Markets – Macro – Technicals

Ursus Interruptus

BearsUrsus Interruptus (UI) is a medically yet to be recognized cognitive disorder that afflicts primarily financial traders who have a view of where prices should be going as opposed to where they are actually going. It can be a temporary affliction from which traders can recover and end up prospering, or in cases of a more permanent condition, will likely cause devastating financial damage.

I’m a recovering UI patient myself, but momma raised no fool. So last week’s 10% drop in indices with accompanying panic spread the disorder like wildfire. Not Ebola mind you, but Ursus Interruptus. I saw previous perma bulls and hard core UI sufferers alike calling for new lows and for the end of this bull market.

I frankly felt odd and out of place for going all bull in the face of this epidemic and even calling for the possibility of new highs and posted an inverse chart on Friday in the member feed that called for an aggressive bull run:

inv 17

That doesn’t make me a genius or brilliant it just makes me disorder free.

Seriously what has changed? It’s still all about central bankers and they don’t want markets down. So half-jokenly I had put up this tweet which outlined the market tankage during the 4 POMO free days only to be stopped by POMO coming back into the market and the Fed’s Bullard rescuing the market with QE extension talk. In short: Jaw boning. Today no POMO is scheduled mind you:

So it took 4 days of jaw boning, ECB QE talk, and additional POMO operations and the Ursus Interruptus afflicted trying to sell this market at the 38.2% Fib, the 200MA and the 50% Fib only to get their heads handed to them. It sucks, I get it, but this is the market we have:

$ES 61.8

And so now what? We have a trade plan and view in the member area on how to navigate the next few days, but the monthly chart makes one thing very clear: The monthly MACD cross everyone was eyeing? It’s on the verge of being gone and the key moving averages have been recaptured:

SPX monthly

I’m firmly in the camp that eventually we will see a deeper correction, but for now the market may just be following the 2007 script and produce higher prices still. Sellers need a breakdown that sticks and so far the only evidence we have are symptoms of Ursus Interruptus. I wait for evidence for more.

For further reading I recommend:

1. Weekend Charts: Cutting through the noise

2. Shaded of Grey: 2007 edition

For more information about our trade philosophy or on how to become a member please visit the About and Membership pages.

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  1. Interesting TACs of the Week (October 20 – October 24, 2014) | Macro Viewpoints

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