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But not so fast there Newt... this isn't necessarily anything particularly positive. To the contrary! Let's put this into proper perspective. At the instant before the market crashed back in April investors were pretty darned nervous that equities might be dropping soon. They were right. Today, with the S&P back to the same level, it could be said that investors are now 23% less
concerned about the possibility of any pullback in equities. Of course, that simply means they've never heard of Greece. Apparently they are also unaware that there is an entire continent full of Greeces to the east of us called Europe. No worries.
From the technical perspective an entirely different story is unfolding. An identical type of phenomenon is now developing in the relationship as that which existed just prior to the 2007 peak in the stock markets. And of course I'm referring to the negative divergences. Now as all of us know, a negative divergence does not in any way indicate when a top might be in. It only gives a hint that a form of momentum is being lost... quietly. It provide a 'wink-wink' to sit up straight and get on the alert for more pertinent signals.
I'm not at all concerned about the 'actual price' level in this ratio as much as with the increasing complacency that is accompanying it, complacency which is not overly obvious on the surface. The degree of "comfort with the long side" should not be increasing like this, at a time when the market a) stretches with all its might to hit a very key price level and b) it does so in the face of the most extraordinary and historic period of danger the world has ever been exposed to. In a nutshell, the metric we are looking at is pure lunacy. That doesn't necessarily mean that the lunacy can't continue but it does suggest the lunatics are very possibly going to find out what fear really is once we get an appropriate signal.
And lo and behold... a signal such as that which has just developed in the MACD histogram as well as in the stochastics. At the current moment, they are in an identical condition as they were at the 2007 peak. This does not necessarily mean the market is for sure going to crash at any moment, but only that "by golly it sure is on thin ice". Caution is warranted to say the least.
Excellent as usual AR. I am just befuddled (wow, I finally got to use that word this year) at the amount of blue pills this market is choking on. Now I know why Viagra is blue. It has just been frustrating as hell watching this grind to the cliff. Although I have almost completely stopped jousting with this BS-based windmill of a market, I must admit that I do have a small "doomsday portfolio" in place. Just letting it ride. The only bitch is, will anyone be able to actually extract their money post haste...Cuz this time it's gonna be baaaaad. In any case I do have in-house staff member to handle the trolls (just in case you need any assistance...)ReplyDelete
Thanks jb1911. Now there's a great looking little Scot. And of course you know what he reminds me of :"The Scots have raised their threat level from “Pissed Off” to “Let’s Get the Bastards.” They don’t have any other levels." [John Cleese].ReplyDelete
Yup, it's just mind boggling. Yet as one astute commenter on another site said this weekend, don't be surprised if we hear some "great news" out of Europe just in time for the market open on Tuesday and we see a huge gap higher. I have no doubt that that's possible. The analysis I did on this page is only pointing out that the initial warning signal that we're currently seeing in the histo and stochastic suggests that 'maybe' we're at a similar peak in the markets as when we last saw them looking like this. But it isn't conclusive. Just a pretty good heads up.
But I have to admit Scotty, I have to seriously consider going long at the next pullback... if there is one. It looks like it's going to be vertical no matter which direction lies ahead. Looking at the NAS 100, as much as it angers me to no end (because of the implications for commodities and for society), a case could be made that maybe we're just at the beginning of a new bull market. If that's the case, then of course we're talking about $400 oil and $39 for a loaf of bread.
Bernanke doesn't give a shit whether people live or starve to death. He's just taking orders from his boss, Goldman Sachs. As long as Goldie and the ECB can continue to create the illusion from behind the curtain, they surely will do so. The don't give a rat's ass about that cute young lad in your picture. You do and I do... but they don't. And please, if you can avoid it at any cost, don't let the bastards vaccinate him. That shit is designed to kill us all in the end. Vaccinate him against what... the viruses they comjure up in their labs? Colloidal silver will kill any virus known to man and that's exactly why the FDA is trying to get it banned from human usage by re-classifying it as a "pesticide". Can you believe that? How incredibly horrid those monsters are. Colloidal silver is a product that is currently available in your local HEALTH FOOD store. Its properties are the very reason that our grandparents and their grandparents used to throw a silver coin in the bucket when they were milking the cows... it killed any bacteria that might be present. That milk never spoiled.
