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Daily Quant | 2015 | August
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2015 August

Monday, August 31, 2015

Posted by | The Weekly Brief | No Comments

 

Market Overview

YTD Performance

2015-08-31 YTD

S&P 500 Pacing

2015-08-31 SPPacing

It’s not over yet! Will the illiquidity reemerge?

Last week’s extreme action was caused mostly by the markets illiquidity last Monday with the Dow Jones down over 1000 at the open. This caused the S&P 500 to trade all the way down to 1867 before beginning a rebound on Wednesday as the extreme volatility continued due to the liquidity issue. We did see reasonable liquidity return on Friday but there were periods throughout the day when liquidity would dry up.

With China down again, this triggered some selling in Europe and the S&P futures. But the most significant negative sentiment came out of the Jackson Hole meetings as no real guidance came out concerning the rate increases in September. Federal Reserve president Fisher suggested that the September hike was still a possibility. As I’ve discussed several times in the past I do not believe that the market actions will be driven by whether the Fed raises rates or not. Market sentiment has changed substantially. Now, after the sharp declines that we’ve seen in the past two weeks, we are likely to see plenty of overhead resistance.

There are many market participants who got caught in that volatility that are looking to sell out of positions if the market rallies. There is a reasonable probability that if key support levels hold early in the week then we could see further movement to the upside.

As we begin this week we will see plenty of economic releases with all eyes ultimately focused on the employment situation due to be released prior to the market open on Friday. Expectations are for 223,000 new jobs and employment to decline from 5.3 to 5.2%.

The big news starts on Tuesday as we are going to see PMI Manufacturing, ISM Manufacturing Index and Construction Spending. Wednesday will see the ADP report and Factory Orders. Thursday’s releases will feature Jobless Claims along with the ISM Nonmanufacturing Index.

I continued expect to see extreme volatility for the next several days and possibly into the end of next week.


S&P 500 for the week of 08/10/2015

2015-08-31 PriorWeek

2015-08-31 PriorWeekLevels

Looking back on last week

Monday

The session began with an extreme broad-based selloff that began overnight in Asia and continued into the US trading session. In the end the S&P 500 was down 3.94% after opening with a 5.3% loss. The NASDAQ finished down 3.8% after starting the day with an 8.8% decline. Massive illiquidity triggered on the opening as there were a lack of bids in many of the primary markets. The big trigger was the Shanghai composite which was down 8.5% as the POC or the People’s Bank of China failed to intervene. They announced that pension funds managed by the bank could now invest in the stock market but this was not enough to stimulate any sort of buying. The NYSE invoked rule 48 which gives the market makers a reprieve from setting prices on the open. There were two interruptions of quotes and halts of market activity to get some stability back into the markets.

Tuesday

Markets started off on a very positive note as the S&P 500 was up nearly 2.9%. But in the last hour of trading we saw some heavy selling coming in to push the market negative on the session as the S&P 500 finished down 1.35%. The NASDAQ outperformed by finishing down only 0.4% after being up on the open over 3.5%. While the market started in a positive note it was surprising as China’s Shanghai composite declined again 7.6%. However, most of the reaction was to the POC’s announcement that it would cut its main lending rate by 25 basis points to 4.6%. This was viewed as a positive but the markets would not know the effects until the opening on Wednesday.

Wednesday

The market started on a higher note and chopped around through midsession. Comments from William Dudley from the Federal Reserve triggered some positive sentiment as he said it was unlikely that there would be a hike in September. The markets took off on a sharp rally into the close as the S&P 500 finished up 3.90%. Meanwhile the US dollar rallied as it was an indication of the carry trade flows that were coming back into the markets. China had also stabilized overnight which also helped to boost a positive market sentiment.

Thursday

The market opened higher and continued the advances to the upside as the S&P 500 was up 2.43%. There was a late afternoon selloff that looked like it was going to decline like it did on Tuesday but it reversed to close near the highs of the session. The Shanghai index soared 5.3% but most of this was due to an intervention by the POC. Meanwhile crude oil spiked 10.3% up to $42.53 per barrel. This helped keep market sentiment positive into the close. There were still signs of liquidity issues as in the last hour the S&P sold off 30 handles only to recover all of them by the close.

