Friday, 8 January 2016

Awaiting short term capitulation

It was just another day for the US equity market, with the third big daily decline of four days. The sp'1920/00 zone looks a rather easy target. However, the 1700s are a viable target for next Monday, if the Friday close is at/near the low of the day.



So, we're net lower on the week/year by a full 100pts (4.9%).. and there is currently ZERO sign of a floor. Indeed, from a weekly cycle perspective, a hit of the lower bollinger - currently @ 1903, would be a valid target for Friday/Monday.

Any Friday close near the lower bol' will open the door to a fierce capitulation next Monday.

Fibonacci chatter...

*There are a fair few fib' retraces/extrapolations on the following chart. I suggest you save it, and then view for better clarity.


If you accept the bear flag from Aug-Dec'... then a 1.6x fib' extrapolation offers the low 1700s as a basic target.

Whether the US/world markets are in the early phase of a 2008/09 collapse wave... impossible to say. I'd need to see a monthly close <1500 to have any serious consideration of that.

Indeed, I hold to the outlook for 2016 I posted on Monday.

Looking ahead

Friday will see the monthly jobs data. Market is expecting 200k net gains, with a static jobless rate of 5.0%. Frankly, relative to the recent ADP jobs number, 200k should be exceeded. The issue is whether the market will see it as good news... or will dismiss it, in face of other  concerns.

*fed officials Williams and Lacker will be speaking

Wild week

Regardless of the exact Friday close, it has been a wild week. The mainstream has already become a little twitchy, with talk of no more rate hikes, and even some murmuring of QE4.

What should be clear now... there can be high confidence in a mid term top, with much lower levels due in the days, weeks, and months ahead.

As I noted at the weekend, the default trade is now to the short side... and other than a monthly close back above the monthly 10MA (currently, sp'2040s).. nothing will have me change that view.

Goodnight from London