Pages

Sunday, December 11, 2011

$SPX - DAX Leading Down

Much of the current economic news has centered around the situation in Europe.  The German DAX has been a good leading indicator for SPX.  The higher low for the DAX in July 2010 was a solid indicator of a bullish move to commence. 

The same was true in early October 2011.  The higher low on the DAX suggested a bounce.  Why just a short lived bounce?

Daily Chart















Unlike 2010, The performance of the DAX is still much weaker than SPX.  The large gap in DAX vs SPX is quite clear, and should be taken as a serious warning.       

Daily Chart
Posted by at

55 comments:

  1. gnerDecember 11, 2011 at 2:07 PM

    Thanks for the charts SC. Where do you think gold is going? will it go down with equities?
    People are getting bearish on the euro so maybe its time for it to pop?

    Many thanks
    gner

    ReplyDelete
  2. SCDecember 11, 2011 at 2:22 PM

    The gap between the DAX and SPX has narrowed a little from Sept when it was the widest. So technically the situation in Europe has improved vs SPX since Sept. I did point out in late Sept that the dynamics will improve for Europe, and they did.

    Now, I expect both SPX and DAX to decline sharply, but with the gap narrowing. It'll take 2-3 months for this to occur. In other words, the bearish case is strong for the next couple months.

    The next crisis is about to kick off, and it probably won't come from Europe...

    Gold should only have minimal downside here. Target is $2020 next for Gold.

    ReplyDelete
  3. SCDecember 11, 2011 at 3:13 PM

    SPX closed at 1255. Interestingly, this is horizontal resistance going back to 2001. Crashed in 2001 when it dropped below the 1254 level, crashed in 2008 when it dropped below 1257, and the downdraft this August 2011 when it fell below the 1258 level also.

    It seemed on Friday that the market was on a mission to rally to achieve a certain level. Backtested this 1254-1258 horizontal "crash" level on Friday.

    ReplyDelete
  4. rogerDecember 11, 2011 at 7:03 PM

    i think there's 195, 1325 before any major downleg..If your bearish, I think you will get better prices to those bear etfs by end of year early jan...We will see a bigger down, but not anytime soon

    ReplyDelete
  5. rogerDecember 11, 2011 at 7:04 PM

    1295*

    ReplyDelete
  6. ThaiHawaiiDecember 11, 2011 at 7:09 PM

    Roger

    You sound like your are positioned for a move to 1300. If you are opposed to SC's move down here, you should give your technical reasons why.

    ReplyDelete
  7. rogerDecember 11, 2011 at 7:24 PM

    ewi wave C, rectangular pattern developing making a move to 1270-1271 and there by breaking above 1267 , because of which in my opinion we will move to 1292..
    Also EUR has a double bottom formation and hence i see a short time appreciation against the $...

    Btw I dont intend to oppose the very learned blogger, just my honest opinion..

    ReplyDelete
  8. rogerDecember 11, 2011 at 7:26 PM

    Also vix's inability to break beyond 30 and seems to be falling below its 200MA, i think should bring more confidence to long term investors

    ReplyDelete
  9. ThaiHawaiiDecember 11, 2011 at 7:42 PM

    Fair enough, but EWI has that as an ALT count, I believe and EUR is about ready to fall off a cliff. If your not right about the double bottom is not right.

    ReplyDelete
  10. SS76December 11, 2011 at 8:08 PM

    Well, Silver getting hammered so far so that prediction looks like it may come true. I am hoping that the S&P drops from here, even if I think it will be short lived as Demark is predicting 1330 for the S & P by Dec 21st as a top.

    ReplyDelete
  11. SCDecember 11, 2011 at 8:38 PM

    Definitely feel free to share bullish or bearish views here. All are welcome.