Friday

After enduring an extremely volatile week, the S&P traded in a narrow range for most of the session, but finished on the higher end of the session up 0.06% and 0.91% for the week. The NASDAQ was able to edge out a small gain of 0.3% and the Dow Jones was down 0.1% on the session. The NASDAQ finished up 2.5% on the week leading the way to the upside.

With only one session left, the S&P is on track to show a decline of 5.8% for the month. This would be the worst month of August since 2012. The Energy sector continued to climb helping to keep market sentiment stable. Meanwhile, the dollar index was up to 96.12 and the 10 year treasuries made a huge reversal coming back from 1.90% all the way back to 2.18% by Friday’s close.


S&P 500 for 08/28/2015

2015-05-29.2

Friday’s action finished the week in a very choppy session, finishing just slightly higher, up 0.06%. The configuration suggests that if the market can stay above the 1978.20 level today then we should see a challenge of the 1999.55 level. A penetration of this level would suggest a further rally toward the 2011.45 pivot level.

With today being the final closing session of the month it will be critical if we close below the 1985.60 level today. Should that occur, it will set the tone for further downside action as we go into the month of September. Consequently, it will trigger a potential sell on the long-term secular trends. I will discuss this on Tuesday’s market commentary, should it occur.

Furthermore, should the 1978.20 level be penetrated, then this would indicate a decline toward the 1966.30 level which is a key level on the charts at this time.

Most likely what we are going to see this week is continued volatility even though the three-day indicator has declined from 83 all the way down to 45.18. I continued to expect this to decline toward the 22-25 level. This will suggest that we will see the markets stabilize above the support levels between the 1978/1966 levels.

The weekly volatility suggests that the most likely range for the week will be 2040.95 on the upside and 1964.30 on the downside. The intermediate charts are the most revealing at this time. Should the market fail to rally above the 2068.40 level in the next three weeks then it will set the tone for a retest of the 1867 lows.

It does appear that the market should set up a major right shoulder top as there is substantial resistance at the 2068 level. This suggests that there is only a 30% probability for a penetration of this level. There is a 60% probability that the market will begin to decline in the next 2 to 3 weeks ultimately retesting the 1867 lows of last Monday and heading toward the target zone of the1820/1770 levels.

Be sure to tune into the Market Thunder show at 12 noon Eastern Time for the full technical review.

The market should open lower, with a 60 percent probability to close higher, should the market remain above the 1978.20 level today.  

 

Today’s Key Levels

ER 2034.05
R3 2023.40
R2 2011.45
Resistance R1 1999.55
Prior Close   1988.87 +1.21
Support S1 1978.20
S2 1966.30
S3 1954.40
ES 1943.70

This Week’s Key Levels

ER 2092.95
R3 2068.40
R2 2040.95
Resistance R1 2013.45
Prior Close   1988.87 +1.21
Support S1 1964.30
S2 1936.80
S3 1909.35
ES 1884.75

 

 

 

 

 

 

 

 

 

 

Friday, August 28, 2015

Posted by | The Daily | No Comments

2015-08-27.2

Extreme Volatility Continues…

Be sure to tune into Market Thunder for a full technical review of this week’s activity…

As I have been discussing over the past several days, the erratic behavior that we’ve seen in the markets this week has been due to pockets of illiquidity. This caused the markets to decline very sharply on Monday and then recover sharply in the last two sessions as we have seen an over 120 point rally from the lows of yesterday.

This is an extreme. The trading activity of this magnitude normally would take several weeks or even several months. This type of action continues to suggest that a major top is forming. The fact that we’ve rallied back very strongly off the recent low is not necessarily an indication of a major low. The setup is completely different than it was last October when we printed 1820.

There was some extreme panic selling going on Monday which looks to be climactic on a short-term basis and suggested that we would see a rally back. While the magnitude which we have moved higher has been impressive, it was done so on these illiquidity pockets. I still argue that the real price discovery has not yet occurred. I believe there will be at least another 3 to 5 sessions before we see stability at a price range where we can determine the true price of the markets.