I noticed on Pretzel's site that a couple of the guys were under the impression that I have about 20 trolls hounding me. That's not the case. It's just one or two who use up to 20 different aliases each. I've been keeping tabs on the activity of all 20 of those aliases and there's no doubt about it, the comments are all coming from the same guy. Further evidence? That same troll was the very first person to post a comment on this site. I banned him good and proper and as a result, there has never been 'any' another troll comment on this site, lol. An asshole like that makes it easy for me. Just shoot him properly and you get all 20 of 'em, lol.
Have a great weekend Scotty. I'm off to work now. See you next week.
Appreciate you noting how the VIX peaks toward the end of the bear market. That will help me decide when to unload VXX. I had not noticed this subtle timing.ReplyDelete
Good stuff AR. This ratio is a keeper. The structure of this market is quite different than the pattern weReplyDelete
traced out in 07. The May-Oct 11 swoon is going to muck up a lot of TA comparisons im afraid.
Although your SPX: VIX chart sure looks like we are tracing out a left shoulder right now.
"Golly Gee Whiz" - really nice chart AR! Digging into ratios can reveal some great stuff and this one is particularly interesting.ReplyDelete
Did you mean 'right' shoulder? You must have, in which case I just have to say "holy smokes, I hadn't even noticed that". Because it's possible what we're seeing is the right shoulder being finished off in the "complacency aspect". That's a rather cool observations... something i've never even thought of. Wow... a right shoulder in the chart of smugness. How cool is that? lolReplyDelete
Would you like to know what it was that really got me to appreciate the value in doing so much ratio work? It was my brother-in-law. My sister's husband is an internationally renowned specialist in his field of "health informatics" and is a professor at the University of Victoria. He lectures all over the world on the topic and indeed created that faculty at UVIC. In face, my daughter is a graduate of that program and now 'she' is off on a similar path. She's at meeting all over Canada and the USA constantly as a consultant. In fact, one day she was in San Diego, Chicago and Montreal... all on the same day.ReplyDelete
But it was a statement that my brother-in-law make that really struck me. This happened about 25 years ago I believe. We were having a conversation in which he said "everything is relative". At first I thought it was just a bit of a smug statement made by a guy who was just a bit too full of himself. But the tiny smile that came over his face as he glanced into my eye made the concept suddenly snap right into focus for me. What an astounding revelation it was. "Of course he's right!", I thought to myself. So we discussed it further. He explained that his beliefs were that in order for 'anything' to have any meaning whatsoever, it had to be 'compared to something else'. It forces us to always think in terms of "relative to what?" If something is not compared to something else, it is meaningless. In the world of stock market analysis, that is one hell of a powerful concept. I've been using it ever since.
Cute. He looks like The Little Prince.ReplyDelete
Very interesting study, AR. The MacD is speaking loud and clear: this cannot continue much longer.ReplyDelete
Right .....Glad you knew what i was going for !ReplyDelete
Tell me Iriquois, are you able to edit your comments? I assume you are.ReplyDelete
I found your site clicking around the internets tonight...very glad I did. You have some very fine chart work and your balanced approach to future market direction is refreshing. I have been actively trading BOTH sides of the market for 15+ years...never felt comfortable with the whole bull bear pep rally thing. That said, I have been legging into some of the largest bearish bets of my adult life over the past weeks and my inner VIX feels very low. *wink* I am not the tin foil hat wearing sort of guy but there are too many silly things out there to count..just noticed tonight HD is trading higher now than it was at the apex of the housing boom when all of the cash out refis were printing free money...and CAT...you kidding me...can you say global contraction....I could go on and on. I wake up each day and try to keep it simple...buy low sell high...rinse repeat. Everything else is just noise, mouse-clicking-ad-revenue-generating-distracting noise.ReplyDelete
Thanks for dropping in. I hear you about HD. The retail end is just nuts. Check out this chart of XRT (retail ETF). It's higher by 41% than it was at the peak in 2007. "Are you kidding me?", lol. There's no way the retailers are doing better now than they were in late 2007, let alone 41% better. True, XRT is made up mostly of consumer 'discretionary' stocks which probably means higher end stuff. But how is it possible that consumer "discretionary" stocks are doing better when the entire population is worse off than they were in 2007? What we're seeing on that chart is the effect of FED money supplied to the chief criminals to play with and nothing else.ReplyDelete
Volume in TVIX is going ballistic! Almost 30 mil shares trades with virtually no progress, after a climax up day followed by a climax down day: quite some hefty accumulation taking place by "strong" hands?ReplyDelete
Hi JW. For sure, I think a huge increase in volume like that is a great signal that a low is very, very close. Yes I'd say the smart money is piling in. Here's another example, although a rather exaggerated one. Here's TZA, just for the comedy side of things. This former giant now sits at a whopping 1% of where it was in its former glory days, lol.ReplyDelete
Thanks much DD. We certainly treat him like one. He's our miracle baby. He was supposed to miscarry at 13 weeks but he refused. He remains a hard head, but a damn smart one...really smart. So we are anticipating either daily complaint calls from the Principal (the kid has an advanced sense of comedy and timing), or continuous accolades from the girls (he loves the girls.)ReplyDelete
" Greece said it will pass legislation to enforce losses on bondholders who balk at the new terms"ReplyDelete
Somebody PLEASE explain to me how that is NOT a freakin default?........What planet are we on??