    ReplyDelete
  12. TomDecember 11, 2011 at 9:14 PM

    Personally, I am positioned for a major drop in the markets so I welcome SC's analysis. The only thing that bothers me is we have a very nice looking "Pipe Bottom" candlestick formation on the daily SPX, like we saw at the beginning of November. These formations are the second most reliable candle patterns of all. For more info go to http://www.thepatternsite.com/pipeb.html

    ReplyDelete
  13. BlakeDecember 12, 2011 at 5:32 AM

    Extremely low risk entry into gold right here at 1679 for a long side trade. High probability of profits in the next 4 days

    ReplyDelete
  14. AnonymousDecember 12, 2011 at 7:13 AM

    Blake, gold went under 150DMA, something it does not do that often....

    ReplyDelete
  15. BlakeDecember 12, 2011 at 7:21 AM

    bluemoon- I don't really pay attention to themoving averages very much, just going off of a few indicators i use for low risk entries into markets and all 3 of them triggered a buy for gold this morning. I went all in at 1679.

    ReplyDelete
  16. ABQDecember 12, 2011 at 7:31 AM

    out 1/2, from previous post:
    http://screencast.com/t/OwFej5FapVN

    Filled Sell ZSL Market 13.4902 -- -- 10:05:18 12/12/11
    Filled Buy ZSL Market 11.819 -- -- 10:11:11 12/02/11

    ReplyDelete
  17. AnonymousDecember 12, 2011 at 7:36 AM

    thanks ABQ, im out of my 31dec SLV puts and half ZSL.

    Blake, 150DMA i use for determining longer term direction. Bounce is healthy, its just gold is breaking it for a second time in last 3 months.

    ReplyDelete
  18. SCDecember 12, 2011 at 7:50 AM

    Dumped my VIX position from the late Friday entry. It worked ok, but not impressed either.

    The problem is there isn't much fear out there this morning with the mkts declining. I take this to be a bearish indication for the mkts going forward, but it isn't all that attractive for VIX short term anyways.

    Had the right idea, mkts did drop this morning.

    ReplyDelete
  19. SantaDecember 12, 2011 at 7:55 AM

    Hi SC

    would you be going into LONG then SPY for today since you dump your VIX

    Thanks!

    ReplyDelete
  20. SCDecember 12, 2011 at 8:03 AM

    The Gold chart is working well:

    http://cyclicalmarketanalysis.blogspot.com/2011/11/gold-target-2000.html

    The downside should be limited for Gold. Silver should still come down ideally to around $30.25. I'm going to look closer today, do some fine tuning. Nice to see Silver finally coming down.

    ReplyDelete
  21. SCDecember 12, 2011 at 8:14 AM

    I was anticipating higher probability of a down day Monday which is why took the VIX positions late Friday. This was just meant to be a short term trade.

    The VIX action is subdued and this is bearish for SPX. The VIX will eventually spike, and there won't be a bottom on the mkt until it does. VIX might just slowly grind up for a while though.

    I remain bearish on SPX. Today was the worst day in my cycle analysis, but the whole week shows in the red by this method.

    ReplyDelete
  22. SantaDecember 12, 2011 at 8:45 AM

    Hi SC

    If you believe the whole week shows red, why would you exit VIX today?


    Thanks!

    ReplyDelete
  23. ABQDecember 12, 2011 at 8:59 AM

    Bluemoon, congrats!

    Re: GC, it is dicey. Breaking 1650 decisively, it could peel off another 75-100, imo...
    http://screencast.com/t/91ito1Tfki

    ReplyDelete
  24. SCDecember 12, 2011 at 9:12 AM

    That position was just intended to be short term. I'll place long VIX positions around spots where I think we can see some dropoffs.

    Eventually VIX can spike over 60 early next year.

    ReplyDelete
  25. AnonymousDecember 12, 2011 at 9:38 AM

    Agree SC, the downside does appear to be limited with gold. My
    analog indicator is showing a turn within 2 days-- FWIW.

    ReplyDelete
  26. TimerDecember 12, 2011 at 10:23 AM

    I see a double low around 14 and 16 Dec, followed by a rebound play to 22 and 29 Dec. Just not sure how low will the momentum take it down by 14 or 16 Dec.