The real test will be in the weeks to come. We will see if we have experienced one of the spike lows yet again like we’ve seen several times in the past (such as the taper tantrum from last year at 1820). The scenario that I believe we are going to set up is a right shoulder which will ultimately fail to make a new high. This will be followed by a new leg down to at least 1780 and possibly as low as 1645 over the next several months.

A continued defensive stance will be necessary during this period as bargain hunters will ultimately be caught again in the next downward pattern as this should set up as a bear trap.

We are poised to test a very critical level in the markets today. Should we continue higher, the range between 1996/2003 will represent a substantial resistance point. This suggests that the market is likely to test his level but will turn lower and consolidate for several days.

The critical level today on the downside will be the 1972.10 level. A penetration would indicate a decline back toward the 1954.65 level. This will be the critical pivot point on the charts from the next several days. A penetration of this level would indicate a retest of the 1867 lows rendered on Monday.

Alternatively, a penetration of the upper end of the resistance zone would suggest that the market could run toward 2020/2038. However, there is currently only a 30% probability for that to occur.

The three-day volatility indicator is currently at 66.04. This is likely to continue to decline over the next several sessions. This will set the tone for another decline if we fail to penetrate any key resistance numbers during this period.

The market should open flat to lower, with a 60 percent probability to close lower, should the market remain below the 2003.25 level today.  

 

Today’s Key Levels

  RX 2053.70
  R3 2038.15
  R2 2020.70
Resistance R1 2003.25
Prior Close   1987.66 +47.15
Support S1 1972.10
  S2 1954.65
  S3 1937.20
  SX 1921.60

Thursday, August 27, 2015

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Market Rallies, but Illiquidity Continues…

The action that we’ve seen over the last five sessions has truly been historic. There has been extreme volatility as the market tries to determine a true market price. As I discussed in yesterday’s commentary, price discovery in this type of market is very difficult. While the sharp rally yesterday looks impressive, there is a lot of air in the current pricing that we are witnessing.

The three-day volatility indicator is currently at 83.15. This is one of the highest readings that I’ve seen. It suggests that volatility should start to contract over the next several sessions. The most phenomenal thing about the volatility that the range indicator suggests is a range of 166 handles for one session in the S&P 500. This equates to a range from a low of 1857 to a high of 2023. This is not likely to be achieved but it illustrates the extreme volatility that we are seeing. This indicator is similar to the VIX in that it measures the probabilities of future volatility from a pure price standpoint.

I expect to continue to see extreme volatility for at least another 3 to 5 sessions. The markets continue to be very vulnerable to large swings up or down. As I discussed above, price discovery remains extremely difficult. While some market participants currently do not believe that the Fed will lower rates, none of the selloff had to do with the Fed or the Chinese situation.

The price action that you’re seeing is the realization of the excesses that are in the markets at this time. Once the normalization and true price discovery can be achieved again then we are likely to see a continuation of the market to the downside. The formation that is unfolding suggests it is highly unlikely that the low print at the 1867 level will be the bottom of this particular sequence. There is a 60% probability that we will move toward 1820/1780 over the next 2 to 3 weeks.

For today, expect extreme volatility to continue if the market cannot get above 1960.15. Expect to start to see it fade over the next two sessions, trading back toward the 1898 level. However, should the market penetrate the 1960 level we could see a move back toward 1982/1985. This level should represent a major resistance level in the pattern as currently there is only a 20% probability that it can trade through that level.

The market should open higher, with a 60 percent probability to close higher, should the market remain above the 1920.90 level today.  

Today’s Key Levels

  RX 2023.65
  R3 2004.05
  R2 1982.10
Resistance R1 1960.15
Prior Close 1940.50 +72.90
Support S1 1920.90
  S2 1898.95
  S3 1876.95
  SX 1857.35

Wednesday, August 26, 2015

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2015-08-25.1
Equity Liquidity Crisis…

Markets continue to trade in a very erratic behavior. We are seeing some serious liquidity issues throughout many of the key market industries, primarily on the derivative side. Having been an active trader for many years, I’ve not seen the type of illiquidity that we are currently seeing. This is causing serious issues with legitimate price discovery.

