Last week I shared some commentary, along with some charts, on what had caught my eye and why. It seemed as if I had Nostradamus inspired insight, for the “markets” moved precisely in the manner I described may result. Then, in what seemed like a “middle-finger” to anyone daring to instill any form of insight, reversed, and moved twice as fast, and twice as much in the complete opposite direction. It seemed to prove that the BTFD (buy the f’n dip) mantra was to remain alive, well compensated.
As usual I was inundated with questions via friends, colleagues and more on what I thought about these happenings. Some were truly interested, others were more of a back-handed snickering opportunity, which is to be expected.
So with the above for context I want to further elaborate on what I’m still looking at and why, for I believe it to be that important.
Whether anything comes of it is not the point. What is the point – is this: Being in business, any business, and not paying attention to market behavior because one may not be “invested” or “doesn’t own stocks” or anything of the such is folly at best – irresponsible at worst.
Regardless of how captured, adulterated or more these “markets” may be. All businesses are connected in one way or another to it.
Hint: Remember how suddenly there were near 100 container ships with 10’s of thousands of containers filled with needed inventory and supplies which overnight were stuck at sea, with no immediate recourse? If you were one of those needing that inventory? Keeping an eye on the shipping markets, bulk rates and others would have helped you stay abreast and maybe inspired one to keep more inventory on hand so you had the product to sell when your competition may have had none. That’s why you need to understand stocks. It’s not about someone’s 401K balance – It’s about your business. Remember that.
So with that said here’s what I’m still looking at with a concerning eye. To wit:
The above is the S&P 500™ via a daily chart. e.g., Each bar/candle represents one day.
As you can see (click on the image to enlarge) the pattern I first pointed out on my previous observations is here as well. The “confirming” movement I point to with an arrow and text as “False…” As you can see the movement then reversed and closed up, over and above, seemingly voiding my first interpretations.
As I implied then, “It was the first sign to watch for, then others should follow if it were signaling correctly.” Some immediate voided the entire exercise when the “markets” immediately reversed sending the BTFD crowd to an early cocktail hour Friday. However, I would still caution against popping the corks on any remaining bottles, at least before the hangover clears entirely, because there just might be a more “bite” for the remaining hair-of-the-dog.
What transpired yesterday is what has caught my eye and attention once more. I noted it on the above chart with both an arrow and text beginning with “This may…”
That arrow points to what is known in technical terms as a “Bearish engulfing pattern.” An ominous signaling pattern in charting terms. Whether or not this pattern plays out to its signaling tradition is, as always, a pure statistical interpretation.
Yet, with that said, buttressed with the prior signal, along with Friday being an options expiry date (aka OPEX) the movement or “market” behavior Monday seems to be signaling that last weeks prior signaling may have been the correct interpretation. And, that Friday’s action should be relegated to the “market noise” category.
So it’s with the above that I used and moved the “signal confirmation box” onto a daily chart, pointing an arrow with the text “Original call…”
Again, if the broader “markets” (aka Indexes) should move and close within the above highlight over the next few days, I believe my original call for “Caution should be paramount” still stands, with far more onerous possibilities to follow.
Will it? Again – who knows. But that doesn’t mean one should take their eye off of what may be signaling far more than just a rain shower over the horizon. i.e., It could be a something that’ll require a surname like Hurricane ________?
I’ll end here with another chart, because I feel it’s also relevant.
As I stated in my first observations, the pattern I was seeing, and what brought this all to my fore-mind, was that I was seeing the same across all the broad indexes, along with its timing. e.g., In the middle of earnings season. Again, to wit:
Above is a daily chart of the NASDAQ 100™. It also sports the same pattern I alluded to prior – with this one distinction, which I believe to be noteworthy: This index doesn’t show the same exuberance of that “throw-over” I noted in my prior takes. As a matter of fact, one could infer that it looks relatively weaker in its pattern than the S&P. What it means is purely in “the eye of the beholder.” Yet, it’s worth mentioning to the point that I also put the same highlighted “box.” A daily close within it over the next few days I imply speaks volumes of cautionary tales for anyone willing to “read between the lines.”
Then again, with that said?
Dow 100K here we come, right?
© 2017 Mark St.Cyr