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Trading Lessons

Stock Market is Getting Scary...

Stock-Markets / Stock Markets 2018 Feb 14, 2018 - 10:51 AM GMT

By: Anthony_Cherniawski

Stock-Markets

Today was a bit of frustration. The SPX wouldn’t go down, but it didn’t go higher, either. Tomorrow appears to be gearing up for a big down day. Wave relationships suggest that possibly both the Head & Shoulders and Broadening Wedge targets may be reached in the next two days. Do the math. That’s approximately a 20% decline from here.

Mike (Mish) Shedlock comments, “Interbank lending took a historic dive. Readers ask "What's happening?" Let's investigate.


The plunge in interbank lending is both sudden and dramatic. What's going on?

Fed Tightening Two Ways

The short answer is a straw broke the Fed's back.

A more robust explanation is the Fed is tightening two ways: The first by hiking, the second by letting assets on the balance sheet roll off.”

Maybe that explains why brokerage houses are pulling in their margin lines. An acquaintance of mine was just wiped out in a margin call on XIV and has to sell his house. It’s already happening…

The Hi-Lo Index is still on a sell, although getting a bit “edgy.” As mentioned before, the trendline is the buy signal in this case.

Asset managers know what’s going on, but are afraid to leave the party. One by one they are reluctantly leaving until one of them is the last straw for the market. ZeroHedge comments, “Last August, we were delighted to point out the latest quirk of this incredibly manipulated and centrally-planned "market": in "Record Number Of Fund Managers Say "Stocks Are Overvalued" As They Rush To Buy Nasdaq", we noted a paradox whereby on one hand a record number, or 46%, of Wall Street fund manager respondents to the BofA monthly survey said stocks are "overvalued"...”

…the rest of the managers will have to buy protection. I just did an analysis of the VIX and was not surprised to find out that the biggest moves are still ahead. Wave [iii] of 5 of (3) has the propensity to be twice or three times the size of Wave [i] of 5. That’s a potential 40-60 point move off yesterday’s low.

Conservatively, Wave [iii]’s target could be 65-85.00.

Wave [v] may be even larger, which could conservatively put Wave 5 of (3) over 80-100.

Remember this chart? If Wave (3) is over 80 and Wave (5) has the potential of being larger than (3), does this chart now make sense?

We may be on the brink of this historic event.

Regards,

Tony

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Anthony M. Cherniawski, President and CIO http://www.thepracticalinvestor.com

As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals.

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

Anthony M. Cherniawski Archive

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