Thursday, 18 February 2016

We are here?

It was another bullish day for the US equity market, with the sp'500 settling +31pts @ 1926. The market has now climbed 116pts across the last 21 trading hours. It has to be asked though... how much higher will this up wave reach.. and will the next down wave break <1810?




The above chart covers 8yrs.. so I suggest you right click and 'view image' for a closer look.

First... the ultimate issue in my view is whether the current rally stalls.. resulting in a lower high, and then whether the next down wave can break <1810.

Every cycle is unique of course, but the pattern of 2007/08 is unquestionably similar to what we have now.

Just look at the MACD (green bar histogram)...

1. the down cycle flooring in July.... then rally into August
2. a top in late August.

It was with that failure to keep rallying, which then resulted in the market imploding across Sept-November.

In my view.. bears MUST hold the line at sp'2K..... but preferably... no higher than a 50% retrace of the wave from Nov'2015 to last Thursday afternoon.

Looking ahead

Thursday will see the usual weekly jobs, phil' fed', and leading indicators. Also of note, the latest EIA oil report (11am).

*Fed official Williams is due to speak in the late afternoon.

Go stare at that for an hour

So... what do YOU make of weekly8f?  The pattern is clearly similar.. and the setup from mid March onward into April offers a potential wave to the 1600s.

We are yet to see capitulation in the oil/gas/mining sector. I'm seeking some mid tier listed companies to file for bankruptcy in the coming months. How much that upsets the world capital markets... difficult to say. What does seem absolutely clear though... sp'1810 - with VIX 30 was no capitulation.

Keep in mind, my original outlook is that the sp'500 will hold the double top of 2000/2007.. aka... no lower than 1600 this spring/early summer. The last three days though, should be a reminder to the bears just how powerfully bullish this market can turn.

Goodnight from London