Several websites I read yesterday referred to stocks’ last minute decline as a “flash crash.” Nothing could be further from the truth.
First, a flash crash shouldn’t apply to a decline that went exactly where it should have and, in fact, was predicted in advance. From yesterday’s post Still Waiting:
I believe the SMA50 at 2064.65 is the primary target, probably when the 5-min SMA200 crosses it sometime later this morning.
Second, a decline shouldn’t be referred to as a flash crash if it was planned and carefully executed by mechanisms we’ve been watching play out on a regular basis all year long.
USDJPY — which was ramped higher all day long in order to prop up stocks, dropped through support in the final hour. They could easily have waited until after the close to let it settle lower. For whatever reason, they didn’t. So, the decline happened in the closing minutes. Bottom line, while SPX has failed on several occasions to take advantage of opportunities to break out, it isn’t because it can’t. CL, USDJPY, TNX and EURUSD are still fully capable of forcing stocks higher.
It’s because TPTB have made certain choices that delayed a breakout. The grand plan will be made clear to us muppets when they’re good and ready.
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And, for anyone who contributes $500 or more or who refers a new annual member, I’ll throw in a free hour of one-on-one coaching on technical analysis/charting.
We’re still waiting on CL to break out – or not – of the falling channel it’s been in since early October. As we noted yesterday [see: Drumroll Please]:
Now, for the 4th time in almost 3 months, it is again threatening to break out of the well-formed channel it’s been in ever since. Whether or not it breaks out will tell us a lot about what to expect from the overall markets.
It almost did yesterday. CL popped up above the channel top an hour into the session, then spent most of the afternoon above it before dropping back through right after the cash session closed.
Classic head fake in a broken and heavily manipulated market. What else is new? continued for members… (more…)
NYA’s chart looks perfectly normal and perfectly bullish — as long as you don’t look too closely. If you do, you’ll see that the rising red wedge delivered higher, not lower, prices. (It was a good thing, though, as it prevented formation of a very bearish H&S Pattern.)
The rise into May 2015 completed an obvious Inverted Head & Shoulders Pattern that promised much higher prices — but, never played out. Instead, a 15.5% plunge almost killed off the rally from 2009.Likewise, the breakout we correctly forecast back in October [see: Oct 25 Update on NYSE] failed to hold. What is it with NYSE and bullish patterns, and will the latest breakout last?
continued for members…
The tops between June and August were nicely aligned (the white TL below.) So, when NYA busted through them in late October, it seemed like the purple channel top would be the next stop. Instead, we got a series of lower highs that forced a redraw of the TL (in red.) It’s not the end of the world, but it does make one question what would otherwise appear to be obvious paths forward. I’ve inserted a falling red channel that fits sorta well. If it’s drawn correctly, then NYA should face resistance at about 10,410 — top of the red channel.
After that, resistance appears to be centered around the red .618 at 10588 and .786. at 10881. At that point, NYA would have an opportunity to really break out.
If, on the other hand, it can’t break out of the red channel, then the bottom of the rising white channel could be called upon to support it a third time in only 4 months (about 9940) with the neckline of a huge H&S Pattern (in yellow) waiting below at about 9640.
The H&S targets 7800, but the more likely target is the combination of the purple .886, white .786 and white 1.272 at 9040. It would allow NYA to put in a higher low that’s in line with the falling red channel bottom.The H&S came within a few points of completing on Sep 29. The rise since then was clearly designed to avoid it playing out.
XLF followed up a bizarre August with a rather tame September – December. That is to say, prices have moved pretty much as expected. Unfortunately, the chart isn’t very clear about the next steps.
In our October 6 update on oil [see: Update on CL] I expressed skepticism regarding oil’s ability to continue rallying. It had just popped 30% off the Aug 24 lows, and had broken out of a triangle formed while digesting those gains. Still, I saw it declining rather than making new highs.
…lower prices make sense. And, they’re necessary — particularly in light of the critical yen carry trade. Japan can’t very well devalue the yen against the dollar unless oil — which is denominated in USD — declines to offset the currency effect.
Yes, it means that marginal players — like the entire shale industry — will be decimated. But, that’s a sacrifice that central banks are willing to make. The health of the oil industry versus the wealth effect of trillions in rising equities? No contest.
I was wrong about CL declining right away. It didn’t start until October 9. continued for members…
RUT has been under pressure ever since June, shedding 16.8% to tag our downside target of 1078 on Sep 29. While SPX’s Sep 29 lows were higher than its Aug 24 lows, RUT made new lows. It was a more complete looking correction. But, the subsequent bounce has been less than impressive.
When it broke out of its falling channel to complete an Inverted Head & Shoulders Pattern in late November, it had a chance to redeem itself. It was the perfect opportunity: a low volume weekend with USDJPY on the rise. Instead, it gave up 8% over the next two weeks. What happened? More importantly, can it recover?
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A while back, I put together a short film for a friend of mine who ministers to homeless individuals in our community. My whole family chipped in, and it turned out to be a life-changing experience for all of us. It challenged our beliefs about who the homeless are and how they came to be without something that most of us take for granted: a safe, warm place to sleep at night.
