I personally think technical stock analysis is bullshit. But there are millions of people who believe this voodoo stock analysis. Well weenies, it sure looks like the Dow has broken below long-term support. Doesn’t that mean sell? This is where these supposed technicians will come up with some new bullshit reason why this should be ignored. I never tire of seeing “experts” create new storylines to sell their propaganda bullshit in order to rationalize why they are wrong. Everyone looks smart in an unrelenting bull market. The morons and shills are revealed when the bear starts to growl.
The Dow has struggled so far in 2014 – down 6.8% year to date. For some perspective, today’s chart illustrates the overall trend of the stock market (as measured by the Dow) since 2003. As today’s chart illustrates, the Dow has benefited from a strong upward trend since early 2009 (see upward sloping green trendline). This year, however, the Dow has sold off sharply due to concerns over steep declines in emerging markets.The Dow’s steep decline has been significant enough to result in a break below long-standing support (upward sloping green trendline).
Yogi just came over the hill!!
I’m a student of TA since 2006… but I think most of the power of TA is self-reinforcing. i.e. everyone watches certain levels because they’ve all been taught to watch certain levels. Anyway, we’re seeing significant support on the weekly chart with the 50MA around 15,400 so an early Spring bounce to 15,700 or even 16,000 would not surprise me. Next major support below is at 15,000. Get a weekly close which falls below and fails a retest, probably around late Spring assuming we get a bounce, and it will be elbows and assholes running for the exits.
What I’ve observed over years is that the TA guys at the Fed watch and understand the same support and resistance levels. When there is the possibility of a major breakdown, some mystery buyer always steps in and starts buying a shitload of futures contracts. The market will break when “they” decide to let it break. Of course that’s once they have fully hedged their positions and sold everything they think they can to the last retail sucker to get long.
Stock prices lead fundamentals.
Bottom line: The markets trend. Until the trend is decisively broken, markets can continue upward even when massively overbought and continue downward even when massively oversold.
Using a fairly simple system to identify trends, one could have probably stayed long stocks until at least now. By the use of TA the bottom in March of 2009 was quite obvious within two weeks of the low.
Stock indices (NDX, SPX, DJIA, RUT) are still, by my measures, in uptrends. The first of several preconditions have been met, however, to suggest that a change in trend may be occurring. Stock index behavior over the next month or two will probably add enough data to make a decent judgement call on this.
Given that metals, Treasuries, commodities and real estate are NOT in uptrends, and that only stocks remain so adds weight to watching for stocks to join the others in a deflationary decline.
TA is a very heterogeneous mix. Everyone uses different signals, and what works in bull markets does not always work in bear markets because bull and bear phases behave very differently.
No one, however, has a Magic System, because a system that always worked would enable compound growth forever. This would mean that whoever developed that Holy Grail would eventually own the entire planet.
That’s not going to happen, so therefore there is no such thing.
Stock price trends, however, are demonstrably not random, so working toward a probabilistic approach strikes me as useful.
For what it’s worth, look for the SPX to head toward the 1800 level. It might go higher, but unless it begins to re-establish a series of higher highs and higher lows and then stays above certain exponential moving averages while measures of overbought-ness don’t correlate with small degree trend changes, then evidence will mount that after this current multi-day rally ends, the next phase will be a larger, steeper decline than Jan-through-Feb 5.
My point is that this may or may not be a point of trend change. Breaking the trend line of the chart above is but one tiny datum in a sea of others.
Technical analysis = Goal seeking
By the way, Jim, I completely concur with your comment about how “experts” create storylines to explain market trends.
“Today the employment report was bad, so stocks are up because traders believe the Fed will act to prop up stock prices.”
“Today the employment report was bad, so stocks are down as traders worry about corporate earnings.”
It’s not science when the same “cause” has opposite effects. It’s shamanism, witch doctor BS. CNBS analysts might as well don grass skirts, put bones through their nasal septa and beat human-skin drums, explaining that it’s flooding in Iowa because the Rain Gods Are Angry.
Experiments have been done where test subjects are placed in a “market” and cut off from any information flow about what it is they’re trading. In no time at all, prices in the test market begin to rise and fall exactly as they do in real markets.
Market prices have at best a tangential relationship with information, because the “data” we see reported is but a tiny subset of all the possible information available on the subject. The News thus only selects data that rationalize their preconceived narratives on cause and effect.
Watching “experts” explain why some market, stock, commodity, etc., went up or down in price is no different than our ancient ancestors sitting around the tribal campfire, listening to the Medicine Man explain why it rains or snows.
hey Admin, you still short Facebook?
By the way, this same principle applies to people touting the metals today.
We’ve had massive, compound inflation since 1971 yet the metals (in real terms) have had two massive rallies with a crushing bear market between them.
Fundamentals didn’t carry the day. The metals are just a market, which is akin to saying they respond to herd behavior and mass psychology just like everything else.
speaking of scumbags on wall street; i started watching “Assault on Wall Street” on Netflix.
A Dimon like character decides in the first few mins to screw everyone over and tells his secretary to get the Treasury Secr in a lunch meeting that day.
It sure is setting the main character to snap, insurance won’t cover the main characters wife’s cancer treatments after it hits a limit, his investments that were guaranteed “safe” have gone down teh crapper, they are about to foreclose on his house and his assets are frozen because the firm that did the investing is being investigated so he can’t refinance.
It is far from well-acted but there are osme good wall street is filled with criminals rants and i suspect “justice” will start coming in bunches soon.
i’ll let everyone know how it turns out.
I think the lil guy will get scared at looking how far he is in the sky and pull back above the green floor, but then, from shock, he’ll slip and slide down the green line all the way back to ’09.
Since the Fed and the Federal gov screw around with the market and government reports (i.e. BLS) anyone who puts much faith in “technical” is kidding themselves. It’s all fake and phoney as hell.
When there is the possibility of a major breakdown, some mystery buyer..-TC
I wager that ‘buyer’ would be the plunge protection team AKA The Presidents Working Group on Financial Markets
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The Working Group on Financial Markets (also, President’s Working Group on Financial Markets, the Working Group, and colloquially the Plunge Protection Team) was created by Executive Order 12631,[1] signed on March 18, 1988 by United States President Ronald Reagan.
http://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets
dd
I was never short Facebook. I cleaned your clock on our bet. You lost. Deal with it. Remember asshole. Admin never loses. Are you still long JC Penney and Sears?
I don’t invest in rigged markets you douchenozzle.
The price never lies. It encompasses all the market’s psychology in one number.
There are no disinterested observers. Even Fed governors and CEO’s of JPM and GS are all part of the milieu.
Trees don’t grow to the sky.
The January pullback was the largest diversion below the daily EMA’s that I’ve seen since late 2012.
Only time will tell if this time it’s different. Given how much the last part of this rally was driven by willingness to borrow money to gamble on Wall Street, this is as good a place for a “top” as any.