    ReplyDelete
  27. amitt gusaniDecember 13, 2011 at 3:27 AM

    hi SC good analysis in gold,perfect brake at $1650,I had read in your earlier post gold might go to 1780 from there to $1650,and from the $2000,great work,analysis!!!!!!lets hope it reaches $2000 soon
    Amitt Gusani

    ReplyDelete
  28. SCDecember 13, 2011 at 8:16 AM

    Thank you, both Silver and Gold may still have some minimal downside, but are starting to become attractive at these prices. The upside will be explosive!

    ReplyDelete
  29. BlakeDecember 13, 2011 at 8:36 AM

    I am pretty confident that gold has bottomed.

    ReplyDelete
  30. BlakeDecember 13, 2011 at 8:37 AM

    a very nice divergence from the dollar's push higher today.

    ReplyDelete
  31. TheBlueMoonDecember 13, 2011 at 9:21 AM

    SC as you think there will be explosive upside move on metals do you think the same for indexes?

    thanks a lot, excellent work SC.

    ReplyDelete
  32. SCDecember 13, 2011 at 9:33 AM

    The metals could still have some downside ideally, but minimal. Silver around $30 would be ideal. Yes, imo they are setting up for an explosive more up.

    For indexes, the explosive move would be down.

    ReplyDelete
  33. SCDecember 13, 2011 at 9:44 AM

    The VIX was acting unusual yesterday. Today it has tested the level of the first week of August (VIX doubled in the 3 days afterwards). It has taken 4 months to come down and test this level.

    This is significant.

    ReplyDelete
  34. SamiDecember 13, 2011 at 9:56 AM

    SC do you see the market dropping for rest of this week?

    ReplyDelete
  35. SCDecember 13, 2011 at 10:09 AM

    This week looks very bearish. If SPX dropped 100 it sure would not surprise me.

    ReplyDelete
  36. curiousmindDecember 13, 2011 at 10:27 AM

    SC,can you expand on your view about VIX? I noticed the divergence yesterday too, and today it is also quite weak. Could it be because of end of year? What do you think the significance is?

    ReplyDelete
  37. SCDecember 13, 2011 at 10:38 AM

    There are less trading days in December due to holidays. That will influence it, but I think the unusual behaviour of the VIX is bearish for the markets.

    ReplyDelete
  38. BlakeDecember 13, 2011 at 11:42 AM

    so much for that bottom call this morning....gold getting hit much worse than silver

    ReplyDelete
  39. StockboomDecember 13, 2011 at 12:32 PM

    My god...can anyone hold gold and silver? they are falling like rock here...any suggestions?

    ReplyDelete
  40. BlakeDecember 13, 2011 at 12:36 PM

    my suggestion was to puy at 1679, lol! This whole market is just unbeleiveable every day. It just moves so far and so hard in each direction, whether it be for weeks at a time, or just for hours, it will still push harader than you can ever ever imagine. I don't understand the driver behind this and why it has transformed into such a monster

    ReplyDelete
  41. Thor JohnsonDecember 13, 2011 at 12:44 PM

    SC's initial analysis was Silver is going down to $28.50 before bouncing back up to $36.50. I've been biding my time waiting for $28.50 to go long and it looks like it's going to happen... the problem is I might chicken out when it gets there.

    Gold & Silver are correlating with SPX right now, and SC also has a 1040 SPX target... so what do you think SC? Will the metals stop correlating?

    ReplyDelete
  42. ABQDecember 13, 2011 at 12:56 PM

    Bought some AGQ here as a hedge....the VIX is too subdued.

    ReplyDelete
  43. SCDecember 13, 2011 at 1:10 PM

    Yes that is my view, metals getting hit initially only. SLV $28.50 or Silver itself $29.50 would be really attractive. It's not a given that it comes down that low either. $30.25 for Silver might be a place to look hard.

