Addicted Market Could Crash Off High
Coming Down Off Liquidity High
Wall Street Greek Technical Strategist Steven Ferguson offers a fresh look at the perilous technical high wire act the market seems to be performing, and he warns again of serious trouble signs in the charts.
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Addicted Market Could Crash Off High
For a market propelled to new recovery highs by the same liquid(ity) drug that has fueled every major asset bubble in the past, and that has led to the current credit crisis hangover, the moment of truth has arrived. Either a correction will begin this week, or it will be postponed to another date several weeks or even months in the future, with the potential for drop only becoming more dramatic as that date with destiny is forestalled.Either the S&P will fall below key support at 1260 or it will rise a minimum of 30 points higher. Should the S&P remain above 1291, I believe traders should cover open short positions.
Major indices closed Friday at the top of a trend-line that forms the upper boundary of a bearish rising wedge, depicted in the chart below. The rising wedge has formed within a larger trend channel. The more times that prices traverse between the lower and upper boundary of that channel, the weaker market internals have become. It is under these circumstances that we most often observe the Hindenburg Omen indicator.
As well, the Elliot Wave structure, depicted in the chart below, now satisfies pattern identification rules for completion of the rally. Note that the entire rally is comprised of an A-B-C wave structure, where the index is presently completing wave C. Wave C is annotated in blue, with the five sub-waves each depicted individually. Importantly, the magnitude and duration of the move accomplished by the fifth wave in a five wave pattern now satisfies optimal criteria for pattern completion. And although Elliot Wave rules would have allowed the fifth wave to terminate at any time, such a pattern rarely truncates before the length of wave five equals that of wave one. Such is now the case, as can be seen through visual comparison of sub-waves 1 and 5 in the chart below.
We also note that an important and reliable Phi Turn window has now passed. The clock is ticking on a confirmed Hindenburg Omen. Credit turmoil continues to churn even as the upchuck is swabbed down the financial drain. If markets continue to rise significantly above Friday's close, the next target is 2.5% higher again at the top of the trend channel. For a correction to begin in earnest, support levels must be penetrated. Greek readers must remain vigilant.
Disclosure: I am short S&P 500 Index Futures
Article may interest investors in NYSE: GS, NYSE: C, NYSE: BAC, NYSE: WFC, NYSE: MS, NYSE: JPM, NYSE: TD, NYSE: PNC, Nasdaq: TROW, NYSE: STT, NYSE: STD, NYSE: DB, NYSE: BCS, NYSE: NBG, NYSE: JNS, NYSE: BX, NYSE: BLK, Nasdaq: MEMKX, Nasdaq: GECMX, Nasdaq: JEVOX, Nasdaq: PEMAX, NYSE: EEM, NYSE: VWO, Nasdaq: VEIEX, Nasdaq: ADRE, Nasdaq: PEBIX, Nasdaq: GMCEX, NYSE: MSF, NYSE: EEV, Nasdaq: REMGX, NYSE: GMM, NYSE: EDZ, AMEX: ETF, NYSE: FEO, NYSE: ESD, NYSE: MSD, NYSE: EMF, NYSE: TEI, Nasdaq: EMIF, NYSE: EFN, NYSE: EMT, NYSE: PCY, NYSE: PXH, NYSE: GMF, NYSE: GUR, NYSE: GML, NYSE: GMM, NYSE: EWX, NYSE: GAF, NYSE: EUF, NYSE: EET, Nasdaq: ABEMX, Nasdaq: AEMGX, Nasdaq: APERX, Nasdaq: PMGAX, Nasdaq: PMCIX, Nasdaq: AOTAX, Nasdaq: AOTCX, Nasdaq: AOTDX, Nasdaq: AEMPX, Nasdaq: AOTIX, Nasdaq: AEMEX, Nasdaq: AAMRX, Nasdaq: AEMFX, Nasdaq: AAEPX, Nasdaq: AEMMX, Nasdaq: ACKBX, Nasdaq: ACECX, Nasdaq: AMKIX, Nasdaq: TWMIX, Nasdaq: NDAQ, NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX.
Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.
Labels: Editors_Picks, Ferguson, Short Ideas, Stock Market News, Technical_Analysis
posted by The Greek | 2:15 PM
6 Comments:
Which "Begs" the reply, all these positive changes made by the market indicators are caused by our Governments stimulus initiatives, not by real market forces. This manipulation is misleading the investors and must be stopped. Housing, Autos, etc are a long way from a sustained recovery. They must be allowed to find their value through real market forces. And the destruction of the wealth of our middle class over the last ten years does not help this recovery.
So they may go down, or they may go up? Is this Cramer type analysis? ;-)
What happens if there is no QE3?
MOre signs of a top....
(1) We are seeing important divergences among major indices
-the DOW 30 make new recovery highs while the S&P does not
-fewer and fewer constituent stocks make 52 week highs with the broader market
(2) The DOW has remarkably attained the same Elliot wave symmetry as the S&P
-wave 5 now is exactly equal in magnitude to wave 1
-most EW practictioners were skeptical this symmetry could happen without a violation of separate criteria on the S&P. But it has and VIRTUALLY TO THE PENNY
(3) the DOW has now completed a classic "blow-off" top to the rising bearish wedge, exactly as the S&P did on Tue of last week
(4) rising food and energy prices are cutting into profits, just as we saw in mid-2008. Refer to "Uncle Ben's Rice" for more commentary
(5) nearly half of the GDP depends on Local, State and Federal government spending. This is unsustainable! Taxes will have to go up. Budgets will have to be cut. QE3 will create much political tension
Fundamental AND Technical indicators suggest a multi-week decline is definitely on the way. Whether this is THE top for months, years or even another lost decade remains to be seen
REMAIN VIGILANT!
The top has arrived. 1281 is now a key technical level. Trend indicators heading into next week point down.
This "Black Swan" in Egypt is simply an event that helps people point to a top. THe market was set up for it for weeks
GDP on government spending, QE ad nauseum, the debt crisis, and the looming need for austerity have all been building for a long while. The debt crisis never went away. But the FED did help the banks to weather it
Nothing would help improve financial standing at the big Wall Street banks more than some deflation at this point
Trading Alert
Over two weeks ago, we wrote that a break above 1291-1296 on the S&P would imply eventual price targets were at least 2.5% higher. The projected range based on the break out was 1323 – 1328.
The S&P traded up to that range yesterday, satisfying all Elliot Wave relationships. Both the DOWN and the S&P traded to the top of a multi-month trend channel before reversing intraday.
A break back below 1310 on the S&P solidifies the bearish case. Also, a minor head and shoulders pattern has also formed on the S&P. This has a preliminary downside target of 1305, which also roughly coincides with cited support level.
Although the early warnings in January seem premature in retrospect, the secondary price targets have been met. This increases the likelihood of a multi-week decline, perhaps the onset of the bear-market rally top
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