Not To Scare The Children, But…

It’s an eerily quiet morning as I’m looking at the “markets” as to see what has transpired overnight. As of this writing the level that I said to “watch” has done precisely what I proposed. Again, as of this writing, there is no real follow through either way, which turns my apprehensive radar to 11.

As I outlined last evening the possibility of the scenario that I argued playing out gains odds the longer we both stay, and fall away from that level I highlighted. So the big question on everyone’s mind, I’m sure (for it’s also on mine) is this: “Then what?” Fair question, so here’s my hypothesis. To wit:

(Source)

The above is the S&P 500™ Futures represented via daily bar/candles. If, and I must implore, if the scenario plays out in a similar fashion to what I argued the other day, what you see above represents where I believe this market has the potential to realize in short order.

I used the futures for two reasons, the first:

The futures contracts are where “Pros” or “Big Money” as they say, reside. This is where the hedges and others will be made and the swings to where there may, or may not be a floor or ceiling gets represented here best. And if you look at the levels I marked with a 1 or 2, they line up far too squarely with other technical levels that both humans, as well as machines might follow. So this is where I would be focusing for any and most clues, especially when volatility has once again reared its head.

The reasoning is simple: The futures trade overnight, hence, if a level of support or resistance plays out in the overnight, it may in effect precede any, and all exuberance, or fear, in the normal hour markets. This is how you could wake up to “Black Monday” type scenarios, or panic selling into the close may be reversed in the overnight hours leading to what may seem as a euphoric buying frenzy at the open.

It’s been many years since any of these scenarios have even been postulated, never mind, even considered possible, But with the Fed. now in the “pulling money out” mode as compared to “putting money in.” One has to once again be ready for anything.

Will it play out this way? Hint: No one knows. However, with that said here’s the underlying premise coupled with a probable conclusion.

As you look at the above chart remember this…

Everyone, especially the so-called smartest of the smart paraded on media argued the above “cliff dive” was all but assured to not be in the cards. And there it is, and now sits in the #1 position of history as the most points lost – ever – in a single day, coupled with, these same people said that based on what they perceived as “all baked in” any and all QT (quantitative tightening) worries, i.e., “The market knows, it’s prepared, the economy is strong, not an issue, blah, blah, blah.” Or, my now personal favorite, “If you’re holding cash, you’re going to feel pretty stupid” That came from none other than Ray Dalio as he appeared with the fawning mainstream business/financial media press at Davos. Or said differently: If you’re not all in on stocks, you’re stupid.

Then the above happened, and now, it appears he’s changed his mind.

Funny how that happens as soon as The Fed. went from lip service of reducing the balance sheet, to full implementation as Janet walks out the door, is it not?

Then again, what do I know. Just ask the “experts.”

© 2018 Mark St.Cyr

An Addendum To ‘Do What You Will’

I just wanted to follow-up with something I’m looking at this evening, because I was inundated today from friends and colleagues asking me for more details as the day wore on. And I wanted to share a bit more, in far more detail, for those wanting to know.

Of course, as has been the usual over these last few days, the “markets” continue to recover.  However, from a purely technical view, this recovery has all the hallmarks of what used to known as “normal market action in response to an oversold condition.”

This type of rebound has been all but extinct these last years. Remember: The sell off of last week was the greatest one day point drop in the “market” in its history. Don’t let that point be lost or forgotten to quickly.

Yes, it looks to an untrained eye as just another version of a JBTFD (just buy the f’n dip) type recovery. But when you look under-the-hood closely, to a trained eye (which I have) there are things that stand out. What those “things” are are far too numerous to go into detail or explain here. All I can say is – “It’s different this time” is not going to work in favor of the JBTFD crowd if what may be lurking pans out.

When you hear the term, “There’s no one trading except the machines” what it means can be interpreted a million different ways, both good and bad, depending on your viewpoint.

However, with that said, although many will see the sudden spike higher today as good news, regardless who or what is trading it, when it comes to “liquidity” issues (as in if there is or not any, and at the needed times) “tells” or “clues” are always something one needs to be constantly on the look for. And let’s just say with Asia markets now closed for a lunar holiday? Things could turn both sour, as well as appear exuberant, depending on which way the “paper cup” gets tossed around. That “paper cup” today represents the “market.”

Below is something that fits that bill, and has caught my eye. To wit:

(Chart Source)

The above chart represents the S&P 500™ Futures this evening as of about 7:30pm EST. I have made a notation of “Watch this level” on it. The reasoning is via a bunch of different indicators and more (I left a few simple Fibonacci elements which are the color coded) should that level hold as some form of brick wall and suddenly reverse? Then one truly needs to watch what happens during the live “markets” on Friday.

If the above plays out overnight, the next process to watch for I have notated on the following chart which is the S&P during regular hours. To wit:

The above chart represents it at the close today. I have made adjustments to my previous chart and trend lines that I related to this morning and made notations that should be easy to follow for anyone not practically adept in technical analysis.

There’s no need to over think or try to reason out why I state what I’m arguing. All you need to know is that if the following happens in line with the way I’ve posited? Then one needs to pay very, very, very (did I say very?) close attention to these “markets” going forward.

The reasoning behind that argument is this: If it does play out – it’s different this time – and not in a good way.

For all we know this market could give all of this the middle digit and rocket once again into the great beyond, as it has done so many times before.

And then again, it could fall in a manner much like last week, out-of-the-blue, and eclipse that day’s historical record – to reiterate: for largest one day decline in history.

I only make these observations and notations because, I believe, we may be at a significant market inflection point that demands attention. And not just some run-of-the-mill type of event, but something much more serious. And just about no one is either calling attention to it, or worse, prepared for it.

As always, we shall see. But we need to make sure we’re watching – first.

© 2018 Mark St.Cyr