Timing & trends

Why The Bear Will Be Held At Bay

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Posted by Cliff Droke via Seeking Alfa

on Friday, 18 August 2017 06:34


Despite similarities to 2015, energy sector weakness won't bring a bear market this time around.

While retail and energy are weak, other key areas are still strong.

Copper strength points to continuing long-term bull market.

Financial markets have been relieved that the past few days have passed without more inflammatory rhetoric from either President Trump or Kim Jong-un. The U.S. stock market recovered from sharp losses last Thursday, Aug. 10, when tensions were high between the two countries. The Dow Jones Industrial Average was up for the last four trading sessions (as of Aug. 16) in response to the easing of tensions, retracing most of its losses from last week.

Although there has been a decent bounce in most major indices after last week's dip, the internal health of the NYSE broad market remains a concern in the immediate term (1-3 weeks). In the past few months, whenever the S&P 500 (SPX) has sold off and fallen to the 60-day moving average, there has been a technical bounce followed by either a sharp rally or some more consolidation and then another rally. See the chart below.


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Timing & trends

Marc Faber and Jim Rogers Agree

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Posted by Financial Tribune

on Thursday, 17 August 2017 07:24

Screen Shot 2017-08-17 at 6.48.14 AMMassive money printing to restart the global economy after the financial crisis has blown an even bigger bubble. Ten years after the last financial crisis, is the world due another one and will it be worse?

Despite US Federal Reserve Chair Janet Yellen saying last month that another financial crisis on the scale of the crash that enveloped the world in 2007/8 was unlikely “in our lifetimes”, several respected stock market commentators believe a new disaster could happen within months rather than years, DW reported.

Jim Rogers, co-founder of the privately owned Quantum group of hedge funds, told the news website Business Insider in June that a stock market crash would happen “later this year or next”. In a separate interview with the business channel CNBC, longtime Swiss investor Marc Faber, who has been nicknamed Dr Doom, predicted some stockholders would “lose 50% of their assets” during what he described as an “avalanche” of selling.


Timing & trends

Learn Your Market History Now Or Be Forced To Learn It The Hard Way Later

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Posted by Avi Gilburt - Elliottwavetrader.net

on Wednesday, 16 August 2017 06:54

George Santayana was noted as saying:

“Those who cannot remember the past are condemned to repeat it”

As human beings, we all have a limited life span. And, as one generation fades away, we often see the next generation growing in its shadow, but forgetting the lessons learned by those who came before them. Sadly, it is a fact of life. 

Today, we see the stock market and certain assets like Bitcoin rising to heights never imagined by market participants even 5 years ago. Yet, we believe the reasons for the rise in price are different today than they were in generations past.

Many analysts and market participants are certain that it is purely due to central bank’s actions that we are creating a new bubble. In fact, someone forwarded me what some deem as “analysis,” which stated that “bubbles are a symptom of central bank monetary policy.” And, sadly, many market participants believe this to be true. 

Unfortunately, too many are willing to adopt what they read as truth, without testing it through the prism of intellectual honesty. So, let me present you a question to test the ultimate “truth” presented about central c22cb6033f069963e4a07f627e3e9627banks and bubbles: What central bank caused what is considered to be the first speculative bubble in modern history - “Tulipmania?” 

For those who are unfamiliar with history, in the 17th century, which is regarded as the Dutch Golden Age, contract prices for tulip bulbs reached extraordinarily high levels and then dramatically collapsed in February 1637. At the peak of “tulipmania,” a single tulip bulbs sold for more than 10 times the annual income of a skilled craftsworker. 

Yet, there was no central bank that was involved in this event. And, amazingly, this has been the case study for what we deem to be a “bubble” within markets. Moreover, it has been determined that this bubble was caused by the “madness of the crowd,” as coined by Charles Mackay. So, again, no where do I see any central bank involvement in this case study of a market bubble.

You see, Mackay concluded that crowds often behave irrationally, especially when dealing with financial markets. This irrationality of the market is what causes bubbles to occur. While we may want to view a central bank as the “rational reason” for such bubbles, the ultimate point is that there is nothing rational about bubbles. Therefore, rational reasons are immaterial, if you really think through the issue carefully. 

