Friday, 14 December 2012

A day of weakness

With the main indexes closing lower, it has to be asked, is that really it for this up cycle? The move from 1343 to 1438 may indeed by the 'stupid bounce' that I had originally sought..and now apparently is complete. The doomer bears still need to be cautious in the days ahead, but...things could soon get rather exciting.


sp'weekly2, rainbow

sp'daily7 - fib levels


Today's declines are certainly nothing dramatic, but considering we were brushing up against the scary sp'1440s yesterday, it is very pleasing to be pulling back lower. The fact we closed <1420, was a little bonus in my view.

Spiky weekly charts

The weekly index charts are starting to put in clear spiky tops, which are often indicative of a turn - just as spikes are often seen at key floors. The weekly rainbow chart is still sporting an outright green bullish candle, but I'm not too concerned about that.

Fib levels

The recent low was sp'1398, I'm pretty confident that won't hold, in which case, where then? The 200 day MA @ 1387 will be massively important, so..yes, I'm certainly seeking a return into the 1380s next week. The fib' retracement would suggest maybe we'll get stuck around 1379..somewhere in that area.

So, considering the moving averages, past key lows, and the fib' chart, I'm seeking my next pre-Christmas exit around 1385/80 - next week.

Bonus chart

I wasn't planning on throwing this one out there this evening, its more of an academic curiosity than anything...

NYSE Composite, weekly, 20yr, Renko - 3 bubbles

Even though I generally (to my own surprise) only write about short term charts, my background is really in economics, with a great interest in the 'bigger picture'.

The above chart summarises the past few decades of nonsense. Three giant bubbles, each more insanely based than the previous one. The present 'paper' bubble, created in part by Bernanke - but also by other central bankers, is of course what is likely the final bubble of the modern era.

At some point in the years ahead, - my best guess is sometime between 2015-17, the paper bubble blows up. Whether its via a bond market collapse, hyperinflation, or just a combination of societal/economic issues, the end of the paper bubble will be a painful one.

In terms of this Renko chart, we have our first brick/block to the downside. A break <6500 will be significant, and signify a move into the 4000s. That is around 40/45% lower than current levels, equating to the sp'700s.

Whether that happens in 2013, 14..or 15..doesn't really matter in the bigger scheme of things. What is clear, when this bubble ends, it will be the start of another series of difficult years, especially for the EU and United States.

Looking ahead

I am quite looking forward to tomorrow. We have two pieces of econ-data, consumer prices and industrial production - both announced pre-market. We could open higher on any 'spurious' fiscal cliff news, but so long as we stay in the 1420s, I'll have no concerns.

Indeed, right now, the ultimate stop level is arguably now sp'1438. The big money bears can start to increase their positions in the days ahead. All thats missing is a VIX back in the 20s, that would really spice things up before Santa appears.

Goodnight from London