Best of the Week
Most Popular
1.BrExit House Prices Crash, Flat or Rally? UK Housing Market Affordability Crisis - Nadeem_Walayat
2.Stocks Bull Market Climbs Wall of Worry, Bubble? When Will it End? - Nadeem_Walayat
3.Gold Price Is Now On Its Way To All-Time Highs - Hubert_Moolman
4.Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - Harry_Dent
5.UK interest Rate PANIC CUT! As Banks Prepare to Steal Customer Deposits - Nadeem_Walayat
6.Gold and Silver Bull Phase 1 : Final Impulse Dead Ahead - Plunger
7.Central Bankers Fighting An Unprecedented Global Economic Slowdown - Gordon_T_Long
8.Putin Hacking Hillary for Trump, Russia's Manchurian Candidate? - Nadeem_Walayat
9.Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - Chris_Vermeulen
10.Gold Sector - Is it time to Back up the Truck? – Mortgage the Farm? - Peter_Degraaf
Free Silver
Last 7 days
Post Yellen = Market Confusion - 28th Aug 16
Theresa May Instructs Police, NHS Gp's, Public Sector To Stop Racial Discrimination in Service Delivery - 28th Aug 16
Ignore Yellen and Buy the Dip in Precious Metals - 27th Aug 16
SPX Downtrend Should be Underway - 27th Aug 16
Unraveling the Secular Economic Stagnation Story - 27th Aug 16
The Precious Metals Sector and the Fed. . . - 27th Aug 16
Stock Market - All Is Calm, All Is Not Right - 27th Aug 16
Gold Junior Stocks Q2 2016 Fundamentals - 26th Aug 16
Buy Gold’s August Dip? Gold’s Monthly Sweet Spot In September - 26th Aug 16
The IMF’s Internal Audit Reveals Its Incompetence and Massive Rule Breaking - 26th Aug 16
Commodities Are the Best Bargain Now—Here’s What to Buy - 26th Aug 16
Why I Left Canada and Became A Citizen of the Dominican Republic - 26th Aug 16
The GLD vs GOLD - 26th Aug 16
Can Stocks Survive Without Stimulus? - 25th Aug 16
Why Putin Might Be on His Way Out - 25th Aug 16
Bond Guru Gary Shilling - The Bond Market Rally of a Lifetime - 25th Aug 16
A Zombie Financial System, Black Swans and a Gold Share Correction - 25th Aug 16
OPEC’s Output Freeze: What Has Changed Since Doha? - 25th Aug 16
Merkel Prepares For a Deliberate Crisis While White House Plans For a Disastrous Succession - 24th Aug 16
Suspicious Reversal in Gold Price - 23rd Aug 16
If Trump Can’t Pull Off a Victory, Expect a Civil War - 23rd Aug 16
Ceding ICANN and Internet Control to Globalists - 23rd Aug 16
How to Spot an Oversold Stock Market - 23rd Aug 16
Gerald Celente Sees Worst Market Crash, New Military Conflict, Gold Spike to $2,000/oz - 23rd Aug 16
EU Olympics Medals Table Propaganda Includes BrExit Britain - 22nd Aug 16
BrExit Win's Britain Olympics Success Freedom Dividend, Economy Next - 22nd Aug 16
Stock Market Top Forming, but Slowly - 22nd Aug 16
(Really) Alternative Banking Systems - 22nd Aug 16
Vauxhall Zafira Fires - Second Recall Issued - Inspection Before Bursting into Flames? - 21st Aug 16
Will the Stock Market Bubble Pop Regardless if the FED Never Raises Rates? - 21st Aug 16
US Government Spending - 3 Big Stories Not Being Covered – Part III - 21st Aug 16
Silver Analysis - 20th Aug 16
SPX New Highs, Correction Next? - 20th Aug 16
Housing Bubble - The Marginal Buyer Holds The Pin That Pops Every Asset Bubble - 20th Aug 16
Gold Miners Q2 2016 Fundamentals - 19th Aug 16
Which Price Ratio Matters Most in a Fiat Ponzi? - 19th Aug 16
Big Policies, Bigger Failures - 19th Aug 16
Higher Crude Oil’s Prices and USD/CAD - 19th Aug 16
Here’s Why You Should Look for Dividend Stocks and How - 19th Aug 16
Deglobalization Already Underway — 4 Technologies That Will Speed It Up - 19th Aug 16
These 6 Charts Show Why the Average American Is Fed Up - 18th Aug 16
SPX Easing Lower - 18th Aug 16
Low / Negative Interst Rate’s Legacy - 18th Aug 16
The 45th Anniversary of The Most Destructive Event In Modern Monetary History - 18th Aug 16
USDU - An Important Perspective on the US Dollar - 17th Aug 16
SPX Completes Wave 1 Decline - 17th Aug 16
How to Quickly Spot Common Fibonacci Ratios on a Chart - 17th Aug 16
When Does a Forecast Become a Trade? - 17th Aug 16
Kondratiev Wave - The Financial Winter Is Nearing! - 17th Aug 16
Learn "The 4 Best Elliott Waves to Trade -- and How to Trade Them" - 16th Aug 16
Stock Market Bears Turning Bullish At New All Time Highs - Time to Get Worried? - 15th Aug 16
Job Seekers Sacrificed to the Inflation Gods - 15th Aug 16
A Look At Commodities and Financial Markets Trading Week Ahead - 15th Aug 16
Stock Market New Top Forming? - 15th Aug 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy - 3 Secret Charts

