Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Stock Market Seasonal Inversion Patterns

Stock-Markets / Stocks Bear Market Mar 30, 2009 - 05:40 PM GMT

By: Captain_Hook

Stock-Markets Best Financial Markets Analysis ArticleThe Boys From Brazil  - As postured on these pages for some time now, seasonal inversions in trading patterns of markets tend to occur in mature markets due to sentiment / structural irregularities. In the case of the US stock market, what has essentially occurred is because the general investing population has been ‘dumbed down' due to excessively good economic conditions over an extended period, along with powerful mind-numbing corporate propaganda, their aversion to risk has been dangerously tempered.


This has caused them to adopt a casual attitude towards risk, and explains why such a large percentage of small speculators, who have proven themselves to be the ‘dumb money' once again by increasing long exposures to historic extremes set against falling prices, remain stubbornly bullish to this day. In essence then, they are simply too dumb to respect risk evidenced in their persistence to game the market, which is why stocks have fallen in correspondingly record fashion as well. As Mark Lundeen points out in his latest , only the crash of 1929 to 1932 saw greater volatility than the present sequence. As he goes on to point out however, this of course does not mean total losses in stocks will not match the extremes witnessed in the 30's, which is supported in knowing just how complacent investors are in the face of stark reality .

The following is an excerpt from commentary that originally appeared at Treasure Chests for the benefit of subscribers on Wednesday, March 18 th , 2009.

And it's this denial of reality that has caused the five-wave impulse into last week's low and possibly sponsored a seasonal inversion of the trading pattern this year, which would mean a low of intermediate-term degree occurred last week assuming a successful test is witnessed by options expiry on Friday. If this test does not occur, which would mean investors likely remain too optimistic to sponsor a lasting bounce, and likely borne out in post expiry open interest put / call ratios and Commitment Of Traders (COT) data, then a seasonal inversion could probably be bypassed, with the present bear market potentially taking the volatility record away from the 1929 to 1932 sequence. As stated yesterday , I am not predicting this, but it could happen. So you see, it's important investors capitulate to some degree this week with at least a ‘test attempt' of the lows along with key post expiry put / call ratios making a lasting turn higher in order to sponsor a squeeze. If this does not transpire, after some possible post expiry strength, stocks could surprisingly plunge once again, which would financially injure yet another strata of semi-savvy speculators who have taken on long positions for the anticipated contra-trend rally.

So again, and as mentioned Monday , we will be watching this week's market action along with next week's post expiry options distributions with great interest in gauging probabilities associated with a possible seasonal inversion of this year's trading pattern. In terms of gauging probabilities associated with a test of the lows occurring this week, Monday's reversal was supportive such an outcome, with continued call buying increasing these chances. Of course un-welcomed strength yesterday countered Monday's losses, which is disconcerting. Furthermore, because this is a global affair like no other in history, strong equities in Asia early this week is making certainty associated with such an outcome somewhat questionable, however if US market internals remain dominant, which has been the case, then stocks should weaken considerably as the week wears on, which would yield the anticipated test. In doing so, this would signal to us a significantly increased probability a profound sentiment change will be marked this month, from predominantly bullish on the part of small speculators towards increasing bearishness, where when combined with historical precedents and market technicals / internals (see below), would be sufficient to sponsor a lasting contra-trend rally in stocks around the world. (See Figure 1)

Figure 1

Past this week, and as with our previous comments regarding the importance of a strong finish last week, which was in fact the case, equally important will be a strong monthly close, which will signal not only a change in sentiment on the part of speculators; but more, an increased willingness to accumulate and hold stocks on the part of institutional investors. In terms of the technicals displayed in the chart panel above, it's important to notice the positive divergences in the indicators, where breakouts to the upside would signal a meaningful advance in stocks was underway. What's more, it should also be noticed targeting associated with such a move could involve a rally all the way back up to the large round number at 1,000, which is a possibility that will primarily be determined by the extent speculators turn bearish on stocks. That is to say if speculators turn only mildly bearish on stocks, not being fully exhausted in their bullish aspirations not to miss the bottom, then the contra-trend rally will be correspondingly shallow, which is why we will continue to closely monitor sentiment as any rally progresses. Nothing will be taken for granted on our part in this regard, as it's important to remember any strength exhibited in stocks over coming months is of the corrective variety, meaning any rally must treated as suspect.