    Finally Silver coming down into this range - been waiting for a while.

    Wild market for sure, and it is going to get much wilder!!!

    ReplyDelete
  44. beetlejuiceDecember 13, 2011 at 4:54 PM

    This comment has been removed by the author.

    ReplyDelete
  45. beetlejuiceDecember 13, 2011 at 4:57 PM

    I am not confident that the metals have bottomed given that the USD has now broken a double-top and the risk trade will be off as the markets continue to decline.

    The dollar has been signalling from the begining of the stock rally that it didn't have legs.

    Whilst I expect Gold to surge from wherever it eventually does bottom i wouldn't go out on a ledge just yet.

    There is a fib cluster of dates for gold in January and the chances are that if we see a major stock market sell-off then it could get hit really hard for a few weeks.

    ReplyDelete
  46. ZigZagDecember 13, 2011 at 5:29 PM

    NYA line chart measures to a low here today, or tomorrow. Measure back from today to my Oct 3rd cycle low, and we hit my July 22nd cycle peak.

    http://tinyurl.com/d33m5gz

    ReplyDelete
  47. TimerDecember 13, 2011 at 7:36 PM

    EURUSD is an inverted CUP and HANDLE break down pattern. And USD DX is an upright CUP and HANDLE break up pattern. I think Stock will follow the currency pattern by going downward. The deflation hurricane in Europe will likely force every asset class less the US$ to go down as capital takes flight. Gold and Silver also echo the drop.

    ReplyDelete
  48. stevesteve121December 13, 2011 at 7:54 PM

    nice chart ZigZag.

    do you have a blog ?

    thanks

    ReplyDelete
  49. ZigZagDecember 13, 2011 at 8:10 PM

    Thanks stevesteve121.. No blog yet, but I'm working on getting one here soon to make it easier to see all previous cycle charts in one place..

    ReplyDelete
  50. AnonymousDecember 13, 2011 at 9:17 PM

    SC,

    Gold has broken 150 DMA for a second time since september which is a huge warning IMO. 150DMA was a significant buying support for last 2 years. IMO this is a sign of prolonged deflationary period of metals that we are entering. Gold silver ratio has made clear 4 waves up with 5th to follow targeting at least 60-64 level.

    ReplyDelete
  51. AnonymousDecember 13, 2011 at 9:21 PM

    Looks like your original take on metals SC this summer was correct its just the timing was off. MF global fiasco jeopardizing futures market may be the trigger for another round of beating in all commodities.

    ReplyDelete
  52. AnonymousDecember 14, 2011 at 4:59 AM

    Bobo, what is your i think based on? There is strong chance of silver diving to mid 20's perhaps lower if 5th wave up plays out. GS ratio moved up higher to critical resistance overnight:

    http://img856.imageshack.us/img856/8910/streamingserver7276555.gif

    ReplyDelete
  53. beetlejuiceDecember 14, 2011 at 5:08 AM

    1inbluemoon, I agree with most of what you say.

    Dollar is and has been sending a clear signal for several weeks and is now being confirmed by a breakdown in gold.

    Two words.....DEFLATIONARY SPIRAL.

    China is falling into a sink hole. Property prices collapsing as much as 60%, manufacturing shrinking and unrest is growing.

    Need I even begin on Europe.

    ReplyDelete
  54. AnonymousDecember 14, 2011 at 6:06 AM

    Beetlejuice,

    regarding USD - according to the 2008 dollar fractal, which we are following pretty close, dollar strength may peak into the dec 20th, then some weakness and one more spike into Jan 1 2012 (a lower high) is possible then longer period of weakness to follow.

    ReplyDelete
  55. AnonymousDecember 14, 2011 at 6:12 AM

    Bobo, world monetary supply is a lagging fundamental do you not agree? Did it shrink in enough in '08, '06 etc to justify the hair cut in metals?

    ReplyDelete

Subscribe to: Post Comments (Atom)