Here is another quick look at the 2010 and 1987 stock market crash comparison charts again. This time I have also plotted the DEMA smoothed MACD on both time frames which tends to give 1 to 5 day earlier sell signals as compared to the regular MACD.
Right now the DEMA smoothed MACD is inches away from a new sell signal on the market. The only thing missing from the comparison is a big down candle in the 2010 time frame that would bust under the minor uptrend since July 1, 2010. Do we get that Monday? It sure would help the comparison a lot.
The up trendline on the RSI (Relative Strength Index) since July 1 is also showing that a downside break from it could come at any time, similar to the 1987 period.
MACD histogram continues to drift lower towards the zero line showing that bearish momentum is still slow but also still dominating for now.
This comparison chart by the end of next week is either going to look a lot more interesting (if your bearish) or not interesting at all (also if your bearish). The end of next week is clearly going to move the current indicators into more defined stances and reveal much more concrete information as far as the next big move.
The Semiconductor HOLDRs (ETF) already has both a bearish MACD cross and a Dema Smoothed MACD downside cross.
Tom
Your posting is thought provoking but this analysis is really getting long in the tooth. One commentator here has rightly indicated that this market is one of extreme confusion (on rather low volume). Your daily forecasts are vacillating all over the place, reflecting the market confusion; and always with the Cardinal Climax or about a month ago, some other astro aspect in the background.
This comparison to 1987 is looking less like 1987 from the point of view that it is taking about 45 days longer for the the market to head over the cliff (if it ever does).
As you have rightly noted, the month of August is one heck of a month to have much movement at all in the market – – particularly a steep swoon. Heck, Europe is practically on holiday the whole month.
I think the probabilities are incredibly remote, but I suppose that that is what would make the movement that much more extreme.
Fundamentally, I am a not optimistic and have placed my chips in that manner with shorts on specific stocks, TZA, puts, a lot of cash and a gold mutual fund.
We are frequently hearing how important powerful people (e.g. Wyley brothers in Texas just making headlines today in WSJ) have gamed the system. This Administration in power will be devastated if the market goes over the cliff and they will have every motivation (ethical and unethical to ensure it does not). I suppose you can say that Bush could not delay the inevitable but he was within months of leaving office after two disastrous terms. However, I do think that Herbert Hoover was only in the middle of his one term.
Boy, I ramble and I am sorry. You spend a lot of time on your analysis but I think you need do some rethink on your approach. It sure would be sort of interesting to know how YOU are investing, or even if you are investing. Are you eating from your own cooking?
Tom
I tink if you look at just about all blog analysis in recent months, mine included, this pattern of switching from Bull to Bear and back again, reflects the utter confusion in the market, and if anything lends itself to a continued rangebound market for some time.
Saying that. I am seeing a picture of 2 opposing forces at work, the large correction May – July unfolded as a bullish falling wedge, the recent up move thorugh July is unfolding as a smaller but potentially bearish wedge. Similar behviour was prevalent before the 1987 crash, and the Fall 2008 crash, though on short and longer timeframe.. Perhaps this will resolve itself eventually in a similar manner, though shorter-term I favour the upside to re-assert itself.
Geoff, yes it is getting long in the tooth. I am currently short since 7/27 through various short ETFS, but I have this sense that I will probably have to close them out maybe as soon as opening trading this Monday unless by some stroke of luck the market gaps down this Monday and breaks below trendline support. The market is reluctant to show weakness right now and there is still the possibility of a huge move up that could even blast to the April highs. We are in a pivot point now and the market must decide.
Perhaps the Astro stuff is completely wrong, again. They have stuck their neck out way too far and maybe the whole thing will either invert or be completely ignored.
Maybe instead of writing about the sp500 every day I will only write about it occasionally when there is actually a strongly indicated trend change or turning point. Writing about it every day sort of forces me to say something but in reality a lot of times the market does not really decide that much so often, it moves in trends.
Reason I have been writing about it so much every day is that it seemed as though we are headed for high volatility resolutions soon, but with every day that goes by without a downward break, this could be misguided…
So as usual.. lets see what happens next week.
Yea Gooner agreed. The market is not showing weakness now, the trend is your friend until indicated otherwise. If we pop higher again this market could keep going and going like the energizer bunny as it would break key resistance points. Especially if the SMH manages to pop above its long trading range.
Tom, I have only followed you a few months, and I was impressed when you called the top in April correctly (although not impressed enough at the time to act on that call).
One of the common themes among most analysts I follow is that if we break above the June high of 1130 in the S+P then we will contiinue to accelerate up. When most are making the same call it always seems to work out differently. If a crash is going to occur soon, I feel like the most likely setup is for us to move up from here and exceed the June highs, stall out somewhere between 1130 and 1150. At that point the sentiment should be very bullish, and the crash could begin…
If you look at the 1987 scenario you have been showing, it shows the market did make a new “rebound high” just before going over the edge.
My thought right now is to hold a smaller long position with tight stops and wait to see if we form a divergent high in the indexes in this next run up, then take a stab at a short position.
The one thing that makes me think a big move down may still in the cards is the high volatility we are seeing back and forth – I don’t see a real strong base for the market to withstand a strong move down.