SPY charts with too much text interspersed... weekly wrap up... big picture... perhaps along with a few drum beats paired with pipers trills... maybe helping to keep time... and differentiate the occasional trill from the bass drum calling the march steps ? .
As I noted on Wednesday... (posting it at the time where the charted green vertical line is) too many down days in a row without an up day. And, also... the move made was getting pretty far away from the Bollies... always a potential "mean reversion issue" there... which it did even more of before reversing today ? (But, note the Bolly divergences occurring on the SPY weekly in 2008?) "Excess" leads to mean reversions... fairly predictably. That doesn't mean "the decline this week was too big" to be sustainable ? It only means... "too big"... relative to the slope of the Bollies at the time... or relative to the number of down days in a row ? So, what was "a big excess" in % or $ value in a decline at the end of this week... perhaps won't be an excess at all by the end of next week... even with much bigger moves made ?
But, Wednesday/Thursday clearly had that strong "whiff of panic" in the air... I saw a vid titled: "investors are selling like its 2008". Only... not really, unless early... and, not done yet ? By the end of the next week or two... perhaps we'll find out... how true that is ? Also saw a lot of posts (including at ZeroHedge) addressing "the slow motion crash" we've been having... which WAS true, in the sense of "now" not behaving like the 2020 crash... but... how true is it that this is "slow motion" when compared to 2008 ? Note that the verbiage used re "slow motion crash" only appeared AFTER the slope in the charts in the last few weeks shifted into "not slow motion any more"... So, will 2022 re-chart just like the 2008 event with the current event on the weekly charts shown... down below the dissection of the 10 minute chart, just below
So, today, they engineered an up day, which, thus far, has managed mostly to foster an even more massive confusion in the market... as is conductive to fostering greater fear... and greater regret... when trades fail to follow trends slavishly in the short term... and greater volatility, as we are experiencing now everywhere [except in the indexes we suppose to be giving us the measurement of it]. No doubt the move today is rekindling in many a new hope for "new all time highs" coming imminently... and, that's a particularly big issue... coming as it does at what appears it is right at a primary inflection point ? Those hopes have to be inflated... in order to optimize the effort in crushing them ? Otherwise... you won't get that "capitulation" event in a sustained performance... like that we saw hints of the last two days ? The move today succeeded in undoing a majority of the downside that had been realized this week... without much impacting the larger trend data at all ? There was "room for that much noise to occur" built into the chart. That in itself is telling... that a 18 point move in the SPY is explained away as "a bit of noise" to end the week. But, for all that... it has the big move on this first chart... still leaving SPY entering a steepening decline, holding 2 points BELOW the lower Bolly on the weekly chart.
I've annotated the 10 minute SPY... showing how "smart money" in the NVI... provides the beat... and the "dumb money" in the ADL keeps step and does as its told... Note the volume trends appear to matter more now in predicting next days moves... than they did when liquidity was greater ? But, what might is say about the trade on Monday ? Looks like perhaps "an excess" exists in the volume in ADL in the move into the close ? What the chart doesn't show... is that NVI also showed a big spike higher into around 3:30 when it suddenly evaporated...NVI went back to flat... and made a red candle as it did. Spoofing, obviously... or, even the smart money getting nervous ? If "spoofing"... leads one to note... "not without a purpose" ? But, what purpose ? Can you read the tiny bend in the KST of the NVI to mean something ? Sure, you can... but, will it matter when trading opens on Monday ? I don't expect its useful to try to pick direction in a trend based on nuance... in a market that lacks it ? The short term chart is a salad of conflicting signals... any one of which can change in a moment. I guess... "I don't care"... because if it moves higher in the short term... I'm positioned for that... and if it doesn't... meh... I'm not going to plan to trade the open anyway ? It's almost always true that the big moves at the open are worth playing... the swing trade... when you do have a good feel for the tune being called... when trends are intact... predictable... and you have a reason to expect they will continue...
Sort of the opposite of the current market ? So, pretty much any short term positioning... should be based on trades reaching extremes on both the short term and long term charts... not on just one ? That will probably do more than anything else to help avoid getting out of step... ?
