This post by Unersaettlich has been promoted from StockTock Social.
Ruben’s statement in a comment:
” . . . it’s not a pennant anymore.. That ship has sailed…The only possible reliable pattern to keep in mind is the Expanding Triangle. ” seems to go a bit far. The chart below shows quite a few possibilities involving pennants (all now broken downside by today’s action) as well as the triangle (Tony C and I had a nice email exchange and agree that we are still peacefully coexisting even if we do have minor differences). I was happy to see that Dan and Ruben and I (and several others, including Schweizer’s video “Rally? – not so fast.”) all found ways to bounce around in similar waves (even if numbered differently) and wind up heading the same direction (at least in Ruben’s Count 2). The 770ish 2002 low is the least of our worries, and 700 or worse would follow in short order if 770 breaks.
If the truth indeed comes wrapped in a pennant, the 840ish lower boundary should now resist instead of supporting. The pennant’s top line will probably resist, even after it crosses below 840, as is about to happen with one of the possible pennants (pink in the chart). I also colored the 5dMA pink because it has so closely tracked this pennant’s top line lately.
Tony C’s Expanding Triangle does need less evidence now, though. Any significant excursion above 840 would pretty much dispose of the pennant concept (but the top downtrend or channel boundary formerly thought to define a pennant would still resist). However, rallying the full height of Tony’s Triangle would be unlikely because of much resistance from MAs, Fibs, and the downtrends already mentioned. This, coupled with continued selling by hedgies to meet redemptions, and lack of enthusiasm everywhere with selling into anything remotely resembling a rally, keeps the 5dMA looking very sad indeed. Even the big pop the other day just put a minor squiggle in it. With the 5-, 20-, and 30-dMA’s all actively resisting, along with the top downtrends of former pennants, any rise above about 900 would surprise me. I would be even more surprised if it lasted longer than a few hours. Sellers would pounce on rises intraday, leaving only an ugly bearish long spike of a shadow on the day’s candle as they stripped the flesh.
Of course, our friends of the PPT, and other exogenous factors may indeed surprise us at any point, and judging from the action in foreign markets, maybe US stocks may look more palatable to foreigners than to us, especially as long as the Dollar keeps rising, which will be exactly until China or whoever else has gazillions of greenbacks starts moving into gold on volume in anticipation of better days for metal. Commodity stocks, natgas and maybe oil, might turn around a bit if the winter gets colder, but I was playing in the leaves outside today at a time when we used to have a foot of snow that often had been here since it fell on the poor little trick-or-treaters weeks earlier, and would still be under all the other white S#@& (as it is affectionately known y those who shovel) that fell until nearly April.
clearly and sadly we are heading into a global depression. every company will be vunerable to bankruptcy as this plays out to 2010. god help us all. if only i bet my house on the downside instead of fearing this crazy idea of a rally. today i covered my short at 839 only to have to get back in at 824… and a light position at that. this is the scariest time and most anxious time of my life. wish that better days were ahead for us but the writing is on the wall and with this … all stocks will fall.
Bear markets have sudden and violent swings…
900 right now is an 11% upside from the close. 770 is 3.7% from the close. You can figure out the percentages. There is more risk here being short and playing for those last few percentage points, in my mind, than being long.
While you may be right that there is more near-term downside, do you think we are going to put in THE bottom this year? I don’t.
The pink and white downtrends now looks like the operative pennant definitions, only they are becoming more like channels, with the Expanding Triangle broken downside along with the support for all pennants. I updated the $SPX chart accordingly, and will post it, along with a long-term weekly chart.
I did indeed sell all bear ETFs into today’s topping action, not only because of the risk of playing chicken with the ETF tops, but also because this is happening in a cash IRA account with a three-day settlement period, so I want some cash ready when buying opportunities develop, and any bear market rally that develops is likely to be short. One might think that $SPX has too much resistance to rally thru the 5- & 20dMAs and the pink downtrend from 745ish back to 900ish, but a month ago saw a similar move from 845ish to 1007. This will be easier to see on the charts when I get them on the blog.
I absolutely agree with you that the bottom won’t be in this year. We have very pleasant company in this opinion in the person of Meredith Whitney.
Another SPX view:
http://social.stocktock.com/profiles/blogs/ta-signs-on-the-spx
Oscar thinks 723 is the magic number:
http://social.stocktock.com/video/video/show?id=2348194%3AVideo%3A6095
He also looks for a bear-market $SPX rally back to the low 900′s, an excellent opportunity to reload my levered bear ETF’s after Thanksgiving or thereabouts. His advice not to trade during the holiday week makes sense.