(For What It’s Worth)
This afternoon (being Tuesday) I was looking at the markets as I usually do scanning various indexes, currencies, and individual names as to gauge what’s going on within them for my own references. I’m very adept at charting, technical analysis, as well as probabilities, and an understanding of Greeks (the technical term not the nation) and such. I’ve read all the books, taken many courses, and can hold my weight with any professional trader – and have, in both the futures market, as well as options, and straight up stocks. So when I’m looking at the markets I have a good idea of what I’m looking at as opposed to many that are just repeating what they heard on some financial show. I believe this uniquely separates me from most other business, or motivational speakers today. I say this only for those who know me only as a business speaker or writer, and are only now reading my writings on global markets and may wonder. “Who is this guy to make such observations?” So with that all said here’s what I noticed…
During the early morning I was looking at the ETF known as the SPY™. For those not well versed it’s nothing more than the ETF that mirrors the S&P 500™. Yet today it serves another purpose. It’s the index for all intents and purposes everyone from the institutional/pension fund, hedge funds, you name it right down to the Mom and Pop 401K holder. Basically if you’re in the market, chances are you have money attached or within it. So its representative value as to gauge, or get an overall feel today is immense.
So as I was glancing I noticed something that caught my eye. (e.g., the moving averages.) And not just one or two. (e.g., the 50day or 200day) but rather – ALL of the majors, All converging at the same point. For the 20, 50, 100, as well as 200Day is itself rare. But as they say on late-night TV “But wait! There’s more!!” For there truly was more: They’re all about to converge and break a very significant trend line. Again – All at the same time. This is just as rare, and the implications are extraordinarily serious.
As I said, at first I was just glancing, and when it first caught my eye it was a “Huh, that’s interesting” moment, and I went onto other things. Then a little later on during the day I read over at Zero Hedge™ the following headline: “Calm Before The Storm” Dow’s Range Crashes To Lowest Ever. Reading this article made me look deeper into what I saw earlier and drove me to articulate my findings here, for what it may portend is meaningful in my opinion as I’ll try to articulate it further with some charts and notes I made this evening.
So let’s start with chart 1 which represents where the first time of late this happened:
Above is the market as represented on a daily basis via the SPY ETF. Notice the similarity of range-bound as we are today. The amount of time for this is also quite similar as we are today. (You can click on images for larger viewing)
What followed this confluence? As they say in a courtroom: Next slide please…
That’s correct. What you’re looking at is what we now refer to as “The great financial crash of 2008” As I said earlier, “This confluence of moving averages is rare” but not so rare that I can’t show it again, it’s the where that leaves one thinking “holy s##t!”
Again we move to – next slide…
You’ll notice in the above chart I’ve added a GOLD trend-line that is anchored on the left to what is now referred to as the “Generational Bottom” where the crisis supposedly was over. What you’ll also notice are the 2 Ovals which as previous – mark where all the moving averages combine and cross. Notice also they touch that trend-line. What’s the significance you might ask other than a basic trend-line touch?
Both required Fed. intervention with either a QE notice, Operation Twist, ZIRP, QE 4Eva Jackson Hole speech etc. to stop the rout and send the markets soaring on the promise of “free money.” But don’t forget – If you stay and look at another chart, just like TV, “I’ll double your order!” for concern.
The above chart is the continuation of the previous showing the rise to where we are today. Notice both the averages nor does the market approach that trend-line except for a few key points. And those points are key and here’s why: The anchor is what is now referred to as Ben Bernanke’s famous/infamous Jackson Hole speech where he was interpreted to imply QE 4EVA, where the markets never looked back until: Next slide please…
As you look at this chart which is nothing more than a close up of the previous to where we are now. You should take careful notice that the low point on the lower left is the same low point on the previous chart toward the upper right. It’s important because that point is the upper extreme anchor point of Mr. Bernanke’s “we’re gonna do QE and more” with St.Louis Fed. President James Bullard’s verbal stick-save to the markets when QE was supposed to end and the markets “tantrum-ed” only to be saved by Mr. Bullard’s implied assurance that “maybe more QE was still a possibility.” And look at where we are now ever since. All the moving averages crossing once again – while precariously within spitting distance of also breaking that all important trend-line. And finally…
Here it is again only in a little longer shot once again for a more visual representation. I’ve highlighted that anchor point as to show what and where we are currently with no QE. i.e., Rolling over and about to break not one, not two, but all the major moving averages crossing in what is known as a “multiple death cross” while also simultaneously about to cross a major trend-line of previous support anchored to not just any anchor point, rather: they’re anchored to direct Fed. intervention points. Intervention that was viewed as if not taken the markets may roll over – and off the charts.
What happens next is anyone’s guess. And I’m not an adviser or suggesting what one should do with the above. It’s just an observation I couldn’t help myself with looking into further when I saw that the Dow had hit a record – of nothing. It set off too many alarm bells for me to not look deeper for myself, and the above is what I see. What you see and do with it is entirely up too you. I would advise you, like myself, don’t take anyone’s word for what’s going on, do your own research and make your own conclusions.
However, if there was one last thing that ran another chill down my spine it was this. For those that don’t remember. The indication that real trouble was brewing that might not be contained didn’t start here. It was in the Shanghai index. And what happened yesterday?
It once again looked like it was fine – then plummeted over 6% out of nowhere catching everyone who though the rout was over, once again, wrong – and flat-footed.
All this and the market has nothing but “calm waters and smooth sailing” priced into it as interpreted by all the sentiment indicators. As well as the confidence of “The Fed’s in control, and has their back, because this time it’s different, so higher highs – here we come!
It’s far overused, but it’s because it rings so true: History doesn’t repeat, But it sure can rhyme just as well as any rapper of today.
© 2015 Mark St.Cyr