One of the key elements of a legitimate and healthy market is liquidity. The erratic behavior that we saw in yesterday’s session is producing distortion in determining real pricing in many markets. This is why we are seeing large swings several times within an hour.

While many feared that the liquidity crisis would occur in the bond market, it appears to have shown up in the stock market as we are seeing a traders strike. Many traders have stepped to the sidelines not providing the usual liquidity that’s in the markets. The lack of reasonable trading by them is causing systemic issues within the normal pricing mechanisms. The result of this is causing massive swings up-and-down intraday.

Due to this volatility, it is going to take at least 5 sessions for prices to stabilize, setting up the pattern that will tell us the next directional move. The three-day volatility index is now at 81 which is one of the highest levels I’ve seen going back to 2008. This suggests that we are likely to continue to see high volatility for next 2 to 3 sessions. This could extend to 5 to 8 sessions before normalization in the patterns will occur.

The key level on the downside today is 1864.50. Penetration of this level will suggest a decline toward the 1848.55 level. On the upside, the key level is 1886.70. A break through this level would signal a move up to 1908. Today’s action is likely to trade within an inside day if we don’t penetrate the 1867.10 level in the first two hours of trade. If this occurs, expect to see a generally positive session moving back toward the 1886 support level, possibly trading as high as 1908.

The action does continue to confirm that the market has entered into a full-blown downtrend as we now have a 60% probability that the market will trade down to the 1820/1780 levels before there is any true support in the market.

The market should open higher, with a 60 percent probability to close higher, should the market remain above the 1864.50 level today.

Today’s Key Levels

  RX 1948.40
  R3 1929.30
  R2 1908.00
Resistance R1 1986.70
Prior Close 1867.10-25.60
Support S1 1848.55
  S2 1827.20
  S3 1827.20
  SX 1786.45

Tuesday, August 25, 2015

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Global market meltdown accelerates…

After some 35 years plus in the industry, I thought I would never see a nearly thousand point drop on the Dow Jones. The S&P down 103 points at its worst level came back to close 77 handles off Friday’s close. The extreme volatility that we’ve seen over the past three sessions is likely to continue today. However, after a steep drop like we’ve seen, it is likely that today’s action will trade within the inside range between the 1926/1933 level on the upside and between 1859/1841 on the downside.

The last three days’ action in my opinion has changed the conversation that will be going on amongst market participants. Now that it’s obvious that the Fed is not interested in controlling asset prices and are set to raise rates, we are likely to see market participants focus on other elements that have been working in the background. It is my opinion that the market breakdown represents a huge shift in market sentiment and is not likely to change anytime soon. The likelihood of a sharp rebound from the bottom again is very low. The circumstances that are around the markets on this decline are substantially different than what we’ve seen in the past.

As I have discussed in the Market Thunder show for several months now, I was expecting to see a market high in July and then to see a decline through the next several quarters moving down toward the 1820/1780 levels initially. With yesterday’s action we did see the S&P trade down to the 1867 level. We should see after two days of consolidation a continuation of the move to the downside to reach these zones.

On the upside for today, the market should be limited to the 1926.90 level as an extreme. If penetrated, only a 30% probability, the markets would continue toward the 1960/1972.50 levels.

Should the market penetrate the 1859.50 level on the downside, this would suggest a decline toward the 1840/1825 level and would also trigger panic selling in the market.

My expectation is for at least two days of stabilization before a resumption to the downside.

The monthly models are likely to signal a sell signal which will terminate the long term secular bull market that we’ve been in since 2009. Should this occur then we will be entering a new phase of the markets which is likely to continue for at least 18 to 24 months. The overall configuration suggests that the breakdown of the secular trend could even have further implications.

The next 2 to 3 sessions will be important to understand how the next configuration will unfold. After a sharp break like this it will take anywhere from 8 to 12 sessions minimum to normalize the market after this extreme volatility spike. During that time markets are likely to trade in a very random fashion, whipping in a range rather than any type of new trend at this point.