How does the narrow view... plug into a bigger picture ? That matters more than just in today's trade... or Mondays... as a stand alone... So, the trade next week ? Will it answer the question re "how close" we're going to come to matching the performance of the market in 2008... which seems it is shaping up as a decent enough proxy for the current event... as long as it's not "chart artifacts" being posturing as spoofs for us ?
The move made this week leaves the bottom in any new trading range at 385... which, assuming the larger trend remains intact, likely limits the upside commensurately, so what was working as a range from 410 to around 450... is likely now no better than 385 to 425... with the head of the weekly candle now parked at the Friday close at 401... which still leaves the weekly candle a red one... still leaves it with a solid downward vector on the weekly chart... and just a bit below the middle of that proposed "range"... which still suggests a short term up move continuation could occur... in a continuing down trend. Taken along with price information apparent in the options trade... positioning (generally, these days) might be optimized by ending today holding nearer term SPY calls (say, May 20 around 410)... and looking out a bit longer for puts (say, June 17at 385 or lower)... at strikes where the price vs time leverage works best. That will still depend on when you're entering the position ? Well timed trades in puts are made during up days... in a rise prior to a short term peak... which lets you buy higher strikes for less $ ? If you've missed the peak... and chase the market as it falls... that means paying double for the same puts as before the peak... and holding bigger risks vs time and $... for less potential return ? A market like this FORCES you into having the discipline to buy (calls) while prices fall... and sell (buy puts) as they rise... If you don't... it will be hard to survive "trading" over the next few weeks.
That also has you, as always, trading time value, versus risk, versus price... in opposite land. The trend that is established... is easily seen... thus is always overpriced. I think perhaps the way to best "stay in step" with the music, now, is to set one's expectations on the weekly charts... and then make trades linked to those expectations with discipline... based on opportunity as it is presented in the daily charts. One of the reasons the trade isn't working for most people right now... is the strong lack of consistency in trend information "in context"... given what they're looking at... and what they're trying to correlate with it to have it make sense... That's more apparent now in things like the VIX suddenly (and entirely inexplicably) tracking with SPXL for a bit... instead of SPXS... which fact in misdirection occurring is applied in the trades made... so it requires protecting holdings with hedges... but also the larger risk amplitude in "divergences from track" requires hedging your hedges... ? And, that drives greater complexity... and greater cost... making it more likely mis-steps will occur... as its harder to figure out when one tune ends and another begins... when the "metrics" you look at for guidance on that... aren't working.
Remains to be seen how that reversal follows through... on Monday... or, how many up days in a row there might be... how far up they might try to move things next week... or how long that "trend" might be extended. But, the weekly chart has not been nudged into showing any meaningful change occurring, yet... ?
Fundamentally, things have not improved at all... but things have "wiggled" the charts, again, and steepened the slope in the fundamental decline occurring... that stocks have only now begun to reflect. Reality is finally setting in... with the awareness that Biden / Pelosi are... an open-ended danger to themselves and all others... even if that's now pretty much the same as what you get from most other world "leaders". American "exceptionalism" was based in "We're not as totally clueless as the rest of you bastards"... but now we are.
Equality in that, now... will not turn out to provide any hopeful with any larger advantage... as precipitous decline is much easier to engineer than sustained flight.
The oil price... is NOT coming down... whether markets crash or not. SPR releases are "eye wash" that only makes the reality worse... and every other choice made... is one that drives prices much higher now... and vastly higher still in the future... in a way that requires that remains true over longer time frames... whether demand drops or not. Market functions we expect to work... will not continue to work... in oil and other things. So, the Fed's contribution in "killing the demand"... also makes things worse. The Fed only has options in "which" worse they want: A. - higher prices paired with a self correcting ability in the free market to make more... if capital flows to address supply deficits. B. - higher prices paired with "less"... that backs the economy into an forced inability to correct anything. The Fed, for now, chooses option B...shrinking the pie... to compensate for the pie shortage. Biden imposes option B independently of the capital markets... as he obstructs market functions in ways other than "only" obstructing $ flows ? They both work hard to "misdirect" the flows they do control. They all (claim to) dislike the consequences of their choices... and they all refuse to admit those consequences are a direct result of their own bad choices.... so refuse to quit making bad choices. So... stick a fork in it ? That's the only option that makes any sense at all now... at a fundamental level. "Speech control" that prevents dissent... only mirrors how much VASTLY worse things are in the "control" empowered over market functions... that prevents competition from solving problems... on purpose... as they profit from the corrupt "control" of flows... not from having to deliver success... or risk being held accountable for the failures. It's broken... and can't be fixed.
