Market Analysis

The Bull Case

bull caseI think it’s fair to say I’ve done an exhaustive job of pointing out all the concerning issues we see with this market as of late, both in technical charts and in The Evidence. And the data continues to be extremely concerning. As many of you know, especially our members, Mella and I are discussing markets constantly and her work speaks for itself (Chart Lessons). We’ve been selling strength as of late and it’s been a very good trade, but if I’ve learned anything from trading with Mella it’s not to be stubborn and to keep a very close eye on what she sees.

Now none of us can know how the next few days or weeks will play out, and there’s still plenty of downside risk here still, but I think it’s only fair to get a view of the bullish scenario here.

So let me present some of Mella’s charts here that highlight the possibility of a massive blow-off top yet to come.

We’ve shown Mella’s pitchfork chart quite a few times and it’s been amazingly accurate in highlighting support and resistance going all the way back to 2011.

In this context then note the similarity in structure between then and now:

Mella 2

Combine this chart with a potential inverse structure:

Mella 1

And you have perfect bear hell into year end.

So in this context this week’s decline potentially sets up the necessary right shoulder. But be sure today’s decline caused some damage as we broke the recent trend line and this decline has further downside risk as well:

Mella D

Of course this week’s decline has an oh so familiar ring to it doesn’t it:


Last month the lows before OPEX were the Friday/Monday before. Next week is also the FOMC meeting and we know markets just love those:

Fed stifel

Add to the fact that markets are now heading toward oversold:


One then has the perfect combination for some major bear tossing into OPEX. Divergences be damned:


Are there any subtle signs to support this notion?

Well, today marked a breakdown on many levels. And I’ve been pointing out all the poor internals for weeks now. Yesterday markets showed us this picture:

And oddly enough, today this picture improved:


Doesn’t mean lows are in, but it is a positive divergence after a string of negative ones. So there. After all the depressing charts I’ve shown I got an earful at home 🙂

Categories: Market Analysis

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15 replies »

  1. IHS normally don’t appear at a top. They occur at bottoms. The pattern would be correctly ID’d as a cup-n-handle should it play out to the upside.

  2. Great post – nice to hear the other side!
    And that last photo is great – who wants to cross Mella???
    Seems that the probability the OPEX won’t come through this month is low – but, occasionally, like August, it doesn’t. Hmmm. Lots to ponder.


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