Taking the theme of an email received from a reader and expanding...
There are obvious similarities for the Transports between the run up to Armageddon' 08 and the current period.
More than the similar triangle structures I would be concerned with what the momentum indicators are doing. Here we look at MACD, which bearishly diverged into a wash out and recovery to test the highs. At that point MACD failed to positively diverge and preceded a major crash.
The same setup is in play today and I would say that if you see that lower trend line break, get into full risk management mode. There is of course also the chance that bears are feverishly looking for things that echo the glory days of 2008 in denial of the current rally.
Edit (2:24) Adding in a chart with weekly RSI showing an even more compelling divergence similarity to 2008. So that's the 2 most commonly used momo indicators saying "be careful" beyond this bull trade.
http://www.biiwii.blogspot.com
http://www.biiwii.com/analysis.htm
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There are obvious similarities for the Transports between the run up to Armageddon' 08 and the current period.
More than the similar triangle structures I would be concerned with what the momentum indicators are doing. Here we look at MACD, which bearishly diverged into a wash out and recovery to test the highs. At that point MACD failed to positively diverge and preceded a major crash.
The same setup is in play today and I would say that if you see that lower trend line break, get into full risk management mode. There is of course also the chance that bears are feverishly looking for things that echo the glory days of 2008 in denial of the current rally.
Edit (2:24) Adding in a chart with weekly RSI showing an even more compelling divergence similarity to 2008. So that's the 2 most commonly used momo indicators saying "be careful" beyond this bull trade.
http://www.biiwii.blogspot.com
http://www.biiwii.com/analysis.htm
Subscribe to NFTRH or
Subscribe to the free eLetter
I know this seems crazy but if the Euro has temporarily bottomed here and breaks out of its bearish wedge the SP500 should go up ~35% from there... just like it has the last two times it has done this. That would tack on about 500 pts to the SP500 and put it within spitting distance of 2000. This seems crazy given the deteriorating conditions but it is what it is. You always said that going against the herd is sometimes a very lonely business... this is one of those cases for me.
ReplyDeleteWell the herd has denied that the market has been bullish since May. So, that could well be the play. In the newsletter we have been following the election year cycle, which the market has been tracking pretty well. It calls for a HARD UP from here and then two very different potential outcomes depending on election results.
DeleteFiltering out that noise, the USD does not look good technically and nor do T bonds. At least not for the near term. Hence, your Euro thesis looks good.
Hey Gary! '08 was an election year too!
ReplyDeleteSeems like the crash came by around... August or September, eh?
Ooh, scary! :-)
Of course here's your problems:
ReplyDelete1) Volume is completely different this time.
2) What the heck does Tranny have to do with liquidity collapse anyway.
1) It's not my problem. It's just a chart, and I am short nothing and long many things.
Delete2) Beats me, it's just a chart.