Two or three things likely to result... One: Biden's government is going to fail... it has failed... and as they will not correct the errors being made... wins "worst President ever"... and it cannot be recovered. The country might fail in result... and descend into revolution or civil war... And, pretty soon, on current trend... either one might seem like the better option than more of what we have now. New t-shirt meme: Got baby formula ? Things will continue to get worse... people are going to starve. Two: the Fed and the banks... are going to fail...they have already failed (circa 2008). Forced recognition beginning to occur now... will not correct the errors being made... etc., and cannot without banks... including central banks... being failed. Three: the dollar has lost its former "reserve" status... That's a done deal already... some who shouldn't be are slow to recognize it... most are unaware of what it requires will become true, soon... and, soon, after a brief spike as markets swoon and rates rise... the dollar will begin to decline in value versus other fiat currencies... becoming just another dirty shirt And, as it does that... oil and essential commodities (food) will sustain up-trends... as dollars (all fiat) shrinks in value... gold and silver will begin to hold and recover their lost monetary value at some point... as the dollar (source of their suppression) and other fiat all decline relatively... Meanwhile other base metals and industrial materials will decline in value in parallel as trade, markets and industry implode.
Other industry, however, is likely to survive... Banking probably will not... even it if does not go quietly...
The move in SPY today... unwinds a tiny bit of excess in SPY exceeding weekly Bolly Band limits... and moves it back up to just below the lower Bolly on the weekly chart... still in a steep decline...
But, what else can you read in the weekly charts (below)... comparing now with 2008 ?
First, note the slope of the decline the last three weeks... exactly matches the slope in the decline in the really bad three weeks in October 2008... but, obviously... does that with much smaller moves... from a much higher base... that leaves a lot farther to fall...
The pattern in the trade in 2008 and now... is very similar... deviating mostly in an excess on the upside now, as having the first bounce in the new decline (Sept - Jan)... making a higher high instead of a lower high. That mostly suggests the current market has a larger excess in BTFDism than 2008 had... and you can see that same suggestion in "excess enthusiasm" now vs 2008... by noting that in 2008 the market fell though 10% fairly easily, after it had tested 10% only once. Then, the market crashed through 10% down to a 20% decline... where it dithered and tested the 20% limit three times over 8 months... before crashing through it on the fourth test... into an accelerated decline lasting only three weeks. Currently, we're mimicking that pattern... "just" at the cusp of accelerations. Only we've been duplicating that event while testing the 10% level repeatedly over a span of 6 months... while also making a new high... and then crashing through 10% only in mid April... finally moving down to test the 20 % decline for the first time... yesterday. We dropped the next - 10% in only three weeks... but doing that only after first testing the 10% limit three times over 6 months. So, now...the "support" below - 10% is become "upside resistance'... making 425 the upper end of the range ? How likely is it that the "capitulation event" that occurred on crossing below the - 20% barrier in 2008... has occurred again now... and will have us crash right on the through the - 20% into an ongoing decline ?
I'd say the odds of that are pretty good... given the slope versus time issues in multiple metrics, and where the accelerated decline phase versus time is only one issue... "Acceleration" is accretive...the evidence of it hard to miss... the "context" relevant. The relative magnitudes in excess are clearly important... the current peak almost being "excess" defined. I've noted before our "slow motion crash" had a ratio in a factor of 1:5... slowing it and stretching the decline to the right... currently it is more like 1:2... exactly comparable to 2008... but, perhaps, in a market more inured to volatility... not as well recognized ?
The main difference then and now is in the entry path... then, from a sustained, more solid and LEVEL base at the peak... which had it fall more early on... which rapidly bent the MA's lower off the peak, in the early months, moving them lower ahead of the decline. In 2008, the 55MA was steered below -20% before the price crossed it convincingly ? Currently the 55MA is only now peaking off its rise and rolling over to reach a flat level... currently flat at 438 or - 8%... and, by definition... it can't bend lower faster than it is ?.. From the peak to this weeks low... the decline we have is slicing across the MA's at a 90 degree angle... so, "a vertical drop" relative to the prior trend... only the prior trend being "not flat" is stopping it from going down vertically ? However, that function is time dependent... as the longer term MA's are "flat"... the approach to them will become more vertical over time... the decline will accelerate from here... as it must under current conditions... which, however you consider it, are much less favorable now than in 2008 ?