Again however, this of course does not mean a substantial rally will not ensue, where again, speaking strictly from what is considered a minimal ‘standard' Fibonacci retracement after such a dramatic move down, a move back to the 38.2% mark in the proximity of the large round number of 1,000 on the S&P 500 (SPX) is a distinct possibility. Moreover, this possibility is fortified in knowing that comparatively speaking to the crash pattern in the Nikki, which can be seen here , at this point in the sequence the SPX would only be down 35% in mirroring the Japanese experience, which corresponds to the ‘normal' retracement discussed above that would put prices back in the proximity of the large round number at 1,000. If this does in fact transpire, you can think of such a move as a test of the break of the four-figure mark, which will undoubtedly prove to be meaningful in terms of an ultimate low, as well as in terms of duration of the bear market. (i.e. how long stocks should be expected to remain depressed.)

The question then arises of course, if investors do not turn sufficiently bearish to create a ‘wall of worry' for the bulls to climb, then what will sponsor a rally moving forward, a sharp rally that could see the SPX move all the way back up to 1,000. In the first place, there's no guarantee a ‘standard' minimal Fibonacci retracement is in the cards prior to stocks resuming the primary trend lower, where as mentioned above, the present contra-trend rally could be quite shallow (21.8% - a common Fibonacci derivative under such circumstances), with speculators remaining insanely bullish for an unfathomable period of time, just like the 1929 – 1932 sequence. I'm beginning to think this is an increasing possibility after yesterday's rally in stocks, and this view will be strengthened if this week yields no discernable test of last week's lows. That said, and irresdpective of the ultimate outcome, being long equities post options expiry this Friday is likely a good idea from a speculation point of view because in doing the math, at a minimum the broads still have approximately 10% of upside remaining from a Fibonacci retracement perspective. This, added to the knowledge post expiry this Friday all earthly constraints will be removed from stocks running into month's end from a options (sentiment) perspective, along with continued buying forcing more hedge fund buying into month's end, should yield higher prices sooner than later.

More reasons stocks should rally in coming days can be found in other areas as well, such as increased quantitative easing measures , new international quantitative easing measures , and possible accounting rule changes , where some might consider such developments positive fundamental changes, but in reality are of course nothing more than desperate fiscal / monetary measures that will have little lasting power now that the larger credit cycle has turned lower. Or it might simply be a weaker dollar ($) that's sufficient to do the trick (for whatever reason), which you may have noticed is now apparently good for financials and bad for gold according to the ‘boys from Brazil' (BFB), who live in New York, Washington, and Chicago. (i.e. and have visited Jekyll Island .) Like in the story penned by Ira Levin , those running our financial institutions these days are a bunch of little Hitlers who know no bounds to greed and the desire for power. Did you see the latest one from Goldman Sachs? Now they are proposing to lend money to their employees in an effort to keep milking the system while attempting to avoid public scrutiny. I guess this means they intend to run the company into the ground so the loans need not be paid back later on. Let's hope this happens to all the banks, no? I could go for a good old fashion Jubilee . That would clear the books in a hurry.

Either way, and like Adolph, the BFB are bound to run into increasing trouble sooner rather than later in my opinion, with a blow-up in the precious metals market a likely trigger for the big banks. As you may know, the big banks have a meaningfully concentrated short position in the silver market that is in jeopardy of finally getting away from them if 40 days of backwardation in the market is any indication. It's said silver is the most heavily manipulated market in the world given present circumstances, and this assessment is likely correct. With chronic physical shortages around the world now apparent however, at some point the BFB are bound to be exposed, which will send prices soaring. A pronounced loss of confidence in the system would do it, with the masses increasing turning to poor man's gold (silver) to escape the chaos as the metal of kings moves well into four-figure territory. And you know the best part of the move is still ahead of us in the observation the masses still prefer to game stocks higher as opposed to grounding their wealth in precious metals, which is a sentiment that is confirmed by our studies associated with the stock market. (See Figure 2)

Figure 2

As you can see in the above however, where head and shoulders patterns are present in the trade of both precious metals shares and gold itself, the BFB love to hate gold, and will take every opportunity to minimize them whenever possible. And it just so happens they will use those times that investors are enamored in buying paper to do so, such as now, with the cyclical contra-trend rally in stocks now underway. Of course the level of success they have been able to engineer lately has become increasingly shallow as not only are they running out of physical metals in meeting the demand from more knowledgeable and wealthy investors; but more, as volatility and fraud in the paper markets becomes more apparent, increasingly marginal buying is coming in from new audiences. Of course the silver market only trades $1 billion per annum at present, meaning the move into the metals is still in its embryonic stage, with the best yet to come. So, make sure to continue accumulating the physical metals while the opportunity still exists, because once a panic to acquire safety ensues, it will be too late, of this I can assure you.

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

http://www.treasurechestsinfo.com/

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 © 2009 treasurechests.info Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by treasurechests.info 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 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