Think of it as "Lord of the Flies" writ large. That's the only way it makes any sense.ReplyDelete
Hey mate, I wonder if DOW theory is still relevant today? DOW transport continues to diverge and was down another 1.46% today.ReplyDelete
Anyway gotta fly. I'm busier than a one legged man in an ass kicking competition at the moment.
I guess we're going to find out. Personally, yes I think it's still relevant. Danno has brought it to the forefront as well. Take care bud.ReplyDelete
AR, you will appreciate this article:ReplyDelete
Wow! That is some really awesome magic and I have no idea how you did that Zim. I assume you could slow it down? If so I'd respectfully suggest you do that, maybe cut the speed in half. That is borderline incredible. Congrats on creating something few, if any, have ever seen before. I've got a hunch that took one hell of a lot of work to put together.ReplyDelete
As much as I question slowing it down, what's that old saying? Flattery will get you EVERYwhere?ReplyDelete
This afternoon, I thought about this and wasn't particularly pleased about it:
As much as I question slowing down, what's that old saying? Flattery will get you EVERYwhere?ReplyDelete
This afternoon, I thought about this and wasn't particularly pleased about it:
Doesn't it always seem like the validity of TA is questioned near tops and the validity of FA is questioned near bottoms? Recently, I've sure read a lot of reasons to buy despite the glaring technicals...ReplyDelete
Geez man, that's an awesome effect. Pretty amazing and totally interesting. Now you're just teasing me.ReplyDelete
Isn't that the truth. I know exactly what causes it too. At tops, the market has just been through a hell of an uptrend which has found support continuously from "whatever the source". But those legs higher are followed by the most measly little pullbacks time after time after time. And it's that very action (which also defines a bull cycle) that cause one negative divergence after the other to 'fail'. In other words they suck us into going short too early. But the very purpose of momentum indicators like RSI, stochastics and MACD is to identify "oversold conditions" in a bull cycle, not tops. Conversely, the purpose of those same momo indicators is to identify overbought conditions in a "bear cycle", not to find oversold conditions once the market is in bear mode. 98% of investors don't seem to understand those rules. My problem is even worse... I understand them perfectly and even teach people about those rules... but I myself commit the cardinal sin. I ignore them.ReplyDelete
But I've slapped myself upside the head a few times over the years and I'm catching on. The only problem is that we never know "in the moment", exactly when the transition occurs from bull market rules to bear market rules. To try to anticipate that change is a sin against one's sacred account. And I've been a sinner. But no more. I've found Jesus. Jesus H. Christ to be more specific, lol.
Man, bacon is good.ReplyDelete
Can you believe how many views that video has on YouTube? 96 million. Incredible.ReplyDelete
Whoa Zim...that overlay is really disturbing...Indiana Jones disturbing...I'll leave it at that.ReplyDelete
Cuz you're just too darned interesting of a writer/researcher/debaucheror ...and a stand up guy to boot.ReplyDelete
Good idea to never admit to your brother-in-law that "he's right" - I would never tell any of mine that, I've got too much pride!ReplyDelete
A buddy of mine gave me a photocopy of a simple stick chart of the DJIA/Gold ratio in 2004 and that simple chart changed my perspective that indeed everything was relative. Recreated it in Excel and to this day it's my goto hombre, especially since I focus almost entirely on PM's. When I get some time to update with some revised annotations (and yes I still print out stuff and use pen and ruler - old school enginerd), I would love to post and get your thoughts.
