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Stocks & Equities

STOCKS SLAMMED: Volatility Crushes the Rally

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Posted by Greg Guenthner - Rude Awakening

on Tuesday, 06 February 2018 06:17

 

  • downThe Dow sets a startling record
  • The biggest drop since 2011
  • Plus: What’s next for the stock market?

Investors took a sledgehammer to the face yesterday as the major averages posted their worst drop in more than six years.

The Dow shed 1,175 points (its biggest point lost in history) to close lower by a staggering 4.6%. The S&P 500 wasn’t far behind, posting a loss of more than 4%. In a dramatic shift, the major averages flipped from extremely overbought to painfully oversold in a matter of days.

The stock market carnage is the top story at many major media outlets. Everyone wants to know what pushed stocks down an open elevator shaft. Was it earnings? The Nunes memo? A Trump tweet?

Nope. 

The truth is the market has grinded higher without a correction for too long. Stocks were too hot. Volatility was dead. Something had to give.

Check out this chart:



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Stocks & Equities

Market Stumble Or Something More?

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Posted by Lance Roberts - Real Investment Advice

on Monday, 05 February 2018 06:32

Last week, I discussed the continuation of the “market melt-up.” To wit: 

“Since the beginning of the year, the acceleration in the markets has continued unabated. As I showed yesterday, the acceleration in the S&P 500 has now gone parabolic.”

SP500-DailyPrice-2009-Present-012518-1

“Never before in recent history has the market been this overbought and extended from longer-term averages which suggests that a correction that reduces such conditions is highly likely in the near-term.”

Well, this past week, the market tripped “over its own feet” after prices had created a massive extension above the 50-dma as shown below.  As I have previously warned, since that extension was so large, a correction just back to the moving average at this point will require nearly a -6% decline. 



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Stocks & Equities

Friday's Sell-Off Sets The Tone For Weeks To Come

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Posted by Paul Rejczak

on Monday, 05 February 2018 05:57

The main U.S. stock market indexes lost 2.0-2.5% on Friday, breaking below their three-day-long consolidation as investors reacted to quarterly corporate earnings, economic data releases, among others. The S&P 500 index accelerated its short-term downtrend following breakout below the level of 2,800. It currently trades 3.9% below its January 26 record high of 2,872.87. The broad stock market retraced more than 50% of its month-long rally off the December 29th local low at 2,673.61. The Dow Jones Industrial Average was relatively weaker, as it lost 2.5% on Friday, and the technology Nasdaq Composite fell 2.0%.

The nearest important level of support of the S&P 500 index is at around 2,750, marked by the January 11 daily gap up of 2,750.80-2,752.78. There is also an important Fibonacci retracement of 61.8% of the month-long rally at the level of 2,749.73. The next potential support level is at 2,720-2,740, marked by some previous consolidation. On the other hand, resistance level is now at 2,780-2,800, marked by previous level of support. The resistance level is also at around 2,835, marked by last week's local highs.

There is a pretty big chance that the index reached some major medium-term high on Friday a week ago. It broke below its month-long upward trend line on Tuesday following gap-down opening of the trading session, confirming reversal of the uptrend. Will it retrace all of its January rally or even continue lower? The index is at its three-month-long upward trend line. For now, it looks like a downward correction:

1

Negative Expectations Again

The index futures contracts trade 0.8-1.2% lower vs. their Friday's closing prices this morning. So, investors' expectations before the opening of today's trading session are very negative again. The European stock market indexes have lost 1.0-1.4% so far. Investors will wait for the ISM Non-Manufacturing PMI number release at 10:00 a.m. The market expects that it was at 56.5 in January. However, this data release probably won't affect the overall negative market sentiment today. Investors will also wait for more quarterly corporate earnings announcements.

The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following an overnight move down. The market remains close to its local lows, well below its Friday's panic end-of day-lows. It continues its short-term downtrend, as it retraces more of January move up. The nearest important level of resistance is at around 2,760, marked by an overnight gap down and Friday's daily low. The next level of resistance is at 2,780-2,800, among others. On the other hand, support level is at 2,730-2,740, marked by short-term local lows. The next level of support is at 2,700-2.720. The futures contract is well below its Friday's session lows, as the 15-minute chart shows:



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Stocks & Equities

DANGER: “The Wall Of Worry Has Collapsed”

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Posted by KingWorldNews

on Friday, 02 February 2018 07:16

Following the trend of extreme, euphoric bullishness on stocks, Investors Intelligence said Bulls rose 1.3 pts w/o/w to 66, just below the 32 year high of 66.7 seen two weeks ago. Bears fell to 12.6, a fresh 32 year low, down from 12.8 last week and vs 12.7 in the week prior. The spread of 53.4 is just below that 32 year high of 54 two weeks ago…

Boockvar continues:  “Reflecting also the euphoric state was the read in yesterday’s Conference Board Consumer Confidence data which showed the amount of respondents who think the stock market will be higher this year reached a record high dating back to June 1987when the question first started being asked. See chart below.

