Archive for the ‘crash’ Category

This post is republished…because it was posted the 3rd February and the 9 February happened exactly hat I told you…wait and see if the media catch up the issue energy junk bond and bank! They did it!

And now oil has a target between $20/$25…good luck!

 

 

Well, after the Bank of Japan intervention it seems the Bear are reassessing themselves. What now?

In effect I already posted that the BoJ could only delay the inevitable.

What I do see. I see that 2016 is great opportunity for smart managers.

The low of January has a pattern that does not look like holding and we are going to re test it.

Unless another panic event comes along, the natural end of this correction (please read correction, not crisis) would end up somewhere between 1,820 and 1,720.

When? Between February and March (which is the seasonal oil lows…between $20 and $26). Then there will be a recovery into April and a zig zag trend until October.

More technical updates later as this is what I keep on posting from a while now – but readers keep on asking me about updates.

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As predicted, we saw the intervention of the ECB and this week we will probably see the Fed and Bank of Japan.

The short squeeze, depending on strength, has targets area 1,920, 1,970 and then 2,050. (it would be ASX200: 5,350/5,400 approximately).

On a technical analysis point of view the graphs says “it’s a trap!!”.

Unless it clears the all time highs 2,130 – the targets between here and October at 1,785, 1650 and, on panic, a spike on the 1,550 (ASx200: 4,000 or lower!)

Yes the Reserve Banks could negate this pattern. And that is why I say “a game too dangerous”.

But it definitely looks scary

This week will be a decision maker.

We just had Draghi speaking and China intervening. Now next week we wait for Yellen and the all important FOMC.

The issue is SP500: 1,870 and the algorithm trading.

If the Reserve Banks cannot stir the market decisively above  1,870 the machines can see two targets 1,785 in the near terms and 1,500 between here and October.

What is worst, as 2008, a lot of asset classes looks like linked…so not much protection there.

Scary picture, I know. very few places to hide.

Algorithm trading is really diffused in the US – not a fantasy or a conspiracy theory (there are several pieces of information even from the SEC – Security Exchange Commission -US). Last year they seem to have a momentum trading style (so pushed over and over the FANG – Facebook, Apple, Netflix, Google) – this year they seem to have changed style in a price/volatility.

Evercore data signals that on 101 momentum stock, only 5 have risen since start of 2016. Now Robotic buy/sell by quantitative machines has turned to price trend/volatility.

There are a few strategy to fight back – but overall, for the market, only the the Gang of Reserve Banks (US, China, Japan, Europe and England) can save it.

Definitely, if you are not aware of this, you have a problem.

After the full on falls, the markets seems to have calmed down. Is it finished yet?

Unfortunately probably not…yet. There is still some pain to go, but not much.

Why I say so?

The pattern we had since start of January has the classic pattern of the Machines attack (which is algorithmic trades software that trades 1000 positions per minute).

This January was particularly vulnerable as the FED was out and see the reaction to its interest rate move, in the US there were no Buy Backs planned plus most people were on holidays. In a market with so low volumes the Machines can reign supreme.

A bit like Terminator…when the Machines attack with such low volume the only choice is run.

Usually the Machines have a 3 days attack pattern (considering holidays they respected it…first attack 30-31 December and the 4 January – then 6-7-11 January) until they push the index in deep oversold and the stop. Now we are in a stop zone – so we need to be careful on what happen next.*

My November target  was a low under the previous of 1,867…so I would stay out.

Unfortunately, on a technical view, until this happens the SP500 is likely to be trapped between 1,850 and 2,130 (the technical low is 1782 in January 2014)

Please do not even try to short the market. As I said in a previous post “in 2015 any crowded trade (so where the mass thinks is going to happen) did not work, and it will not work in 2016”. Now the crowded trade is “doom and gloom” so there is quite a potential for a savage snap back (rally) fueled by people (and Machines) that need to cover their positions.

All in all, the idea is being calm and do not listen to the noise. Unless there is an event (US High Yield bond crisis, Iran attacking Saudi Arabia or something similar) on top of this situation this is a normal correction.

 

*For the people that do not believe it, please read an article from 2014

http://www.extremetech.com/extreme/176551-new-laser-network-between-nyse-and-nasdaq-will-allow-high-frequency-traders-to-make-even-more-money

Definitely there is a lot of complacency in the market, mostly due to our propaganda filled media.

– PM Tsiparas is doing a ballet…saying to the Eurocreditors (Euro Group) that he will be more lenient and accepting their requests and play the hard core rebel with the Greek voters

– The media push amazing YES vote in polls….and if you look into the polls the sample is just 1,000 persons in Athens and the difference between Yes and No is irrelevant (5% within statistical error)

-The Eurogroup is playing hard core no deal before referendum (which has been already threatened in its legality as the Greek Constitutions forbids referendum on fiscal matters).

– On the other side Europe decided not to cut the emergency assistance.

As a primary consequence it look like PM Tsiparas is in a corner and could lose government majority even if a NO wins, with more confusion ensuing.

On the stock market we are having a nice rally, but looks like more an oversold rally to me.

The key point is SP500 2,072/2,067. But the deteriorating pattern in DJ Transportation and DJ Utilities indicates that is more a matter of time before the breach occurs.

China – after the PBOC intervention we saw another wipeout caused by the shadow margin lending. In my view this is a basing pattern and it will be volatile for a while. But a crash is something that the Chinese Government does not want (also it did not want a mega rally as before as it is unsustainable)

So we can still expect a weak July and then a volatile recovery pattern in August.