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
Here’s Why The Left’s New Economic Policies Are Just Stupid - 19th Feb 19
Should We Declare Emergency for Gold? - 19th Feb 19
Why Stock Traders Must Stay Optimistically Cautious Going Forward - 19th Feb 19
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble - 18th Feb 19
Stacking The Next QE On Top Of A $4 Trillion Fed Floor - 18th Feb 19
Get ready for the Stock Market Breakout Pattern Setup II - 18th Feb 19
It's Blue Skies For The Stock Market As Far As The Eye Can See - 18th Feb 19
Stock Market Correction is Due - 18th Feb 19
Iran's Death Spiral -- 40 Years And Counting - 17 Feb 19
Venezuela's Opposition Is Playing With Fire - 17 Feb 19
Fed Chairman Deceives; Precious Metals Mine Supply Threatened - 17 Feb 19
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19
Will Stock Market 2019 be like 1999? - 14th Feb 19
3 Charts That Scream “Don’t Buy Stocks” - 14th Feb 19
Capitalism Isn’t Bad, It’s Just Broken - 14th Feb 19
How To Find High-Yield Dividend Stocks That Are Safe - 14th Feb 19
Strategy Session - How This Stocks Bear Market Fits in With Markets of the Past - 14th Feb 19
Marijuana Stocks Ready for Another Massive Rally? - 14th Feb 19
Wage Day Advance And Why There is No Shame About It - 14th Feb 19
Will 2019 be the Year of the Big Breakout for Gold? - 13th Feb 19
Earth Overshoot Day Illustrates We are the Lemmings - 13th Feb 19
A Stock Market Rally With No Pullbacks. What’s Next for Stocks - 13th Feb 19
Where Is Gold’s Rally in Response to USD Weakness? - 13th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

Stock Market Technical Analysis

Stock-Markets / Stock Markets 2018 Feb 09, 2018 - 03:55 PM GMT

By: Christopher_Quigley

Stock-Markets

This week’s “flash crash” has inflicted some technical “damage” on the market but nothing too serious, for the moment. However, some caution is warranted.

To gauge where the markets go from here I believe it important to focus on how the Dow Transport Index behaves, as it is the weaker of the two main Dow Indices. (As was the case in 1998 and 1999, just before the tech crash of 2000). Currently it is trying to consolidate around its 100 Daily Moving Average but I suspect new lows will be tested before too long. Remember technical analysis 101: “when significant moving averages become points of resistance rather than points of support you are in a bearish trend.”


Accordingly, please note: if the 9,440 price level is broken on the trannies the next key price point will be 9,029.  Should this level fail, the Dow Transports will be in a bear market. How the Dow Industrials will react in the event of such an occurrence will be fundamental to world stock market behaviour for the rest of 2018/2019.

My major concern now is not simply market technical reality but the functionality of the New York Stock Exchange itself. What the “flash crash” of last Monday has shown us is that there is no real liquidity in the stock market, period. (It fell 800 points in 6 minutes). In many ways it is becoming increasingly obvious that the NYSE is no longer fit for purpose. Too much power has been given to Algo and Quant trading entities to the detriment of market making professionals. How this new system”” is going to operate in a true bear market is anyone’s guess. Should a real bear trend develop, given what we have just experienced, a “recession” could be priced into the market within days or weeks instead of months and years. Under such circumstances it is quite possible standard sell stop execution and normal retail trading will not operate effectively, thus exposing active traders and investors to massive uncontrollable losses. See this note that appeared in the “Wall Street On Parade” blog, by Pam Martens and Russ Martens yesterday:

“The U.S. Senate Banking Committee needs to get its act together and immediately schedule hearings on the trading outages that occurred at numerous discount brokers and mutual funds on Monday. According to thousands of on-line complaints, customers of major firms like TD Ameritrade, Fidelity, Vanguard, and T. Rowe Price could not access their accounts using the firms’ websites and thus could not place sell or buy orders as the market dove 1,597 points in mid-afternoon, then partially recovered to close down 1,175 points.”
Complaints against Fidelity included this one from a client named Lee Yih:

“The Fidelity Active Trader Platform finally loaded after 80 minutes of trying. I put in 4 orders, but nothing. No indication of orders received, no indication of an execution. I do have the order numbers, however. The website should not be giving the appearance it is up, when orders entered are swallowed up and we do not know where we stand. I called them and waited for 32 minutes on hold before giving up.”
Given this “crisis of market functionality” investors and traders who have benefited greatly from this bull market, which commenced in March 2009, might consider going to 100% to cash right now thus avoiding the inevitable train wreck I see coming down the tracks. The recession catalyst I see will be the FED forced to raise interest rates quickly due to imported inflation as a result of an ever weakening dollar. Rising interest rates will destroy sovereign fiscal policies worldwide and force growth crushing personal taxation increases. In other words austerity will return with a vengeance.

This market position exit strategy may mean losing some profits from future hyperbolic market action but it means one is liquid and in pole position to take advantage of any “flash recession” and the inevitable eventual “flash recovery”. It is now obvious we are living in an altered trading environment.

Chart: Dow Transports: Daily.

Chart: Dow Transports: Weekly.


Chart: Dow Industrials: Daily.


Chart: Dow Industrials: Weekly.

Charts:  Courtesy of StockCharts.Com

Source: “Wall Street On Parade” 8th February article  by Pam Martens and Russ Martens,

Christopher Quiqley

B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.

Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web   sites based in California, New York, London and Dublin.

Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.

© 2017 Copyright Christopher M. Quigley - 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 trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2019 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

6 Critical Money Making Rules