Saturday 2 January 2016

Wall Street, we have a problem

US - and most other world equity markets, saw a very strong rebound from the late summer lows. Yet, the Dec' close was a pretty ugly one. Upward price momentum has stalled, price structure is offering a giant bear flag. If January fails to close significantly higher, US and world equity markets are in real trouble.

With 2015 now wrapped up, I wanted to highlight a few things.

As ever.... for the big/serious money, its not about the intraday or even day to day action. The weekly and monthly closes are what really matter.
*I'll stick to highlighting the sp'500, as it broadly applies to most of the other indexes. It is notable of course that the 'old leader' - Transports, is far weaker, which is especially ironic (and bearish) considering the consistently low fuel prices.


The issue of the monthly 10MA is something I have been incessantly highlighting lately. The Dec' close sure was a major problem for those equity bulls who were hoping to end the year at least fractionally higher.

Yes, the sp'500 only saw a net decline of -1.7% @ 2043, but that was indeed under the 10MA... and 91pts below the May high of 2134.

Right now, new historic highs look out of range until mid Feb' at the earliest, and that would assume no further weakness in early January.


A rather appropriate blue candle, after the bullish greens of Oct/Nov. Equity bears should be seeking a red in Jan/Feb. First natural support would be the lower monthly bollinger.. around the 1900 threshold.


Seen on the MARCON chart, we can see how we've now been at MARCON 6 for TEN months. This is pretty incredible, and is highly indicative of the market having stalled after climbing on ZIRP and QE for the better part of six years.

spmonthly7 - ichimoku

I very rarely highlight ichimoku. I'll merely note support at the red line of 1936, and the upper part of the green cloud around 1600. By April/May, the top of the cloud will be around 1650.

Any daily closes <1930 would be a red flag, and offer the 1700/1650 zone by late spring.


If equities fail to push back upward, with a Jan' close in the sp'2040s or lower, we'll see the MACD (blue bar histogram) cycle remain negative.

At the current rate, the actual MACD (black line) will turn negative sometime between March-May. The last time it went negative......  Sept'2008.

... and that wasn't exactly the best month for US/world equities.

For now... holding at MARCON 6.... but if 5 is hit in the spring/early summer, then it'll be time to sound the alarms. Until then... everything bears careful monitoring.