Market Analysis

Fragile

I’m probably one of the few remaining people left raising red flags, but hey, I see what I see and some of it I share and what I see is a fragile market that is setting up for pain. Now if you’ve been reading my public analysis you know about my Sell Zone, you also know about the weakness in charts beneath.

I’ll share another oldie, but goodie. Gaps.

Here’s one of the $SPX with open gaps:

Oh yes I’m a bit cheeky here, as it is the $SPX chart from January 2018 I outlined in my warning back then suggesting volatility will make a comeback and gaps would fill.

Well, they did and quickly so:

Or have we forgotten how quickly things can change? Chasing prices higher is not a guarantee of future results.

In any event, thought I’d share the current gap situation on a couple of charts.

Here’s $NDX just since June:

Here’s $SPX since the beginning of the year:

My apparently variant perspective: Many of these gaps, if not all, will eventually fill. And, as we saw in February 2018, gap fills can occur with a vengeance with little warning. Hence my view: This rally is fragile, handle with care.


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Categories: Market Analysis

16 replies »

  1. As Jesse Livermore said, you make profits by being right, and sitting tight. I hear the bell ringing, and so does anyone with a stitch left of reasoning and critical thinking skills. The only way this market can continue going up is through the dollar imploding and hyper-inflation kicking in. If that happens, the market may go up nominally, but in real terms measured in gold it will be dropping like a stone, as gold will explode north!

  2. There are so many people frustrated with this market….except the “Warren Buffet investors” who never sell :-). I mean, this market has been a dream since the 1930s (and especially since the early 1980s) for people who keep it simple: buy good companies at a decent price….and just keep holding. This has simply been the winning strategy until now. Will it be for the next 50 years?

  3. In my point of view, we are dependent on the big Wall Street houses. Just notice how ever rally in the last couple of weeks has been started with the opening bell of the Wall Street!

    The first big investment houses who start a series of sells might cause a panic on the retail traders who have entered the market recently. Most of all those who are over leveraged might end up getting kicked out first which floods the market with cheaper stocks which in turn leads to falling prices and potentially triggering stop losses below.

    As Mr. Henrich pointed out in another article, the sell off is usually a slow process, but once started the last all times high might not come back any time soon.

    Running a short strategy is – from my experience, pretty tough and it’s difficult to get the timing properly to place a trade or repurchase. Repurchasing is also difficult, since doubling the volume is sometimes not enough in order to pull the BEP (break even point) high enough. Therefore, it highly depends on the available cash you got. If there’s plenty available quadrupling the volume can be helpful, but u must be super sure the market is exhausted after a rally.

    And ofc, above all, risk and money management is most important to keep losses at a minimum or you can simply sit out a growing loss until the market turns in your favor.

  4. This guy is selling you all snake oil. The longer you keeping reading and listening the less wealthy you will become and never make it to the top 10%. Who cares about any of this gibberish and garble. The FED is in the game and Trump will do what it takes to get re-elected. The 1st priority is to keep the markets up. So they shall. Maybe Jan 2021 its a different story. This is a Doug Cass wanna be and perma-bear type he needs to go into hibernation.

  5. This guy is selling you all snake oil. The longer you keeping reading and listening the less wealthy you will become and never make it to the top 10%. Who cares about any of this gibberish and garble. The FED is in the game and Trump will do what it takes to get re-elected. The 1st priority is to keep the markets up. So they shall. Maybe Jan 2021 its a different story. This is a Doug Cass wanna be and perma-bear type he needs to go into hibernation.

  6. I just know one thing: at some point this global debt fueled economy will simply….totally collapse.. This is simply a the biggest (debt) ponzi scheme in history. Central banks can not forever save “the system”.

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