The market should open higher, with a 60 percent probability to close higher, should the market remain above the 1877.30 level today.

 

Today’s Key Levels

  RX 1960.60
  R3 1944.70
  R2 1926.90
Resistance R1 1909.15
Prior Close 1893.21 -77.68
Support S1 1877.30
  S2 1859.50
  S3 1841.70
  SX 1825.80

Monday, August 24, 2015

Posted by | The Daily | No Comments

Your Guide to the Weekly Brief Commentary

Market Overview

YTD Performance

2015-08-24 YTD

S&P 500 Pacing

2015-08-24 SPPacing

Global meltdown continues.

As we begin this week we start where we ended last week; with the markets declining 2% or more on the open based on projected overnight activity. China continued the meltdown as the Shanghai index was down 8.52%. The environment has become quite risky. It is possible that we could see further panic selling if support levels are not held which I will discuss later in this report.

I have discussed on the Market Thunder show many times that I believe that the market would come to a point where it would no longer participate in the Ponzi scheme that the Western governments and China have been placing on the markets. It is now obvious that they have lost control of the markets. Certainly it is possible that some extreme intervention could occur causing the market to find support. Regardless of whether that happens or not, the market action that we are seeing is clearly the beginnings of an elongated decline.

As I’ve also discussed in the past, there is no reason for the market to rise and every reason for the market to go down. We continue to see economic activity waver in a very mixed fashion for the last 18 months. If the market can penetrate through the 1932.45 level basis the S&P 500 today then it could trigger extreme panic selling, pushing the markets well below 1900. More on this later.

If you look at the economic activity this week you’ll see that there is no real material news to come out. Tuesday Consumer Confidence and New Home Sales is released followed by Durable Goods on Wednesday. Thursday GDP and Jobless Claims will be released. Finally, on Friday Consumer Sentiment. But does anyone even care about these numbers as we come into this week? The expectation is that GDP will show an increase of 3.2% but I don’t believe that matters.

As I discussed in Friday’s Market Thunder program, I believe that we have signaled a major top and that we will continue to see a decline that will last for at least 18 months. The magnitude of these declines are likely to be substantial, even if we see extreme volatility in the next several weeks.

The reality is that the market has been broken. Everything has been exposed. It will not work as it has been working and assets are likely to finally readjust themselves in spite of any government intervention will be able to solve. The markets now know that there really is no more bullets left and that the market needs to correct substantially.

I cannot expect to see a recovery in spite of the extreme selloff that we’ve seen in the past four sessions. The good news is that your portfolio should be well positioned for this decline as most equity positions have been sold out several weeks ago. ETF and mutual fund positions have been honed down to nearly 0 well ahead of this decline. The VPM models have moved to only a 14% bullish position as we continue to see mass liquidation. However, one of the hotspots that is emerging is the municipal bonds space. They are seeing quite a bit of traction as a flight to quality trade has begun. This is perfect timing so that many of you can utilize the Cash Reserve Municipal Bond Premier Portfolios that are in the system for your cash balances. There are multiple states that we have been able to locate an adequate number of bond funds that you can utilize.


 
S&P 500 for the week of 08/17/2015

2015-08-24 PriorWeek

2015-08-24 PriorWeekLevels

Looking back on last week

Monday

The market began trading on an upbeat note although it was very quiet with low volume once again. The S&P 500 finished higher by 0.5%. The markets were able to turn a 10 handle loss into 11 point gain while the NASDAQ composite was able to rise by 0.9%. Most of this activity was short covering which began shortly after the beginning of the session.

Tuesday

After the market unfolded in a broad-based rally on Monday, it gave up more than half of the gain on Tuesday. The S&P 500 lost 0.3%. The NASDAQ declined 0.6%, underperforming the other markets. Market volume continued to be very lackluster as we had fewer than 700 million shares changing hands on the NYSE floor. News out of China effected market sentiment as the Shanghai composite was lower by 6.2%. While there was no explanation for the decline in the Shanghai composite, many market participants believed that it was a better than feared housing starts report which would keep the People’s Bank of China from implementing further stimulus.

