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Interesting pattern is developing: Each big rally is met by a big or bigger sell off. Last week saw a strong Thursday, followed by an equally weak Friday. Pre-election rally was followed by a post election serious whackage.

Out of the noise comes patterns, some of which may even contain some signal. The battle between buyers and sellers, supply and demand, may be shifting.

I am not concerned about most of the blather you hear on TV. Earnings are what is the biggest potential driver of lower stocks — not the election, not the fiscal cliff, not Europe, not the nonsensical uncertainty trope. Slowing earnings often mean weaker economies, and that may ultimately lead to lower asset prices. Ignore the nonsense coming from people with 18 daily hours of air time to fill.

If markets are going to bounce, it better be here. As the charts (after the jump) show, the Russell 2000, S&P500, Nasdaq 100, and Dow Jones Industrials have all broken their June 2012 uptrend, and are at or below their 200 day moving averages.

If you are a bull, here is where you buy ‘em. If you are a bear, you wait for a drop, and on a rally attempt back to the 200 day, you short them — the wait for the attempt to regain the 200 day to fail.

At that point, the 200 month week moving average becomes a not unthinkable downside target . . .


Charts after the jump



Chart courtesy of MacroMan (click here if charts are not observable)


Category: Markets, Technical Analysis, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “Markets Can’t Catch a Bid”

  1. PeterR says:

    200 month moving average not an unthinkable target?

    At first this seemed like a typo, but it is not!

    SPX monthly MA(200) is around 1160, a level of extreme support which is entirely possible IMO.


    Have a good weekend.

  2. Bill Wilson says:

    I haven’t seen many articles yet that proclaim “QE has stopped working”, or something to that effect. My point is that sentiment could get worst.

    Investors (myself included) have probably been a little too confident in the FED’s ability to inflate assets prices. On the flip side, as long as asset prices are falling, the FED probably has a green light to continue QE.


    BR: We’ve run that chart repeatedly:

    The Decreasing Impact of QEs / Twists

    Reviewing QE(s) and Operation Twist

  3. 4whatitsworth says:

    At the moment I see no reason that the next few years will be good for consumers or markets. I think that the last few years have been lifted more by government spending than QE. Here is the chart from yesterday . Pick your favorite number as a % of GDP that will come out of the economy as government spending and taxes normalize any number over 2.5% puts us in recession. I know tax the rich, tax the rich they are the problem, I think we will see that the problem is you can only tax a profit. For now I am 35% in cash and waiting to see if the government kicks the can one more time if not the party is over.

  4. danm says:

    As I put on my tinfoil hat this morning, I could not stop thinking that since TBTF and co. are addicted to easy gains, the easiest way to make make money at this point is to short something and make that market tank.

  5. VennData says:

    Consumer sentiment hits five-year high in November

    You can turn the lie machine off now guys.

    – Jack Welch

  6. SivBum says:

    Thanks to consumer confidence data, highest since 2007 before Lehman. Indices all green now. S&P up 0.33%.

  7. hue says:

    danm — a few days, weeks back, you wrote that we will get more big storms, and areas will be left to “decompose” because of lack of funds (or will) to rebuild. The first was areas in the Big Easy, the next will be areas along the Jersey Shore. Will we see people move away from ocean front properties in our lifetime? Ice melts slowly at first, but accelerates exponentially, whether it’s man made or naturally

    But that is probably not tomorrow’s business. First, the political lemmings will lead us off the fiscal cliff

  8. wally says:

    Put me in the ‘this is where you buy them’ camp.
    We are looking at a long, solid rise for the next couple of years, in my opinion, regardless of political games. To me it is a very simple equation: the lack of a recovery in construction was the thing missing from a normal recovery from the crash. Now that we are seeing that recovery, increased employment will follow, and therefore increased demand. Increased demand drives all businesses, all services.

  9. danm says:

    Will we see people move away from ocean front properties in our lifetime?

    Research says Montreal will get flooded… I don’t know if it will happen but it did cross my mind when I moved.

    4 years ago, I chose a place that was high up on a plateau on purpose… no way water will reach this area. And no way the rich will move inward and somehow confiscate my land so they get the “new” waterfront property.

    How many people are adding this variable into the mix when choosing a home? Something tells me nearly no one and I’m one of the rare freaks. LOL!

  10. lo574 says:

    Barry I think you’re spot on; it’s about earnings. Absolutely turn off news television [it's only entertainment and noise] and examine the larger picture both here and overseas. I got short the market Sept. 17th seeing the road ahead and it isn’t one of growth………..yet. Glad to have a buying opportunity at lower levels. Bring it

  11. wally says:

    “Will we see people move away from ocean front properties in our lifetime?”

    When we had the huge Mississippi River flood back in the 90s, the government did move to stop rebuilding in areas that everybody knew damn well would flood again. After Katrina, similar but weaker efforts were made.
    I predict that no such efforts will be made now and that we will see a replay within the next couple of decades. The amount of relocation obviously required is so large that nobody dares broach the issue.

  12. PeterR says:

    Sometime during the day, “month” was crossed out and “week” inserted for possible support at, now, the “200 week moving average.”

    SPX MA(200) weekly is even lower, around 115.

    Is this correct and what you meant?

  13. bart says:

    “QE has stopped working”

    QE1 – $338 billion/month
    QE2 – $59 billion/month
    Twist – n/a
    QE3 – nothing so far
    /sarcasm on QE having stopped working