The Rocky Horror Show of Charts

“Buy every dip” they told you all summer. Bull after bull came out and told people to buy the dip. That worked well, no really, it worked. The move to new highs looked impressive. In the headlines. And in some indices and in some stocks that is. It didn’t work in many others. At all. In fact many indices have been an absolute horror show technically and never made new highs and/or they kept dripping to new lows.

To compound the problem the same people that told you buy buy buy never told you to sell. Don’t sell new highs was the mantra. The rally is expanding. No seriously, that was the PR circus running even in early October. Most bullish period of the year is just beginning remember?

Ignored were the negative divergences, the weakness underneath, the narrowness of participation (see also: Lying Highs). All of it.

And now the “hope” is for positive seasonality into year end, buybacks coming back, etc. Which may well happen of course.

After all we are very oversold here and a rally will emerge somewhere from these conditions.

But there is a lack of accountability as to the underlying damage that is being caused here. And while there are still key individual winners in 2018 the underlying picture remains absolute horrific.

I’ve picked a few select indices and sectors that highlight the current state of affairs. Buy every dip without selling.

How did that work out for the larger investing public and hedge funds for that matter?

Banking Index $BKX:

Semis $SOXX:

Transports ($TRAN):

Homebuilders $XHB:

That latter one being a classic example of what I mentioned above.

And don’t think I’m being too selective here. Yes $NDX is still up on the year and $SPX is near flat at the time of this writing, but look at the broader market. It’s a horror show:



Vast technical damage incurred everywhere.

Most buyers of every dip are under water if they didn’t sell.

Wall Street didn’t tell them to sell. They never really do. And I get it, markets tend to go up in most years and in the AUM business it makes sense to keep wanting to attract new cash at all times, keep buying until the bitter end. And then buy some more.

It works until it doesn’t:

The message for investors and traders: Look beneath the headlines and the marketing and stay abreast of developments beneath the surface. Form your own opinion. Technicals matter and they signaled well in advance not to believe the hype.

Related readings:

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Categories: Opinion

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