Wednesday

The market ended Wednesday’s session on a lower note after enduring a very volatile day as the S&P 500 finished lower by 0.8% as it turned from a positive week into a negative decline of 0.6%. Overnight news out of China that they were able to rally 1.2% had no impact on market sentiment. The action in crude oil pushed the market lower by 4.3% to $40.80 per barrel put further pressure on the markets. Inflationary expectations continued to rise as the week unfolded.

Thursday

The markets registered their third consecutive decline with the S&P dropping sharply by 2.1%. The market declined to levels not seen since early February and the NASDAQ sold through the extremes down 2.8% continuing to be weaker than the other indices. There continues to be rhetoric and uncertainty around the rate hike speculation and concerns about global slowing. Meanwhile, the China market continued its decline of the Shanghai index as it was down 3.4%. The Chinese government released an estimate that the GDP would be lowered to 6.5% but most folks don’t believe that as they believe it’s closer to four and maybe 3%. This kept plenty of pressure on the market throughout the session.

Friday

Friday’s action experienced new panic levels of selling as the SP 500 plunged 3.2%. The 65 handle selloff pushed the market down to levels not seen since late October of last year as the index lost 5.8% for the week. The markets started on a very weak note and just continued to decline sharply in the last two hours of trade as we saw a panic sell pushing the Dow Jones down over 500 and S&P down 64 handles. Meanwhile, China continue to decline as it saw a 4.3% decline is it extended its weekly sellout to 11.2%. Most of this was based on the manufacturing PMI that came in at 47.1% as this was a 6 ½ year low looking back all the way to 2009.

   

S&P 500 for 08/21/2015

 
2015-05-29.2  

Friday’s action saw a sharp selloff as the markets pushed through some critical support around 2002. Once this level was penetrated we saw a sharp decline as the market finished on the low of the session at 1970.89-64.84.

The configuration suggests that the market will continue lower with overnight selling pushing the possibilities of the market trading down to the critical support of 1932.45. Penetration of this level would set the tone for a decline down to 1912.15/1894.00.

This key support is at the 1949.30 level. If this is penetrated, then we will likely see a further decline to the 1937.85/1932.45 levels.

On the upside, the key pivot number is 1992.50. Penetration of that level would signal a reversal. There’s only a 30% probability for that to occur.

As I mentioned earlier, the VPM database has issued several orders bringing the bullish percent down to 14%. This has not been seen since 2008. One of the more interesting facts about this is that the market is at much higher levels than was realized after the Lehman crisis when the market was already down substantially. With the market still only 7.6% off its highs, this is a very unusual event that we are seeing.

I discussed for the past several months that the lack of participation in the database was very dangerous from a trend standpoint. Also, I had projected that a high would occur in July which has been the high. Today we are now seeing that nearly every momentum stock has now failed.

We are likely to see some extreme volatility over the next three sessions as the configuration suggests that a major topic has been signaled. Especially if we can stay below the 1984 level on a monthly basis which will be the close next Monday. Should this occur, it will suggest that the market will continue down toward the 1820/1780 level. This would represent a retest of the taper tantrum that we saw last year.

Please remember that there will be no Market Thunder show today. The next one will be on Friday of this coming week.

Many of you know we are in Sedona at the Renew retreat. We will continue to write detailed commentary over the next several days to ensure that you have full awareness of all the patterns going on.

The market should open lower, with a 60 percent probability to close lower, should the market remain below the 1981.10 level today.

 

Today’s Key Levels

  ER 2014.15
  R3 2003.95
  R2 1992.50
Resistance R1 1981.10
Prior Close 1970.89 -64.84
Support S1 1960.70
  S2 1949.30
  S3 1937.85
  ES 1927.65

This Week’s Key Levels

  ER 2047.76
  R3 2029.60
  R2 2009.35
Resistance R1 1989.05
Prior Close 1970.89 -120.65
Support S1 1952.75
  S2 1932.45
  S3 1912.15
  ES 1894.00

 

 

 

 

 

 

 

 

 

 

Friday, August 21, 2015

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2015-08-20.2

Massive selloff, S&P 500 closes below support…

Special half-hour Market Thunder show will be aired today at 12 noon Eastern time.

