Danger In The Markets? Part V

This is the last blog post (Part V of V) in this "Danger In The Markets?" blog series.

I would like to end this blog series with another look at the daily 1-year S&P500 chart. This chart depicts a Rising Wedge from the March lows. As well, I have indicated a potential H&S (Head and Shoulders) pattern in red. For those unaware, both of these patterns are bearish. I believe more in the Rising Wedge than the H&S, as it is more established. Additionally, the VIX can be found along the bottom of the chart:



Chart Courtesy of StockCharts.com

One will note that in yesterday's post (Part IV) there was a daily S&P500 chart that showed a Rising Wedge pattern as well. The difference in appearance between that chart and the one above is that the bottom trendline is drawn differently - the chart above incorporates the early October low. Regardless, should this Rising Wedge pattern be validated through future price action, conventional Technical Analysis methods would "measure" a resulting price far below the March low of 666.

As I have mentioned repeatedly on the blog (and these commentaries can be found under the "Stock Market" and "Investor" categories) I strongly believe the rally from the March low of 666 is a Bear Market Rally. The implications of this belief, should it prove accurate, are profound both from a financial markets perspective as well as an economic one.

As I have stated previously, I do hope that my analysis and conclusions as to where the markets and economy are heading are incorrect, and that we are on the path to true Sustainable Prosperity. However, I am firmly convinced from both an economic and markets perspective that we face an array of difficult problems in our economic future and resolving them will likely prove most vexing.

It should be noted that, as mentioned repeatedly on this blog, my views are very contrarian in nature. As such, they are quite at odds with those held by the vast majority of economic and financial professionals who are firmly convinced that we are currently experiencing a recovery with little or no risk of further economic damage...



SPX at 1066.63 as this post is written

Danger In The Markets? Part IV

The charts seen in this post are from Maurice Walker, http://thechartpatterntrader.com. First, a daily 1-year chart of the S&P500. The large broadening pattern (in blue) is notable, as is the smaller one, as seen by the dotted line.




chart provided by http://thechartpatterntrader.com

Chart Courtesy of StockCharts.com

Here is a weekly chart of the S&P500. Notable here is the downtrend line (in black) from the October 2007 highs that seems to be serving as resistance. Also, the MACD and Full Stochastics seem to be reflecting weakness.



chart provided by http://thechartpatterntrader.com

Chart Courtesy of StockCharts.com

Next is a weekly chart of the QQQQ. Again, as with the S&P500 chart above, the downtrend line (in black) from the October 2007 highs that seems to be serving as resistance. Also, the MACD and Full Stochastics seem to be reflecting weakness. As well, the RSI is declining:




chart provided by http://thechartpatterntrader.com

Chart Courtesy of StockCharts.com


Now onto Part V...



SPX at 1046.50 as this post is written

Danger In The Markets? Part III

Moving on to the stock market. First, a 1-year daily chart of the S&P500. Although at first glance, the advance from the March lows doesn't appear too suspect, two aspects are notable. One can see that currently the price has dipped below the 50 day moving average (line seen in blue -the red line is the 200 day moving average) for only the second time since the rally began in March; and second, the MACD indicator along the bottom seems at best lethargic; at worst, it is a significant divergence from the advancing price:



Chart Courtesy of StockCharts.com

Next, here is a daily chart from ~ mid '07 of the NYSE Summation Index. I have put in the S&P500 as an overlay in green, with the NYSE Summation Index's MACD at the bottom of the chart. What I continue to find interesting here is the negative MACD divergence as indicated on the chart, as seen by the blue trendlines:



Chart Courtesy of StockCharts.com

Next is a 10-year daily chart of the VIX. The level of 20 (as seen by the blue horizontal line) on the VIX seems to be a good demarcation of stress. I originally made this observation on September 16, and note how the 20 level seems to have subsequently acted as support.

The VIX has been above this 20 level continuously since early September of 2008:



Chart Courtesy of StockCharts.com


Now on to Part IV...


SPX at 1045.41 as this post is written