KWN-Boockvar-I-1312018

....continue reading HERE

also from KingWorld:

There Is Extreme Danger Ahead And All Roads Lead To A Higher Gold Price



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Stocks & Equities

How Will The SPX 500 Reach 4000?

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Posted by Avi Gilburt - ElliottwaveTrader.net Gilburt - ElliottwaveTrader.net

on Thursday, 01 February 2018 06:10

There is no real secret to the market. In fact, it is rather simple. But, that does not mean the specific smaller degree moves in the market will be just as simple.

You see, markets are no different wherever you look. Whether that be metals, equities, Forex, crypto-currencies, etc, they all react in the exact same way. Markets simply move from one extreme to another. And, we need to be able to identify where those extremes can cause a turn. 

Moreover, in making your determination of turning points, there is no one definitive point at which a market must turn. Rather, we are dealing in probabilities when we attempt to analyze that which is non-linear in nature, such as the financial markets. 

For those that have followed me for years, you would know that this is exactly how I apply my analysis. As an example, we were able to identify major shift changes in the DXY when we called for a multi-year rally in 2011 when we were in the 74 region, with a long term target in the 103.50 region. 

Another example was when we caught the top in the gold market in 2011 within $6 of the high actually struck. However, our initial expectation was that gold would see a 40% pullback. And, before gold even struck its high, we noted that if that 40% drop would not hold support, it could open the door for gold to correct all the way back down to the $1,000 region. Many disregarded our analysis since everyone was so certain it would easily eclipse the $2,000 region during the parabolic phase it was in at the time I made this call. So, when gold gave us a 40% correction from our top call, we began looking for a resurrection of the bull market. Yet, when the market made it clear that it was not going to resurrect, we began looking down to that $1,000-1100 region before looking for another bottoming structure.

This is how we view markets, as we do not believe that anything MUST happen within the financial markets. 

As another example, back in 2015, we had LONG term targets in the SPX at 3500. And, we maintained this perspective even when the market pulled back to the 1800 region in early 2016. Our immediate target from the 1800 region was the 2537-2611 region, at which time, we expected a standard pullback before we would march onto our next target region between 2800-3000.

Well, as you can see, we were clearly not perfect in our smaller degree expectations for a pullback from our initial target zone. While I would love to be able to accurately identify each twist and turn in the market, the fact that I am a fallible human being attempting to analyze a non-linear system makes perfection unattainable. 

Again, we deal in probabilities when we analyze these non-linear financial markets. That suggests we should not expect a market moving in one direction for an extended period of time. And, clearly, we did not expect a market to pullback to only .118 and .236 retracement levels, when standards suggest .328-500 retracements. Yet, that is all the pullback that the market gave us on our way up towards the 3000 region. 

So, while markets often provide us standard paths to follow the great majority of the time, if one understands the non-linear nature of the market, then one also understands that the market will act outside of standards in the minority of times. That is what seems to have occurred in the last 6 months. But, that does not mean one should abandon analyzing markets based upon standard higher-probability patterns to which the market adheres the great majority of the time. Rather, it means one has to understand that the market may not adhere to those patterns in the minority of instances, accept that, and move on.

In summary, one must maintain a broader perspective of the market based upon probabilities. And, in order to maintain an appropriate risk management perspective, one should reduce their higher risk positions when we strike a standard target, but maintain core stock holdings during a long term 3rd wave. This is what I noted to the members of my services, and how I handle a market that extends beyond standard expectations. 

Lastly, to show you the general perspective I have maintained in the overall equity market for many years, I am attaching a monthly chart of how I see us continuing in this bull market, which likely still has a number of years to run. While we are certainly getting closer to a point where a 15-20% correction can be seen, that will simply be another buying opportunity before the market rallies north of 3500SPX in the early 2020’s. And, for those wondering, this chart has been relatively unchanged for the last several years, other than adjusting for this extension in wave (3) of v of 3.

full-ChcazkrXsRDSjLI1Q3ok6

See all charts illustrating the wave counts on the S&P 500.

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.



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