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Where the Markets Are Headed
Latest Activity: Oct 10
Fibonnaci in Nature
Started by Terry H. Last reply by Terry H Sep 25.
Started by Terry H. Last reply by Terry H Sep 23.
Started by Terry H. Last reply by Terry H Nov 5, 2013.
Started by Terry H. Last reply by Terry H May 7, 2013.
Started by Terry H. Last reply by Terry H Apr 18, 2013.
The stock market has become extremely volatile, trading up and down hundreds of Dow Jones points in a day. But our indicators have remained steadfastly bearish throughout the last few weeks. For example, despite several big rally days, $SPX never broke the downtrend line that connects its series of lower highs. Until that downtrend is broken, the $SPX chart will be bearish.
Equity-only put-call ratios remain on sell signals. The charts in Figures 2 and 3 show that the ratios are racing higher now. As long as they are trending higher, they are on sell signals.
Market breadth has been swinging wildly back and forth. Six of the last ten days have seen +/-2000 breadth. That is quite unusual. Both breadth indicators are on sell signals, and both are in oversold territory. However, the market can continue to decline sharply even while oversold.
Volatility indices continue to rise, even though they have had some wide swings, just as the stock market has. But the trend of volatility is higher, and that is bearish.
In summary, the intermediate-term indicators are all bearish, so even though oversold conditions are setting up potentially strong buy signals, do not act on these buy signals until they are actually confirmed.
Posted in on August 4, 2014 - 11:31am
I want to spend just a moment pointing out how these market tops can unfold. One good example was in 2007. The market had just made new all-time highs in July and everything seemed wonderful. Volatility had been low (except for one hiccup back in February, 2007), but no one seemed worried. Then, $SPX broke down sharply with a 30-point down day (yesterday was a 40-point down day for $SPX), and that unleashed the bears. The accompanying chart (Figure 5) shows the severity of the decline. Figure 6 shows how volatility ($VIX) behaved, and shows the power of volatility protection, for when the market declines that quickly, the volatility of volatility increases dramatically. Also, note that no two markets ever are exactly the same, but this type of scenario could be unfolding now, since it has happened before.
Figure 1 shows the devastation that took place between July 24th and August 16th, 2007. $SPX dropped from 1541 to 1370 at its capitulation low. There were eight severe down days for $SPX in that stretch. Figure 2 shows how $VIX did over the same period. It rose from 16 to 37 (during the capitulation day).
Read more: http://www.optionstrategist.com/blog/2014/08/stock-market-tops-hist...
Here's a log chart of the DJIA from 1918 to 1932.
If you want to understand why the Fed's monetary policy has not been working, read this paper read last year at the San Francisco Fed:
DJIA Inflation Adjusted Chart since 1982 to Oct 23, 2013.
I'm bullish on the market into year end - Gold is looking strong again as well!
A thorough talk on EWI's interpretation of where we are in all markets and the economy and why from a historical perspective with charts, and an explanation of why they didn't think the US stock market would go this high.http://www.elliottwave.com/club/analyst-videos/ewi/steve-hochberg-1...
Rhee, for a noobie like me, I was wondering if you could possibly post a current stock chart that shows the sweet spot you are talking about. I feel like I have a good number of tools at my disposal to make an informed decision but I'm not quite there in terms of using them correctly. I understand that "the trend is your friend" and not to "catch a falling knife" but I'm still having some trouble making wise decisions. Any insight would be appreciated. Thank you!
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