Friday, January 24, 2014

"Bank of America Head Technician: 'Our Bullish View Is Invalidated, Going Neutral; Below 1806 Spells Trouble"'

In my experience, and I'm a lot older than most of our readers, this is not the way bear markets start. The realization that stocks were dropping spread too far, too fast.
Bull markets tend to roll over, gently start trading down and then, after running through class IV rapids, do the waterfall decline thing. They don't start with 4% drops.
Here's 1929:

Online Stock Trading Guide

1987 was even gentler. Just drifting along in the late August warmth, oh look Fidelity has a full page mountain chart in the WSJ on August 25 at DJIA 2722 bragging about their performance.

That of course was the day the market top-ticked but nobody was on hair-trigger to get rid of their investments at the first 2/10% decline, so the market got rocked for 36.1% over the next 55 days.

So the next question is: Is this the start of a 10-20% drop or is this a fakeout-shakeout'?
Beats me.
But my best guess is 1910 on S&P before I have to check into  a fortified bunker.

Here's the key: If, on the next run-up we don't see new highs, then there is big trouble coming.
S&P 500 1804.94 down 23.52. Daily low 1800.69.

From ZeroHedge:
Yesterday's BofA's MacNeill Curry warned that once above $1270, gold becomes "explosive" as the squeeze trap slams shut, which explains why the shorts are desperately defending the critical resistance redline. Today, the chief technician of Bank of Countrywide Lynch looks at the two other key correlation pairs: the S&P500 (via the Emini ESH4) and the USDJPY, which by virtue of being the key funding pair determines the price of risk in virtually every corner of the globe. He is not too happy with what he sees.

Here are his thoughts:
On the S&P500: ESH4: From Bullish To Neutral
Anxiety across markets has reached a n/term extreme. The trends of the past few days/weeks are set to correct, but not turn...  The break of 1809.50 has invalidated our bullish view, but we ARE NOT BEARISH, JUST NEUTRAL. Going forward, we expect an 1805.75/1846.50 range trade before an eventual resumption of the larger bull trend. Below 1805.75 spells trouble, but bears only gain control on a close below 1767.75. See the chart for equivalent cash levels.

On USDJPY: Bearish $/¥.
Stay bearish $/¥. As we highlighted yesterday (Liquid Technical Alert: Stay bearish $/¥ 23 January 2014), bounces remain corrective and temporary. Our initial downside target is the 200d, at 99.97, but this should only be a temporary stopping point. Medium-term targets are seen to the Jun'13/Apr'13 lows, at 93.79/92.57, before greater signs of stabilization and a resumption of the LONG-TERM uptrend toward 124/147 (to be fine-tuned)...MORE