Yesterday’s action was extreme as it was able to trade through the key support early in the session and then entered into a sharp collapse of prices, trading as low as the 2035.73 level where it also closed. Typically, when a large decline like this occurs and closes on the low of the day, we will see some follow-through early in the session today. However, the market will then usually close higher on the session, retracing part of yesterday’s decline. Yesterday was also the third day down in the pattern which suggests there should be a 1 to 2 day rally then a resumption of the downside. During this rally, should it occur, it should not move above the 2068 level.

The key pivot number in the pattern is 2029.75. Penetration of this level would indicate a further decline toward the 2023.10/2016.40 levels. As I mentioned in yesterday’s commentary, the only objectives were on the downside which were 2044 and extremes of 2018/2002.

With today being a Friday, if we can close below the 2061.80 level then this will signal further weakness to head toward the objectives I mentioned above.

The VIX has moved up to the 19.14 level which is near the extreme that we reached a couple weeks ago on the decline to the 2044 level. As I have mentioned over the past several weeks, it does appear that we are forming a major top and is likely see a minimum decline down to the 1980 level before this minor sequence is completed.

The market should open lower, with a 60 percent probability to close higher, should the market remain above the 2029.75 level today.  

Today’s Key Levels

  RX 2061.00
  R3 2055.05
  R2 2048.40
Resistance R1 2041.70
Prior Close   2035.73 -43.88
Support S1 2029.75
  S2 2023.10
  S3 2016.40
  SX 2010.45

Thursday, August 20, 2015

Posted by | The Daily | No Comments

2015-08-19.2

Wheels coming off? China continues to decline down 3.39%…

The roller coaster ride that we saw on Wall Street yesterday is just the tip of the iceberg. We are seeing international volatility increase across all markets. Yesterday the S&P 500 was down over 22 handles only to rally back to unchanged and then finish down 17.31 on the session. However, with the downward pressure coming out of China, we are seeing Europe and the US futures trade lower overnight.

As I have mentioned over the past several commentaries, the only objectives from the pattern that is being generated are downside targets of the 2044 level with extremes of 2018/2002.

For today, if the market penetrates the 2075 level then it will indicate a decline down toward the 2064.70/2060.10 levels. Should the S&P 500 finish below 2069.85 today, this will confirm lower prices and will trigger the short-term models into a minor downtrend.

The markets have continued to decline over the past seven months to these lower levels and bounce back into the range toward the 2100 level. There certainly is more reasons to sell this market then there are to buy it. We continue to see lackluster economic activity and very little impetus for any sort of rally at this time.

To exasperate these issues even more is the declines in crude oil closing down below $41. This is triggering more risk on some of the oil loans and institutions that have financed many of the fracking operations in the new producing areas that have emerged over the last several years. Meanwhile, Saudi Arabia is cranking up the pumps adding even more supply keeping the WTI crude under extreme pressure. Canadian oil prices have dropped to $23 a barrel. This could be an impetus for WTI to decline toward the $36-$32 levels. Meanwhile, we are just a couple weeks away from the end of the summer driving season where demand is likely to decline and with the increased supplies there’s only one way to go.

Considering much of the risk that is emerging within the markets, we continue to see very complacent attitudes from market participants concerning downside risk. It is likely that if we can finish this week under the 2069.85 level that this will trigger further selling and the possibility of finally breaking through the bottom side of this range as the market sentiment is likely to decline sharply.

Should this occur, this could trigger some panic selling. We could see a very quick move down to the extremes of the current objectives of 2018/2002. The implications of a penetration of this range actually are much larger as we look at the intermediate and long-term charts. It is very likely that we are going to see a decline toward the 1980 level and the potential to trade all the way down into the 1780 levels over the next several months.

