Daily Market Brief

Ghosts of 2011

ghostsFor weeks I had been pointing out the similarities in the Russell chart to 2011 in particular the weekly chart and the general deterioration with negative divergences. While folks on CNBC and Twitter kept raising price targets telling everyone there is no alternative but stocks I asked whether the Russell was about to unravel. This weekly chart outlined the concern I had about the $IWM then:

IWM July

This is what the same chart looks like now:

IWM weekly

That doesn’t make this a told you so, but it highlights the importance of charts and reading divergences. Everyone will surely remember the incessant bullish comments to raise prices, $SPX 2000 this, 2,100 that and of course they were pushing 18,000 $DJIA and God knows what. This doesn’t mean we can’t still make new highs, but it highlights to be very cautious when people just beat a price target drum without any risk qualification whatsoever.

There is a lot of support on the $SPX just around here and we have been trading for a bounce today and we can certainly expect some retesting of levels higher up, but the Russell charts continue to paint a very troubling picture. And so far it has been right on target in terms of its predictive capability.

More to come this weekend. Stay tuned.





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3 replies »

  1. Good stuff and congrats on the good trades. V frustrating week for me as managed to lose money despite being bearish. Covered shorts and added longs too early. Ugh. With 2011 ghosts in mind, what chance do you see of a few more days of relentless selling, possibly down to s&p 200 dma, lower even, next week? Wasn’t it exactly the same time of year, and didn’t we see an entire week of red days, while dax got absolutely obliterated? I must confess am slightly uneasy holding dax long over weekend, though it is small. Do I sound like someone who’s had a bad week? 🙂


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