Unfortunately, most are too willing to adopt the commonly held fallacies about financial markets rather than engage in any independent thought. So, they simply propagate the commonly held fallacies, which causes them to be even more widely adopted by the masses, as the great majority of the public will never test these perspectives through a prism of intellectual honesty and truth.


Timing & trends

The Guns of August, The Trade Set-Up & Removing your Rose Colored Glasses

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Posted by Rambus Chartology

on Tuesday, 15 August 2017 06:22


Today I am going to lay out the case of a major market top and how it fits into the geopolitical backdrop of today. We then profile the trade set-up to look for and finally I will forcefully remove your Rose Colored Glasses you have been wearing since January 2017.

In Barbara Tuchman’s “The Guns of August” she argues that August 1914 was when the Gilded Age died and the modern era actually began. The book opens with the famous depiction of Edward VII’s funeral in 1910 attended peacefully by all the kings of Europe. Never again would the body of world leaders be unified and cut from a similar cloth. The war ushered in a new world, not recognizable from the past. Not since that time have we witnessed such diplomatic folly as in the month of August 1914. Today we wonder are we witnessing a similar conflict between a super power and the client state of China which is an emerging super power?  Could it unfold in a similar fashion?

Since May I have chronicled the topping process associated with a post bubble contraction. We have witnessed the following sequence:

1 The Gold-Silver ratio initially warning of an upcoming credit contraction in the future.

2. European stocks putting in a top in the traditional time window of May-June

3. USA stocks embarking on a final run for the roses, one last hurrah over the summer.

4. The Gold-Silver ratio signaling a confirmation of its original signal.

5. Yield curve flattening and credit spreads widening

6. Investor psychology embracing market top behaviors.

7. An initial crack in the US indexes in the time window of August or September.

The Topping Process

Over the summer we have watched the indexes relentlessly rise despite narrower breath. The FAANGs drove the NASDAQ and Boeing drove the Dow over the past 6 weeks. The DOW being a price weighted index, was inordinately influenced by Boeing, now a $240 stock. Boeing’s rise accounted for 75% of the DOW’s gain since the beginning of July. Strip Boeing out of the DOW and the index barely even rose… Same with the FAANG’s effect on the NASDAQ.

This of course is classic topping action. It masks the underlying exhaustion which has been occurring in individual issues. The exhaustion expressed itself in a lack of volatility. On August 8th the S&P 500 had gone 13 days in a row with less than a 0.3% fluctuation. This has never occurred since records have been kept since 1927.  This compression then expressed itself with the VIX exploding over 80% in a raucous 3 day move.

Bearish market signals have been evident to the few who cared to interpret the charts. Let’s take a look at some of the flashing red flags available to all who care to see:

S&P 500 Orthodox Broadening Top

Pull out your copy of the bible of technical analysis: Edwards and Magee. Look under the index for “The Orthodox Broadening Top”. The example they use is Air Reduction Co. from 1929. I will scan and post below:



E&M remind us this type of top comes from low volume markets (check) and it is precisely defined on the chart (check). It’s definition is:

“It has three peaks at successfully higher levels and, between them, two bottoms with the second bottom lower than the first. The assumption has been that it has been completed and an in effect as an important reversal indication just as soon as the reaction from its third peak carries below the level of its second bottom”


Timing & trends

Trump’s Threat of Fire and Fury Fuels Seasonal Breakout in Gold

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Posted by Ross Clark - Institutional Advisors

on Monday, 14 August 2017 06:29

We’ve been concerned that a US Dollar rally would have negative implications for gold. But, if today’s news related rally manages to hold through the close it will be the fourteenth time we’ve seen a breakout in gold to a new monthly closing high on the first trading day following August 8th. (Optimum seasonal buys have been July 23rd and August 6th-9th). While only 62% of the July-October seasonal moves in gold have been profitable, a breakout in August adds to the reliability. Tuesday’s low becomes the definitive stop. 

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The nervousness surounding the current bull market remains significant. While there are a number of unsettling indicators suggesting a serious...

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