The more vertical entry to the peak... with an excessively high peak driven to the extreme by pairing low rates, money printing, and imposing a targeted QE fueled stock price inflation event ? Ending the "market price support" from that trio of drivers... as they must... will drive... a free fall... without that support. In 2008... the "chart" support at the - 20% level was provided by the 223MA... at - 30% it was the pairing of the 377 and 610MA. When those broke... that when the accelerated major decline occurred, taking SPY from 82 to 65 in a week...down 17% in one week... today would mean opening at 400 on Monday... ending at 332 on Friday.
But, we're not there yet in a chart parallel... as still 15% above the level of that "entry point"... which requires another week to get us there. So, first a one week drop to 340... then a one week drop to 282... would mirror the events of 2008...
In 2022...we might still see a benefit from those MA's providing support ? The last we crossed was the MA84 at 415... next up is the MA144 at 366... then, the MA233... which, in a gradual rise, provided support at - 20% back in 2008. But now that support level at -32% is at 326... So, those two bracket the 340 level. Below that are the MA377 and MA610... which provided brief support at - 30% back in 2008. Those currently are at 277 ( - 42%) and 223 ( - 53%). So, there is potential "support" that exists... but, mostly, it showcases the nature and degree of the excess built into the current market... that we'd still get a 2008 style percentage decline... even with SPY holding those support levels.
But, also note... the support that existed in 2008... was based on "real" liquidity ? Today, we have no idea how "real" the liquidity might be... but, they tell us... they're taking it away ? So... you will have to look for other "support" coming in to drive the trade with volume ? And, that's a shock... because currently a "heavy day" with "above average" trading volumes... is one with more than 300 million traded... and the current chart below... doesn't have a single day with more than 1 billion ? But, back in 2008... a "slow" day was one with fewer than 1 billion shares traded... most days were over 1 billion... and not a single day fell below 500 million... while the peak in selling drove it over 4 billion shares traded in a week ? Maybe they did a 1 for 4 reverse split on the SPY... and forgot to tell us about it ? That would explain a lot... except for where all the $ cast to us as ~ $37 trillion in QE, etc., really went ?
Anyway... annotated the pair of charts below showing that above... graphically...
Perhaps your analytic skills will allow you to determine, from these charts... what I had for dinner last night ? Seems also the right color choice for pairing fear... and blood in the streets... all conveniently enough enabled by clowns ?
In any case... note also the two red boxes... showing the relative dispositions of the Chandelier Exit Short... which seems a reliable enough "crash indicator"... (or "excess indicator" on the opposite side of the current chart) in case the price wasn't doing that for you well enough. Note the relationship of the Chandelier Exit Short... to the arc of the upper Bolly ? It seems a clear time stamp in relation to "the event" beginning... giving us this last week as "week one" in the event ? The juxtaposition of the two charts also shows the "early days" aspect of the current event... with the current chart having a lot more uncharted "white space" open below 400 that the 2008 chart has filled in below 100 ... and there's that 4:1 ratio again... ? And that might work predictively, too... as an equal percentage decline will tend to impose that ? The current chart... would have to extend 165 points lower... to contain the comparable % decline down to the MA610 at 223... but... from there... is where the 2008 event "really began to pick up speed" ? The 2008 event took another 5 months beyond the three really bad weeks in October before it completed. And, it was all done just in the nick of time to discredit Republicans and get Obama elected... as required to get us to where we are now ? From November onthe 2008 chart... you can see the secondary inverted cup and handle pattern into February... the decline from that exit from the short trade... to a "tail tap" in March... and from > $52 there back to >$70 by the first of May... On the current chart... after three bad weeks in May... that would take us into October... with a "bounce" from then depending first on there being an election, then on it being one in which the fraud fails... so a real change actually occurs... as "elections" are what we use to impose "corrections' in politics... while in the markets "corrections" only occur... when corrput monopolies and bankrupt banks are allowed to fail... instead of zombifying everyone else...
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