Just Another Panic Monday?
- June 13, 2022
- / By Jeff Cooper
“One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us.
t’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back.” Carl Sagan, The Demon-Haunted World
It’s only natural to have personal opinions about what you think about the general market and the news that’s questionable. But that has nothing to do with analysis what is actually happening in the markets.
It’s only normal for intelligent market participants to have opinions about the market.
However, you have to learn to interpret the language of the market and go back and forth and have a dialogue with it.
You cannot have personal opinions about what you think about the market because it gets you too fixed.
Speculation is observation, pure and experiential; thinking isn’t necessary and often just gets us in trouble.
Markets can turn on a dime; most traders cannot.
As well, many traders confuse making money with being right.
If you’re in the game to be right, you’ll have trouble honoring a stop because it means admitting you’re wrong.
If you’re in the game as a business, to make money, you’ll be more apt to exercise the discipline to honor a stop.
“Most” professional traders aren’t any better at “predicting” where the market will go than any retail trader.
But clearly having a knowledge of Time & Price cycles will give one a calculated edge.
Hit & Run subscribers have been benefitting from our call late last year that the market would get hit hard in January which would start persistent selling.
Identifying levels and patterns and protecting profits and stopping out when one is wrong and size control is key to surviving:
When in doubt, get out. In other words TIME stops are as valuable as price stops.
So let’s see what the market is saying.
Below are long term weekly charts of the NDX and SPX from the start of the last bear market in 2007-2008.
In the entire 2009 to 2021/2022 bull run, the NDX saw its 20-week ma drop below its 100 week ma once — in June 2016.
That anointed the start of a parabolic run.
That same inflection point/crossover is on the table as of last week.
This is occurring just as the May 2022 low is being tested.
Is this the makings of a low for the largest bear market rally since the January top?
Below is a weekly SPX from the same time frame with a 20 and 100 week moving average.
Notice the crossover in 2008. That did not immediately perpetuate a crash but clearly signaled the door to basement was open.
In 2016 there was a crossover that led to a flush-out that defined a low prior to a parabolic advance.
Arguably, if the crossover is not signaling a bear, then the opposite…a big advance, may be on the table.
Notice the brief and shallow crossover in the fall of 2020. That inflection signaled the non-stop run for the roses from SPX 3000 to 4800.
The moral of the story is that the 20 week is NOT in the region of its 100 week.
Is that a positive divergence while the SPX is testing the May 2022 May low in keeping with the pattern on the drop into March 2020.
Checking UVXY shows a gap up on Friday and a breakout. Is it the start of genuine fear? Possibly because this failure of the recent back to back to back 80% up-days to see upside follow through and instead breakage to the downside may strike fear in the hearts of those that have held on and buyer’s remorse amongst players who bought into the late May triple 80% Up Days.
We’ll hand onto the balance of our UVXY long position looking for a panic spike.
Based on the 20/100 day inflection point on the NDX and the daily UVXY, the take away is we are near a low for the largest bear market rally since the top or we are entering a technical abyss. That abyss may finally produce the fear associated with all intermediate bottoms within the context of primary bear market.
That being said my work suggests that abyss should register a bottom within the next few weeks.
Selling Climaxes at the tail end of a major decline are typically brief.
Today is day 3 of a swoon. Hence the 3 Day Rule is on the table.
Is it possible the market is mirroring the Thursday/Friday/Monday selling panic into October 19th, 1987?
The Friday before Black Monday was an option expiration as well.
This Wednesday we get the Fed so I would not be surprised to see the rubber band pulling back here with the possibility for to snapback into this Friday’s big quarterly option expiration.
From March 14 the SPX rocketed from 4162 to 4637 in ELEVEN trading days.
We are in the wheel-house of 90 days/degrees from March 14th.
Is it possible the market gets a stick save into quarter-end?
Friday we noted that below 389 SPY opens the door to 370/369.
389 is 180 degrees straight across and opposite Jan 4, the date of high.
369 is square Jan 4.
Gold and silver miners had a very interesting upside reversal day on Friday.
They got hit from the get-go with the broad market but made a first hour low and exploded to the topside…on an expansion in volume across the board.
The reversal occurred with a strong dollar rally and on the heels of hotter than expected inflation number.
What does it mean?
I think the market is saying the Fed has lost control.
Be that as it may when the metals do the unexpected you have to pay attention.
The Fed may be on the verge of panicking at the same time a selling panic in stocks installs a washout intermediate low.
Is this the abyss or a Selling Climax following an undercut of the May 20 low?