and is finding some support at 132 -
ReplyDeletehttp://stockcharts.com/h-sc/ui?s=FXE&p=D&yr=0&mn=11&dy=30&id=p92566198841&a=191596129
Sorry (again) its just that when I hear anyone over the moon on anything it gets me thinking of going the other way or at a minimum that I am not right and am now consensus.
ReplyDeleteI will refrain from singling anyone out. I stick with my forecast though.
Interesting price action in here with US BONDS and TLT..............
ReplyDeleteAs soon as the SPX closes below its 5days and 15 days weighted MA, you can go short.
ReplyDeleteThat will be the signal that all the divergences will start to CONVERGE. And this one is good for 50-100 SPX points. It may take 2-3 weeks to run its course, or it may take 2-3 months.
But it is written, and hence it shall be done. lol
http://stockcharts.com/h-sc/ui?s=$SPX&p=5&yr=0&mn=0&dy=3&id=p90898954822&a=184468147
ReplyDeleteinteresting 5 min spx pattern since yesterday at noon...
Carl
ReplyDeleteThe thing about bearish divergences is this: it only happens in up trends! It's a better "take profit" signal than it is a "get short" signal.
One of the things I like to do is draw a resistance line connecting the bearish divergence peaks on RSI. Often, when that RSI resistance line fails, price is ready to resume its up trend with gusto.
We are all focused on the wrong market. I have been long TBT since 36, just now beginning to sell a bit. Equities will still be strong.
ReplyDeleteYep.........Have been short TLT.......closed out all shorts on it today! Good trading!
ReplyDeleteParker, this SPX astro projection shows a CIT from Dec 20 +/- to Dec 31...http://bit.ly/fQn1Jz
ReplyDeleteThanks, JustSignals.
ReplyDeleteIf I am reading things properly, some people are saying P3 to the upside? I am willing to bet everything but bare sustenance money (and I'm pretty much retired) that anyone thinking this is a P3 up needs to look at a lot more history of EW as well as economics and financial bubbles in history. America is on life support. When Japan lowers its tax rate we will be the most costly place to do business in the industrial world and more jobs will leave.
ReplyDeleteI wrote 665 on an index card yesterday. I expect to be looking at it before 2011 is over and asking how people could have believed that pushing on a string was a recovery. The fascist nature of the government and the banks are doing well as they didn't have to mark-to-market assets that would put them into receivership. Aside from that, we have just duplicated England's fall as the world's hegemonic power and as the "lender of last resort", we have no more ability to pull that off.P3 up without an impulse wave? They have taken the public to room 101 and conditioned them to think all ends well as the government has mandated it. It will not. It will have to do what no financial dilemma/bubble in 800 years of history has done with a Fed Chairman who had yet to get a thing right.
Steve
ReplyDeleteI think we go well below 665 at the next 85 month cycle low in ~2016:
http://position-sizing.blogspot.com/2010/12/long-range-view-85-month-cycle.html
How we get there is going to be most interesting.
Is it going to be 65 months of grinding higher followed by a 20 month collapse like the last 2 cycles?
Or is it going to be ~30 months of advance (we are at ~22), followed by a slow intolerable grind of 55 months down.
This time, I would not be surprised if it is the latter.
Parker,
ReplyDeleteSmall bit of information in support of your bearish outlook. If you prepare a geometric progression from the 1932 Low in the Dow 30 to the 1982 low in the Dow 30 and project it out to the present day the long term support level for the Dow 30 is at 4141.
Also the Hindenburg Omen was triggered on Tuesday and confirmed on Wednesday. The last time this happened, August 12, 2010, the S&P 500 dropped 46 points the next 12 days.
Thanks, PermaBear
ReplyDeleteParker,
ReplyDeleteWith "two Americas" it's getting tough to figure what is going to happen exactly when, especially since we are following Britain's decline as they did Spain and Holland's. This is no normal business cycle. This is a complete paradigm shift in world events and where we end up is not precisely known. Britannia once ruled the waves. Now, their navy has been reduced to about a decent sized coast guard.