Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19
The Exponential Stocks Bull Market Explained - Video - 13th Mar 19
TSP Recession Indicator - Criss-Cross, Flip-Flop and Remembering 1966 - 13th Mar 19
Stock Investors Beware The Signs Of Recession / Deflation - 13th Mar 19
Is the Stock Market Still in a Bear Market? - 13th Mar 19
Stock Market Trend Analysis 2019 - 13th Mar 19
Gold Up-to-Date' COT Report: A Maddening Déjà Vu - 12th Mar 19
Save Fintech? Ban Short Selling. It's Not That Simple - 12th Mar 19
Palladium Blowup Could Expose Scam of Gold & Silver Futures - 12th Mar 19
Next Recession: Concentrating Future Losses & Bringing Them Forward In Time As Profits - 12th Mar 19
The Shift of the Philippine Peso Regime - 12th Mar 19
Theresa May BrExit Back Stab Deal Counting Down to Resignation, Tory Leadership Election - 12th Mar 19
Phase 1 of Stock Market Correction - 11th Mar 19
Long Awaited Stock Market Pullback has Finally Arrived - 11th Mar 19
US Presidential Cycle and the Stock Market - Video - 11th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - 11th Mar 19
Chinese Economic Data Shakes the Global Stock Markets - 11th Mar 19
The Fed Is Playing a Dangerous Game - 11th Mar 19
The Stock Market Has Called the Fed’s Bluff, What’s Next? - 11th Mar 19
Turkey Holiday Bazaar Extreme Jewelry Price Haggling - Fethiye Market - 11th Mar 19

Market Oracle FREE Newsletter

Stock and Finanacial Markets Trading Analysis Worth

Stock Market Massive Head and Shoulders Bearish Price Pattern

Stock-Markets / Stocks Bear Market Feb 08, 2010 - 02:31 PM GMT

By: Captain_Hook


Best Financial Markets Analysis ArticleMajor stock market indices put in outside weekly reversals last week, which is a bearish technical indication the intermediate-term trend may have finally rejoined the primary forces that would see prices far lower were it not for official intervention. And although this intervention is now getting talked about in the press in a more intelligent fashion, even if only on a very limited basis, it should be understood most remain oblivious to what makes the stock market world go round.

The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Tuesday, January 26th, 2009.

Of course while better than nothing in terms of enlightening the masses, at the same time it should also be understood that such accounts never present a comprehensive explanation of what causes prices to trend (meaning intelligent speculation is still possible), with the attached above yet another example of this, offering no discussion on investor sentiment, cycles, and so on. The aspiration Mr. Biderman ultimately comes to, that the low volume ‘jam job’ government price managers have engineered is likely a ‘ticking time bomb’, is correct; however such an account is still lacking, and far too late for those unfortunate and unaware speculators who have already been ravaged by such activities.

And it’s likely fair to say it’s also far too late for Obama to repair his image as well, and that of his administration, even if Geithner is replaced by Paul Volker for the State Of the Union Speech on Wednesday, which is the rumor. Obama, being a particularly self-centered political neophyte, will do anything to keep his approval ratings up, including attempting to steer negative public sentiment towards vulnerable key members of his administration apparently. While this may appease the mob temporarily, in the end, because he is essentially attempting to keep a spoiled child happy, which wouldn’t work even if the economy were to recover (which it won’t), such efforts will of course fail, like those taken to steer various markets (precious metals, stocks, etc.). Speaking of this, and the Fed’s central role in official market rigging activities under the guise of being necessary in terms of Working Group activities, here, even if Bernanke gets reappointed this week it won’t matter either, not in terms of the inflation / deflation debate. Stocks, in their lead role in keeping things ‘glued together’ will fall in spite of the Fed’s best efforts no matter who is in charge when speculators change their betting habits, which we know from our work is now happening.

That’s right, it’s happening right now according to our sentiment tudies, where update US Index open interest put / call ratio distributions are suggestive speculators are now buying the dip (weakness) once again, meaning the ratios should begin falling and remain low as prices continue to fall. This is exactly the same thing that happened at the top in 2000 as well when the mania finally burst, where the bears simply disappear due to both financial and psychological exhaustion, and the short squeeze in stocks comes to a crashing end. And the bulls, they are all ready for a rebound already, especially since stocks have now met correction targets consistent with previous turns during the squeeze since March of last year. So, although it’s still possible the hedgers squeeze prices back up again with open interest put / call ratios in the SPX, SPY, and NDX still high, and VIX at the lows, it’s important to realize that speculator psychology has turned, evidenced by plunging values in DIA, DJX, MNX, QQQQ, and RUT, which again, means support for prices has become precarious. The OEX has yet to break out of a triangular formation, which also leaves the door open to another squeeze if ratios remain elevated at expiry approaches.