Take care AR and keep up the good work - much appreciated that you share :)
Haha... as Zimmer says "Flattery will get you everywhere." Thanks for the generous words Scotty. I certainly don't think I deserve 'em but I'll take it as a positive. God only knows how a couple of trolls think otherwise. Yes for sure, this market is simply insane. Basically the FED is just driving it up and will continue to do so for as long as they want. I can't see anything that is going to turn it around. As far as I'm concerned, there's not a single thing that seems to matter any more. I can't see how this current 45 day old absolute bee line to the stars is going to do anything other than just keep right on truckin'. If they won't allow a 1% down day in 45 days then what's to stop them from running her up like that for another 30 years... straight to Dow 16,000,000. I mean it's just totally f'n insane. Yeah, it's really pissing me off as well, knowing that it isn't in the slightest bit "real".ReplyDelete
Any time bro. Yeah for sure, the DOW priced in gold is one absolutely terrific example of how a ratio can reveal the truth. You know what I'm talkin' about. Well I just do the same thing but with different pairs. What is revealed is just as truthful as the truth we find out when we do that Equities/Gold ratio. Like equities priced in oil or the DAX as priced in units of the European financial sector, etc. It's a great concept. One smart ass, in trying to one-up me (Jesus I hate that) said ratio work was useless because "you can't trade a ratio." I guess he never heard of currency trades.ReplyDelete
More Fib fan propaganda here:
AR is there any way I can reach you by email? You can answer me at mine:ReplyDelete
sansangst at yahoo dot com.
I share your frustration. The only way I could actually go long now is if I smoked a lot of weed and had a years supply of Doritos...no frigging way. I know I'm repeating myself but I the CBs are are gonna kill this patient with all this liquidity....and I really think they want to once they max it out...The housing bubble and burst was caused by the exact same behavior thanks to Mr. Geithner...they will turn off the spigot once everyone is in the game and bring it crashing down intentionally. They did it back in '29 also, and they're going to do it again. That's what gets my goat.ReplyDelete
I think Zimmer may have broken the code with that chart I noted. I don't have the ability to do the overlays that he does so I'm kinda stuck. Remember how you mentioned how you were wondering how they were beating the system by scuttling TA. Without coming to any conclusions, is it possible to identify more composite/overlay charts like the one Zimmer graciously posted? If it is repeatable with other dates it would be a helluva way to telegraph an intended trading pattern by merely specifying a previous date...and it would go unnoticed....or maybe I just need more sleep....probably the latter. Cheers :)
Thanks Zim...any other matching overlays that pop out?ReplyDelete
Thanks... the visits actually tripled on Wednesday and quadrupled on Thursday. And they were mostly looking at the one piece on the USD relationship with equities being likely to become permanently inverse going forward. I have no idea why that one suddenly became so popular especially considering that it was published 6 weeks ago.ReplyDelete
Thanks for your array of fib fan charts too. They're great to look at as well as very helpful in putting things into a bit better perspective.
Affirmative, message sent.ReplyDelete
Lol... without a word of a lie, that was my favorite movie scene of all time. When I first saw it, it was like something I'd always want to see but never had until that point. Brilliant!ReplyDelete
Also, thanks for giving permission to jbg1911. I'd stuck my neck out a little bit on Pretzel's blog and suggested that knowing you to a certain extent like I do, I felt that you wouldn't mind if Pretzel himself or jbg1011 came over here and grabbed it.
Sorry Scotty, as far as I know there is no way to overlay two charts with two different starting dates like Zimmer has done. He told me how he did it but it wasn't with StockCharts. I think he said he uses image manipulation software like PhotoShop or something like that. Whatever it is, he does a real nice job of it. As for the animation he created... I have no idea. But I asked him if he could slow down the animation and he did that too. I wonder how much work that takes because the effect is something we've never seen before. Beautiful in a way.ReplyDelete
The idea of the scene is ingenious, but Ford's execution (pun intended) only makes it all the more classic...ReplyDelete
It's always nice when people ask, but it's pretty safe to say permission is implicit when posting things directly on other sites. I've got my share of delusions of control, but haven't yet fancied myself director of the ether. :)
Just flattering when someone takes notice, really. Thanks!
They pop up from time to time, work and don't work, tease and annoy. I'll try to remember to throw 'em up here if any others cross my mind.ReplyDelete
I mentioned this guy here a few weeks ago, & I'm actually not part of his marketing team (despite what you might surmise from the repeated reference), but he publishes some of the best analog overlays out there.
Funny how traffic works...one person sends one link to just the right grandma and...bam...hits multiplying like Fibonacci bunnies...ReplyDelete
Your technique of using Stockcharts' semi-transparent fill boxes to highlight positive versus negative correlation greatly simplifies the visuals. Not that anything else is undeserving of attention, but to me, it stands to reason that the USD study is drawing views. Good stuff!