Who Are They Homeless?
Many regard their problems as self-inflicted; but, homeless individuals often suffer from chronic physical and mental health issues. Others are victims of crime or domestic violence. Still others have simply not been able to find steady work in this selective economic recovery.
And, a growing number are homeless through absolutely no fault of their own. The National Center on Family Homelessness reports that 1 in 30 children has been homeless in the past year — a significant increase since the 1:50 rate during the depths of the financial crisis.
We live in a pretty affluent area, so we didn’t think it happened around here. But, when kids in my daughters’ schools were asked to raise their hand if they’d ever been homeless, about 1 in 10 responded.
Everybody raised their hand when asked if they knew a classmate who had ever been homeless.
Local government has utterly failed to address the issue. State and federal efforts haven’t been much better. Increasingly, it seems the only solution is caring, concerned folks like you and me.
What Works
Organizations like my friend’s, Pass the Word Ministry, are doing an amazing job with very limited resources. Every weekend, they distribute a hot breakfast and a lunch to go, free clothes, tents, sleeping bags, bikes and bike repair, haircuts and personal hygiene products.
They would do even more if they had more money. Their ultimate goal is to establish not just transitional, but permanent housing for those in need. Many dedicated folks are working to make that happen. But, those is need…need help now.
My family has been blessed this past year. So, I’m personally contributing 25% of December’s profits to Pass the Word. And, I’d like to encourage all of you to contribute to either Pass the Word, or to whichever organization focuses on alleviating homelessness in your town.
Do Well by Doing Good
To reward you for sharing your good fortune, I’m offering an immediate, tangible bonus.
Purchase an annual membership at the regular price and then forward me confirmation of your charitable contribution [pebblescribe at gmail dot com.] In return, I’ll rebate you 5 X your contribution, up to $1,250. That’s a $5 rebate for every $1 you contribute, i.e. a $1,750 membership for as little as $500.
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Sometimes the moving pieces work in your favor. Sometimes they don’t. With Iran’s announcement that they’ll be back to 500,000 barrels per day within a week after sanctions are lifted, CL wasn’t about to break out of the falling channel it’s been in since October 7.So, the bump that began with the Dec 14 lows has officially fizzled — stalling that particular algo mechanism. Fortunately for TPTB, there are others.
Yesterday’s forecast remains in place. SPX tagged our initial upside target — the SMA200 — and barely fell back before tagging our second — the top of the megaphone pattern.
This was impressive, given that USDJPY clearly broke trend.But, as regular readers know, there is very strong support just below at not only the white .618 at 120.23, but the critical yellow .618 at 120.11. I don’t know anyone who doesn’t expect the pair to be supported there.Besides, CL — the new star on the algo scene — more than made up for USDJPY’s slump with an impressive ramp that saw it break through August 24’s lows.continued for members… (more…)
When USDJPY can’t lever stocks any higher, we can always count on CL. My own, personal, favorite tin-foil-hat theory is that spanking CL prices higher is the Fed/ECB’s way of coercing encouraging the Band of Japan to facilitate the yen carry trade by slamming the yen lower. Wouldn’t you love to be a fly on the wall for that chat?
Well…as luck would have it, a friend of mine was giving Chair Yellen her weekly foot massage this morning, and eavesdropped during a phone call she placed to BoJ Governor Haruhiko Kuroda. She was kind enought to send me this transcript.
Hello, Haruhiko? Janet here. So… the dollar-yen broke trend again, today, and it’s wreaking havoc on the yen carry trade. We can’t have that, Haru. The holidays are here, and this may our last chance to push SPX up over 2138… I know, I know. A cheaper yen makes all your imports more expensive.
But, look, we crashed oil for you. Remember last year, when it was over $100 a barrel? At 30-something, you’re saving an awful lot. What’s that? It’s up 10% in the last month? So, here’s the thing Haru. I’m trying to help you out. But, I can’t very well help you unless you help me, now can I?
I talked to Mario, and with winter coming on, he would also like cheaper oil. And, I would love to make that happen. But, you’re going to have to help me out with the dollar-yen. I’d say anything over 124 ought to do the trick. And — this is important, Haru — it needs to get there in the next week.
You sound hesitant, Haru. Haru– So, look, this is not a suggestion, right? Ever hear the expression “don’t fight the fed!?” Of course, talk to Shinzo. Talk to whomever you like. But, this is the way it is. If the dollar-yen doesn’t start bouncing in the next day or two, get ready for $50 oil again.
Sure, you can go over my head. But, Jamie and Lloyd are arguing for $80! Got it!? That’s great, Haru. My best to your lovely wife Kumiko.
Second, a decline shouldn’t be referred to as a flash crash if it was planned and carefully executed by mechanisms we’ve been watching play out on a regular basis all year long.
Bottom line, while SPX has failed on several occasions to take advantage of opportunities to break out, it isn’t because it can’t. CL, USDJPY, TNX and EURUSD are still fully capable of forcing stocks higher.