It should be noted that February is a 5-week cycle however, meaning put / call ratios will have little influence on the trade this week, allowing for outside monthly reversals in the major stock market indices to go along with the weekly reversals mentioned above, which would complicate things for the bulls and price managers, especially if volumes continue to increase as selling progresses. What’s more, if Obama actually replaces Geithner this week in an attempt to boost his image and the market falls, not only would this be damaging at face value, but more, it would send the message market participants are worried about Volcker being too aggressive in changing the status quo in reverting back to Glass Steagall Act like policy initiatives. The money center banks are essentially nothing more that mega-hedge fund conglomerates these days, so this type of thing would be viewed as a big negative by the smart money, putting yet another nail in the stock markets coffin to go along with increasing taxes, expanding market controls, and protectionism. And when you add in the changing sentiment picture discussed above, Obama might set the record for officially cooking his own goose this early in his first term with a stock market crash so severe people will still remember in 2012.

The last thing the stock market needs is a cooler (Volcker Rule) right now, where a befuddled and transparent President is seen to be schizophrenic, newly steered by such policy, essentially breaking ranks with the bankers. Such a development would truly be a negative for stocks, which unbeknownst to Mr. Volcker, hard medicine may not turn out the same way as his last exercise in cooling things down. That is to say given the vacuum under stocks, along with the hollowed out economy, that was not the case during his tenure as Fed head (not too mention demographics, stock market participation rates, etc.), like a heroin addict being kept alive on life support he is already dead, making revival later on impossible. You see even if increasing doses of the drug were administered it wouldn’t matter, never mind pulling the plug on the life support machine. So, the turn lower corporate bonds last week, which was right on schedule by our accounts (see Figure 2), should be taken in the appropriate light, especially considering this bubble was the big carry trade for timid but still excessively greedy equity players off the 2009 March lows. All this would make an outside monthly close in stocks predictive in my opinion, not a contrarian play. (See Figure 1)

Figure 1

If this were the case, it would also bring the massive head and shoulders pattern in the Dow, as seen above, into play as well, where it should be noted options distributions offer no pricing support at this time. Apparently Robert Prechter was out last week drawing attention to the similarity between the Dow’s bounce into 1930 and present circumstances, which are in fact almost identical on a percentage and structural basis. If this turned out to be an accurate observation, which might be the case with sentiment beginning to swing in a sympathetic direction to enable such an outcome, according to Pretcher, who is no dummy, the above crash target range would be conservative (his is sub-1,000 on the Dow), as a Grand Super-Cycle Degree event is about to unfold. Certainly macro-circumstances are aligned for such an outcome with demographics and the credit cycle rolling over at the highest level, one leading to the other. People don’t borrow more as they age, but less along with generally developing realistic goals in preparation for retirement. So instead of increasing leveraged speculation they begin to save more, which is a trend the banks are endeavoring to make up for in terms of adding leverage to the system through hedge funds, along with goading the government into destroying its balance sheet as well. This is why just the perception of a Volcker Rule could be so hazardous combined with an untimely shift in sentiment. (See Figure 2)

Figure 2


And that’s why you should take these risks seriously as well. Falling gold is telling you the risk of asset deflation is rising, and although nothing is written in stone as of yet, things could change quickly never the less, where one would do well to remember the last time market / sentiment conditions reflected present extremes, the CBOE Volatility Index (VIX) went to 150, back in 1987. Action causes reaction – where in this case the combined actions of a meddling bureaucracy and complicit mob could be enough to bring Rome to its knees once again, with the most successful modern day cooler in history guiding Presidential policy.

Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our continually improved web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. For your information, our newly reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts, to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented 'key' information concerning the markets we cover.

And if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line. We very much enjoy hearing from you on these matters.

Good investing all.

By Captain Hook

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

Copyright © 2010 Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by Inc. No part of these pages, either text or image may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

Captain Hook Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules