Friday, 26 September 2014

A very important break

US indexes only opened moderately lower, but with the failure to hold sp'1978, there was continued selling, and we saw a style of price action not seen since late July. The bigger issue now is how low can we go into October... and across the fourth quarter?

R2K, monthly'3 - fib levels


Perhaps the most important chart to highlight right now is the R2K.

I've been dismissive of it for months - since it has effectively traded sideways, stuck between the 1210s and 1080s, but after 8 blue monthly candles... we finally have an outright bearish red candle.

There is also a break of the primary upward trend, with first target downside of around 1000, with secondary in the low 900s.

Best downside case?

The following is a new chart.... resulting from today's bearish price action...


For the equity bears (and yes, I'm still one of them at heart), the closer we can get down to the August low of sp'1904 the better. If the current wave continues to at least the 1920s, it will offer a very large H/S scenario.

A bounce in mid October - probably to the 1970/90 zone, would make for the dream re-short. A simple trading stop of course would be somewhere in the low 2000s.

Right now the hope of the 1700s before year end is a mere hope, but if we can battle to the low 1900s next week, I'll strongly consider that Alibaba marked a key intermediate top at sp'2019.

Looking ahead

We have GDP (second revision).. market is seeking an upward revision to 4.6%. That seems overly optimistic. There is also consumer sentiment around 10am.

*next QE is not until next week.

*Bonus chart*

I was going through a few of the 'bigger picture' charts, and noticed Copper...

Copper, monthly

Once again we're brushing the important $3 threshold. Those deflationary bears seeking a key equity top should certainly be keeping an eye on Copper. Primary downside target would be the low $2s.

Those seeking an equity inter'4 down, should look to summer 2011 at the inter'2 wave in Copper... a huge down wave... which right now would indeed result in the $2.25/00 zone before year end.

If Copper remains weak, it does not bode well for the precious metals - especially the more industrial Silver. Further... if the metals continue to decline, it would keep downward pressure on the mining stocks.

A busy day

Certainly, I'm surprised at how today panned out. However, as noted in the morning, once key support of sp'1978 was taken out... 'something new' was clearly underway. I will always endeavour to be open minded on days like today.

It has been a busy day, but I wanted to say thanks for the emails/messages, I do appreciate it. I can only hope the market does finally see an inter'4 wave down... its been a long time coming, and those few bears that are still around, sure as hell deserve some profitable entertainment into year end.

Goodnight from London

Video update from Mr C.

As ever... make of that...what you will.