A FWIW Charted Update

(For new readers, here’s a brief description for the following. For those who’ve been following for a while – you can just skip directly to the chart and following commentary.)

Over the last year or so when the markets are at extremes, or what many deem “moments of indecision” I get asked by readers and more, “What do you think of the current “market?”

As older readers have come to know I’ve been posting and annotating the following chart with my thoughts and/or observations. As always: before hand, and before any subsequent moves that may or, may not occur. Then letting the chips fall where they may. The results of those subsequent calls speak for themselves.

However, I feel the market is on far more tremulous ground today than previous posts. For as I implied in earlier notes – “This last move back to the highs was based more on Wall Street shenanigans dealing with Qtr. ending and more, than anything which resembles a healthy economy.” Below is my latest take. To wit:

2016-05-04-TOS_CHARTS

S&P 500™ (SPX) as of 5/3/16 close

It would seem: the more things change – the more they stay the same.

This morning as I was having coffee I turned on my television to see that the U.S. markets had sold off in nearly a straight line downward in what many of the business news channels are calling an “out of the blue” move. The E-mini S&P futures for an example sunk near 20 points in a matter of just 2 hours. Is this an uncommon move? Well, yes and no. It really depends on context. That said, I am of the opinion there is some “context” here that should be paid attention to.

Before the U.S. “markets” open this morning in the above chart I’ve added my latest annotation as #11. It’s pretty straight forward. It’s all about that gap space directly under those three red arrows. Just as I stated back with “#10 …Lose this area with conviction and a return to the Bullard Bottom quickly is well on the table.” That argument not only still stands today, but I believe is even more relevant, as well as, possible since we are once again threatening it so soon after pushing through and turning it into what technicians call “support.”

“But why is this more concerning today than just a few weeks ago when we pushed through up and over?” some may ask. Fair question. Here’s my reasoning…

If you look at the above chart closely you’ll see that this area represents a previous price gap. This gap I believed more important than some others, and with that, I marked and annotated. The resulting price action speaks for itself. For as you notice when we (the “markets”) screamed back from those February near death encounters with the “Bullard Bottom” the cluster of resulting price action to nowhere over the following week or so is marked at “#10.”

Remember, these lines (like most of the lines on this chart) have been drawn weeks, sometimes months prior. The resulting price action at these levels give confirmation for their importance from a technical stance. (And yes, although I am just a “business person.” Unlike most, I do have the learned analysis chops to read and decipher a technical chart better than most of the so-called “smart crowd.”)

Let’s not forget the reasons “why” we bounced to begin with. Was it great earnings? Great GDP? Great _________(fill in the blank?)

No, it was great jawboning by one central banker after another promising (forget Draghi, does Economic Club of New York™ bring back any memories?) to have “the courage to print.” However, as I’ve iterated many times previous – it’s not having the lasting effects that it once did.( Here’s a recent article for those who may have missed or are new readers.)

In Japan, it’s safe to say, the ¥en is rather confused on exactly what it’s worth as compared to what Mr. Kuroda thinks or says. The problem with this? Hint: Does “carry trade” currency of choice mean anything?

In Europe? There’s now a brewing outright revolt building against current ECB dictates from the periphery. So much so Mr. Draghi has been, shall we say, annoyed? His public comments in rebuttals have been nothing less than loathing for his detractors. Not exactly the way one would think a central banker should go about “winning friends and influencing people.”

And once again we are hearing from Fed. speakers hawkish rumblings inferring “June is a live meeting” or “It’s time to raise” and more. Sure it is. Only one problem, a problem that once again shows itself every time: China.

Why you ask? You thought their recent (which lasted for about a week) “fixing” was to the high side disproving any inclination to devalue to contain capital outflows? Forgetaboutit!

What did China do last night that seems shall we say tit-for-tat with a sudden “out-of-the-blue” ¥en “manipulation” as to help curb its sudden rise? Hint: China devalued its Yuan the most since the August (remember that month?) collapse.

It’s anyone’s guess what happens from here. And as I always say “If someone tells you the do – don’t walk – run!”

However, with that said, being prepared for any outcome is a prerequisite for anyone who’s serious about being: in business. And the commitment to stay that way.

© 2016 Mark St.Cyr