A Stock Market Bear Party Perhaps

Stock-Markets / Stocks Bear Market Jan 11, 2016 - 04:10 PM GMT

By: Bob_Loukas

Stock-Markets

This blog post is a continuation of the bearish theme I highlighted and posted for you back in December, titled: Game Changing Action

Maybe 2016 will be the year when equity bears finally get to celebrate. Although I wouldn’t call an end to the “buy the dip” era quite yet, the current market has a different type of feel and vibe to it. Many people believe – and there is supporting historical evidence – that as January goes for equities, so goes the year. Bulls should hope this axiom doesn’t hold in 2016. The month is still young, but the first week of January ushered in the worst 5-day start to a year in the S&P 500’s history. The last time the market started a year this poorly was 2008, and we know how that turned out.


I am not projecting that 2016 will end up like 2008, but it could. As the bull market enters its seventh year, it’s clear that the cyclical advance is on borrowed time. With valuations at historical highs and the economy moving well below optimal levels, unless equities serve up a blow-off top, it’s difficult to see how the current bull advance can continue. I’ve been relatively bullish on the market for two years, but with the current Investor Cycle looking as if it’s topped, I’m thinking that it might be the bulls’ turn to be fooled by equities.

On a daily timeframe, a very well defined downtrend is in motion with clear Cycle evidence supporting it. If we look back over the past few Daily Cycles, we see an impulse rally into an early November top that failed to make a new high, followed in December by a new Daily Cycle that failed to exceed the November peak, resulting in a day 10 DC high. Since then, the current Daily Cycle has failed, and stocks are plummeting.

In the world of Cycles, equities are showing a classic topping pattern. With Daily Cycles in a declining pattern, we have very clear evidence that the Investor Cycle (IC) has topped. Although the equity markets are now oversold and a new DC is due, the damage is already done! The next Daily Cycle  (DC)should top within 10 trading days, and then turn lower to break below the August 2015 Investor Cycle Low (ICL).

Even though the broader NYSE and S&P indices show failed Daily Cycles and are in clear decline, they remain comfortably above their August lows. These markets, however, are typically led by the Transports and small caps, and these indices – the Dow Transportation index and the Russell 2000 – have broken below the August lows and now rest at multi-year lows. This type of divergence is shouting that the broader markets will also soon break below their August lows.

The Russell 2000 small cap index, in particular, has been suggesting for some time that the current IC is fundamentally weak. In December, the Russell was rejected at the 200-day moving average, and has since moved well below the October 2015 low. After leading the broader indices higher during much of the bull market, the Russell 2000 is again leading, only this time to the downside.

Bulls will suggest that the market is oversold, with technical levels that now favor a Cycle low. That has been the hallmark of the bull market and is why so many traders are confident that the current drop will eventually go down as yet another buy-the-dip opportunity. But for the first time since 2013, I suspect the bulls are going to be wrong. Until we have stronger confirmation, however, it doesn’t make sense to call the end of the bull market.

Equities just finished week 19 of the Investor Cycle, and that’s too early in the timing band for an ICL. And with a 5 year history of 24+ week Cycles behind us, an ICL in the coming days has only an outside chance of occurring . In addition, the current IC has an early, week 10 top that failed to make a new IC high, so I expect the IC to become Left Translated and to fail by falling below the August low. That implies that we should have an IC of at least 22 weeks, supporting the need for at least one more Daily Cycle lower before an ICL.

The setup is in place for a further decline, but I expect we’ll have a counter trend move higher first. I suspect that traders will step in after an initial drop on Monday, and could bid the market higher over the following two weeks. Look for the counter-trend move to approach 1,980 before turning lower into a rather fast, steep collapse below the Oct 2014 low at 1,820. That will set the stage for a potential 2016 bear market.

Trading Strategy Ideas

As always, you must understand the time-frame within which you wish to trade and structure your positions and risk levels accordingly.

In the very short-term, going Long equities now with a stop under Friday’s lows offers a good risk/reward opportunity on a counter-trend rally.  I can see a move back to 1,980, where partial profits should be taken, followed by a test of the 2,000 level over the next two weeks.  At that point, profits should be taken or at least a rising trailing stop strategy used.

I will be personally looking to renter short positions again around the 1,980- 2,000 level, to once more be in a position to capture significant gains from a Failed Daily Cycle.

Special One-Time Offer (ends Jan 15th)

By risking just $1, you could read this past weekend’s premium report in its entirety, along with enjoying full access to the Financial Tap for a full month, including all trade alert ideas.  If you like the service, as I expect, then simply do nothing, your membership will renew.  If you feel like the service is not for you, then simply cancel at anytime, your risk is just $1 to try it out.

LINK:  Monthly Sign Up Page

Use Coupon Code: Risk1Buck

By Bob Loukas

http://thefinancialtap.com

© 2016 Copyright  Bob Loukas - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - 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

Catching a Falling Financial Knife