S&P: A Parabolic Rise or Catastrophic Dive?

Is the S&P going to tank? Are we going to see  2018 as the year when…..

It almost has to be the year that this over-extended, over-stimulated bubble finally bursts – and when it does it’ll shed 40% to 50% in the first three months of the crash“. (Harry Dent)

Or are we going to see the parabolic rise predicted by some, Phil Anderson, who sees the bull not ending until 2025 – 2026.

As a trader, I find the long-term forecasts interesting and important as a context. But, I prefer to reply on Wyckoff and Steidlmayer to give me a clue on how to trade.

Right now, the longer-term indicators I rely on are not showing weakness.

Figure 1 shows the St. Louis Adjusted Monetary Base. A downturn in this chart will give us about a 6-month’s heads-up that money will flood Main Street. As a result, we’ll see an upsurge in inflation. The question is whether the FED will raise rates sufficiently quickly to stop hyperinflation. But, if it does that, we’ll see rates rise dramatically enough to cause a stock market bear to raise its head.

The second chart, Figure 2, is the Advance-Decline line. I’m looking for divergence before I’d be comfortable thinking a top may be in. No sign of one so far.

In the meantime, I’ll look to my charts to get me long.

Dec 29 had important price action clues for me. Instead of producing the reliable Xmas rally, we had a strong down day. I decided that the 29th would raise amber flags (i.e. a warning of weakness) unless we see a strong up day today. One sign of that would be a gap open that remains open by day’s end.

With that idea in mind, my strategy for today was a simple one:

  1. If there was a gap open in Globex, I’d buy the open.
  2. Stops below Friday’s low.
  3. I’d exit the position on a 15-min close below 45% of the open-gap.
  4. I’d re-assess at 9:30 EST. The open-gap is a more reliable pattern based on day session parameters.

An aside: Thanks to all who dropped me a line. I appreciate the comments.

FIGURE 1 St. Louis Adjusted Monetary Base

 

FIGURE 2 Advance-Decline Line

 

FIGURE 3 15-min S&P CFD

 

S&P Buy Triggered

BarroMetrics Views: S&P Buy Triggered?

Figure 1 shows the current position. On Monday, we saw a failed downside breakout. Today we saw an attempted upside breakout that did not quite measure up to my buy signal for three reasons:

  1. The close was too close to the middle of the range – I’d have liked a close at 2355 or higher (basis nearest futures month) – that would have provided a bullish acceptance bar.
  2. I wanted to see an acceptance bar above ‘A’ in Figure 1 (around 2356)
  3. On the 60-min chart: I don’t have a confirmed change in trend signal.  For me to say that the current downtrend in the 5-day swing has ended, I want to see confirmation of a change in trend in the 60-min, 5-period swing.
For all these reasons, I am still on the sidelines.

Let’s see what tomorrow brings.

FIGURE 1 ES Daily

Are You Ready for 2017’s Tsunami? V

BarroMetrics Views: Are You Ready for 2017’s Tsunami? V

My apologies for the break. I went to Singapore and struck probs with my notebook. Anyway, now back in HK till early July.

When we left this series, I said that I’d look at the technical picture. Fundamentally I have taken the view that we’ll see a bear begin in stocks towards end 2016, early 2017.

Figure 1 shows the 13-week Ray Wave count. It raises the possibility that we may see an earlier move down. If that is going to occur, we need to see the down move start now. It took 10 bars to form Wave V. If a top is to form now, we need to see the II-IV trendline breached in the next 6 weeks.

The alternatives are:

  1. More sideways price action, followed by a new high that holds below 2242. The likely max target is 2724 and the min is 2175. The new high is followed by acceptance below 2104,
  2. The new high accepts above 2242 and continues with another bull leg up.

Of the two, I rate scenario (1) as the greater probability.

If the bear is to start early, we’ll have a clear signal tonight if we see another strong day down.

Figure 2 show the day session of the E-mini. On Friday, it formed a traditional double distribution trend days. Pete used to say, ‘trend days are not good continuation days UNLESS it’s the start of a move’.

Let’s see what tomorrow brings.

2016-05-16_18-37-16 13w RWCount

FIGURE 1 13-w Ray Count Cash S&P

2016-05-16_18-38-22. ES Pitt DD Trend Day

FIGURE 2 ES Day Session Market Profile.

Are You Ready for 2017’s Tsunami?

BarroMetrics Views: Are You Ready for 2017’s Tsunami?

I can feel it in the air; all the elements are coming together. I used to say: “It’s not a question of ‘if’, it’s a question of ‘when'”. Now I am saying: ” It’s not a question of ‘when’ but a question of ‘what’. What form will 2017 Bear Market take?

Will it be a grinding, small-moving affair? Or will see 1987 type flash crashes?

1987 is forever etched in my mind. Not because it marked the beginning of my journey as a successful trader, but because of memory of walking into the brokers office that night and asking, as I usually did,

“What’s the S&P doing tonight?”

The reply from an ashen-faced order filler was: “It’s down 20 points!”

I retorted: “You mean the Dow is down 20 points, don’t you?”

No, he said: “The S&P is down 20 points!!”

You have to remember, that the average range for the S&P for the prior 12 months was around 4 to 4.5 points. So the gap down that night represented a 500% increase in volatility! That’s not a night I’m ever going to forget.

Will the 2017 crash mirror 1987? I lean towards a ‘yes’ answer. I’ll consider my reasons in the blogs to follow.