Meanwhile, the Fed is attempting to get out of the QE business and start the lift off to raise rates. In the end it won’t matter if they raise rates or not. They have no ammunition of any sort to support the markets at this point. Any action that they would do that would look like stimulus would most likely be a sign of economic weakness which could trigger a panic.

At the risk of going into a full rant, I believe that the portability for the markets to decline sharply is greater than 60% at this time. It is very likely that we are seeing a major high being formed. As we come into September this statement should become even clearer.

Be sure to make sure that your portfolios are in sync with VPM as this is likely the beginning of a much bigger decline to unfold.

The market should open lower, with a 60 percent probability to close lower, should the market remain below the 2089.40 Level today.  

Today’s Key Levels

  RX 2099.15
  R3 2094.50
  R2 2089.40
Resistance R1 2084.20
Prior Close   2079.61 -17.31
Support S1 2075.00
  S2 2069.85
  S3 2064.70
  SX 2060.10

Wednesday, August 19, 2015

Posted by | The Daily | No Comments

2015-08-18.2

Market Hesitates as Market Participants Wait. Only four weeks away from the FOMC meeting.

Markets chopped around yesterday but drifted lower as the S&P finished down 0.26%. The configuration suggests that the market is likely to continue to decline today, testing some key support levels at the 2089.45 level. A penetration of this level would suggest that the market will continue to decline toward the 2082/2079.30 level. The key pivot level on the charts now is the 2079.30 level. A penetration of this level will indicate a move down toward the 2071/2066 levels.

As I’ve mentioned over the last several days, the only objectives on the charts right now are on the downside. This still suggests that we are likely to decline to 2044 with an extreme of 2018/2002.

The key level on the upside is the 2104.40 level. If we are unable to penetrate this level in the next two sessions then it will confirm these lower prices.

As we continue through the dog days and low-volume, there does seem to be some momentum building for a decline.

There is some possibility for a change in market sentiment to the downside should the CPI come out greater than 0.2%. Should this occur, it could trigger some selling and could cause an uptick in treasury yields. Also, we will see the FOMC minutes from the last Fed meeting. There could be some details that are revealing about the potential rate increases in September.

The market should open lower, with a 60 percent probability to close lower, should the market remain below the 2104.40 level today.  

Today’s Key Levels

  RX 2111.85
  R3 2108.30
  R2 2104.40
Resistance R1 2100.45
Prior Close   2096.92-5.52
Support S1 2093.40
  S2 2089.45
  S3 2085.50
  SX 2082.00

Tuesday, August 18, 2015

Posted by | The Daily | No Comments

2015-08-17.2

Shanghai Melts Down Again; Over 6%!

New fears came out of China that a continuation of the currency devaluation is likely. This triggered a very negative market sentiment in China pushing stocks down sharply. Some moderate weakness has flowed over into the European markets and to the US futures overnight.

Once again the market has traded up just above the 2100 area and we are seeing the probabilities of the market decline back into the trading range again. It will be critical that the 2103.25 level is penetrated in the next two sessions. Should this level not be penetrated, then it is likely to suggest that the markets will decline to the 2079/2066 levels over the next 3 to 4 sessions.

As I mentioned in Monday’s Market Thunder show, there continues to be a lack of momentum or any fundamentals that are likely to drive the markets higher. Meanwhile, market participants appear to be looking for a negative story to try to sell the market off again, watching for the ultimate breakdown of the patterns. After seven months of sideways trading action it does appear that we are seeing a massive distribution. If it were not for the buyback programs by many large companies then the markets would be much lower already.

Currently the only objectives being generated by this pattern is to the downside with a minimum objective of 2044 with extreme objectives of 2018/2002.

With very little news coming out this week, it is likely to drive the market either way. It would appear that this Chinese story will continue to dominate market sentiment.

The market should open lower, with a 60 percent probability to close lower, should the market remain below the 2103.25 level today.  

Today’s Key Levels

  RX 2119.15
  R3 2115.20
  R2 2110.80
Resistance R1 2106.40
Prior Close   2102.44 +10.90
Support S1 2098.50
  S2 2094.10
  S3 2089.70
  SX 2085.75

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