Indeed, it was the utter contempt that Ford so brilliantly portrayed that was as funny as anything else. You could see the point at which he had finished weighing the odds and made the " easy decision".ReplyDelete
I think that volume is a very good clue. TVIX and VIX look like they had a very big 1-2, and not a i-ii.ReplyDelete
And the volume on i was very impressive, and the volume on the pullback ii is very light.
A perfect set up for those who have been positioning themselves for 30+ days.
Hey, I've been meaning to ask you what some of the stocks in XRT have done since 2007?ReplyDelete
I suspect they aren't over their 2007 peak?
If not, then something else is skewing XRT ... like maybe an ETF problem of more shares shorted than exist, and it was a short squeeze? Just curious what you thought about that. In addition to the FED money effect. I almost wonder if TVIX has the same issue which might benefit the longs now if the market crashes ... more buying orders than shares outstanding? Hahahaha.
Thanks AR ... your ratio work always gets me thinking ... and soon I'll start thinking of ratios to look into.ReplyDelete
To be honest Greg, I haven't looked at a single stock that's included in the XRT. It just makes no sense to me that the retail ETF should be 41% higher today than it was at the 2007 peak. But I'm pretty sure we'd find that the individual stocks have done the same thing. I think the ETFs are being juiced and the stocks are just following mindlessly... almost like some sort of convoluted arbitrage or something, lol.ReplyDelete
Sorry bud, but I'm too tired at the moment to figure out quite what you're referring to with the TVIX. Suffice it to say that the $VIX should rise during a market pullback but won't really get cranked up for quite some time to come. The VIX actually peaks near the bottom of the crash. In any case, those holding TVIX will profit handsomely I assume. Mind you, I've heard there are some really wacky relationships seen from time to time between VIX and TVIX. To be honest I'm not even fully aware about what those issues were.
Hey AR I notice ZH posted a critique of MMT.Thought you mau be interested http://www.zerohedge.com/news/sean-corrigan-crucifies-mmtAll the best manReplyDelete
He's just showing off ! Awesome effect,very nice !ReplyDelete
Yeah, Zim has posted some really great animations on this site. This might be the most impressive of all:ReplyDelete
Thanks stinky. I'll read that right now. Then I want to look at a whole lot of market internals charts and after that I think I'll watch the movie "Margin Call". Seems like it might be a pretty appropriate movie to watch right about now. Moresso in the days ahead I'd imagine. In fact I'm getting downright excited to turn that movie on but I just can't seem to put my work down, lol.ReplyDelete
Thanks for the link partner. BTW, there's a guy who I see about once a week who is from England. I don't know him but every time we run into each other we have a darned nice chat. We've spoken about the Henley Regatta and the fact that my daughter has won it (as a member of the women's 8... she was in seat 5, also referred to as "the engine room", lol). In any case, I saw him yesterday and every time I see him I think of you. I'm not sure why though because this guy is actually very nice ;-)
Nice one AR - the sun shines on the righteous ! I had a great day yesterday - almost made up for the whole of Feb ! Am playing the short side on some commodities like coffee as well as the stockmarket. - less intervention !ReplyDelete
That's great news. I like news like that. I've got a very small long position going, basically because I'm idiot. Well maybe not really an idiot (because the position is so small), but an idiot because I'm expecting much more down side. However, I'm basically out of the market for the moment, probably until near the end of the day. Depending on how the day finishes I may short again near the close. But if today's bounce forms a clear fiver, then I there's probably more upside tomorrow I'll wait it out (if I can control my patience issue).ReplyDelete
Good luck on those commodities plays. I wish StockCharts would supply charts for commodities but the only ones available are oil, heating oil and nat. gas.
My first job after uni was in cocoa but it was wrong place wrong time.But it got me interested in markets.I just trade off the charts but I have started subscribing to Jeff Kennedy at EWI and I think he's a good analyst.He has the whole soft commodity complex in a strong bear phase at the moment so I think there are a lot of oppurtunities.There are etf's for most softs.I cant remember the coffee code but cocoa is NIB so you can chart them on Stockcharts.ReplyDelete
Holy smokes! I found it on StockCharts and never even knew it existed as an ETN. Then I queried StockCharts' catalog for "sugar" and came up with another one. Both were iPath instruments. So then I queried for "iPath" and 73 ETNs popped up. Coffee is "CAFE". How quaint is that? lolReplyDelete
Thanks CR. I didn't even realize those things existed, let alone were available on StockCharts. I owe you a drink for that one. You were saying you're a wine man, right? Here you go. Welcome to my office. lol