Market Analysis

Tech Signal

As bears are capitulating and markets keep making new highs on the heels of yet another dovish speech by Jerome Powell investors continue to chase historic valuations.

Nothing has mattered so far, not the imbalances, not the rising $VIX, not the data, not the historic stretches in the charts of individual stocks such as $TSLA, $AAPL and others nor valuations.

But the deteriorating picture underneath markets has left a familiar trail in some of the signal charts and tech specifically looks at very high risk of a sizable coming correction.

Specifically the chart that is flashing red here is the $NASI, the Nasdaq summation index.

It has built a very specific structure that has signaled sizable corrections coming in the past couple of years.

While $NDX keeps making new highs NASI’s price action weakens on new highs, while $NDX is engaged in a pattern of price compression as it keeps rising in a steep rising channel patterns.

I submit we are seeing this again now:

In previous occasions the break in the pattern have led to significant down moves, the last one of course being in February of this year leading to the crash in March.

We also saw a sizable correction in May in of 2019 following the signal.

Both times the divergence took roughly 2 months to build, a similar time frame that can be observed here.

Tops are processes and this process here has been building. No breakdown has taken place yet, but the warnings signals are mounting and are screaming risk off coming.


For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

All content is provided as information only and should not be taken as investment or trading advice. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. For further details please refer to the disclaimer.

Categories: Market Analysis

32 replies »

  1. People still buying the dips in equities when hitting oversold levels even if no divergence hahahahaha

    Instead big opportunity in buying dips in inverse ETFs.

  2. Don’t be shaken out of your inverse ETF positions by other people taking small profits way too early. They will buy again at much higher prices.

  3. Retail is not even thinking of shorting the market or buying inverse ETFs. They will arrive late to the party and buy at crazy high prices.

    • I see a pattern forming in a tech related ETF that says the market has already started its down trend. A wave 2 running flat which means we’ll be in a long downward wave 3 tomorrow.

    • Core PCE index tomorrow morning.
      The charts and the futures are set up for an inflation surprise tomorrow that tanks the stock markets.

  4. THESE DIPS ARE MADE FOR POUNDING AND THATS JUST WHAT THEY DO, BUT ONE OF THESE DAYS THESE DIPS ARE GONNA GET POUNDED RIGHT THROUGH….

    CITI: buy any shallow dip…. CITI cross-asset strategy sees every down-tick as a buying opportunity: “2020/2021 expectations move higher. As a result, current equity market re-rating isn’t an issue. We are buyers on shallow dips. Loose fiscal has been a major driver of the reflationary asset environment we’ve seen over the last few months and is a necessary (but not sufficient) condition to the continued US recovery”

    WELCOME TO SILLY SEASON, BUT WHAT EPISODE ARE WE IN ?? are technitians hoping for the cumulative weight of this slow grind up to meet with gravity a la 19.02.2020 ?! stairs up elavator down ?

  5. Very difficult to not buy the dips due to the Fed intervention. Historically the amount of new funds entering the markets through the big mutual fund houses (Fidelity, Vanguard) tends to dry up somewhat as many folks have maxed out their 401K contributions through September…But as we saw last September the Fed and their “Repos” prevented the inevitable collapse. Tough to make a call when true price discovery has been replaced by Fed intervention…Every one who has been somewhat on the sidelines are waiting for the inability of the Fed to prevent the next leg down from occurring…

  6. Sven,
    The Fed needs to stop buying bonds immediately especially of those companies that are buying back their own shares.

    • Corporations need to award all employees the same number of equity type compensation (stock options or restricted stock units) and not just to upper management.

      Both the Fed and Corporate policies are contributing to wealth inequality.

  7. Everyone,
    Vote out every sitting congressman and tell your company to reform it’s policies that will promote employee income and health benefit equality.

  8. Now that CNBC has finally capitulated and has announced the markets perspective about Fed liquidity and policies and ‘don’t fight the Fed’ brainwashing… the billionaires will now orchestrate a stock market bear trend.

    CNBC just announced the top. Go the other way now. Big opportunity in inverse ETFs.

  9. So close now to the end of all of this control, manipulation and influence over the people by the Fed, corporations, billionaires, media and the stock markets.

  10. Sven,
    “Occupy Wall Street completely missed the real target” because billionaires, media, politicians and corporations completely distracted the general public with so call social injustice foundations and all other social movements all the while the billionaires were accumulating more and more wealth. The general public was lead to fight for things that did not impact the wealth or get in the way of the billionaires of accumulating more wealth.

  11. who else feels screwed over by the company you work for that is buying back stock all to benefit the CEO and upper management teams that are given stock options or restricted stock units?

    what a scam by the rich to get even richer.

    • What a conflict of interest if you have the CEO on the Board of Directors who is approving stock buy backs programs in your company just to make themselves richer.

      Imagine if you could determine how much more you’d like to get paid.

  12. The biggest bubble? The bond market!!!!

    It’s as if debt doesn’t matter at all….and it’s everywhere around the world the same story….this is totally INSANE. Utterly insane.

    And the majority of people are totally clueless about it.

    When the bond bubble cracks….our societies will totally implode.

    You can thank Powell & Co for that

  13. CNBC will soon be screaming “American Civil War II Stocks – there is no alternative! Don’t miss out!”. Exactly the same as they did for these same Pandemic Stocks. Either way, if all the customers are dead or unemployed I’m not sure who is going to buy all these iPads and Teslas hand over fist for the next 50 years currently priced in, but nonetheless a great excuse to rip the market higher another few hundred to thousand percent (if the war is bad enough) by year’s end. Proud to be American! More carnage bodes well for higher stock prices, because human beings, jobs, money and savings are worthless. The lesson of the last four years!

    We’re now also seeing the recurring fashion in hard times of companies such as airlines, banks, law firms, and everything else declaring mass lay-off’s resulting in their stocks then surging – on the basis their overheads are now lower and they will have more spoils.

    Wouldn’t it be better still if all the workers were just dead? The 1% would be happy with that – and that solved the problems of pensions, social security, etc, nibbling away at the little tax they pay.

    The Fed is clearly in on this. Their monetary policies are already designed to ensure only mega companies and the 1% survive and indeed profit from the chaos. If they get rid of most of the population that solves the unemployment problem for them too – and without anyone pulling down prices because they have nothing and no jobs and no money, maybe they’ll get their 2% inflation at last!

  14. PS – now they are laying off the “middle classes” (who are the modern working poor living pay-check to pay-check without stock options) such as pilots, crew, high street bank managers and staff, lawyers who are not partners, technicians who don’t sit on Apple’s board, etc, those guaranteed monthly contributions into 401k’s and pensions funds blindly lifting SPY and QQQ, then washed around by the fund managers to cream a bit off, might be under threat. Robbin Hoodies were more of an excuse by way of a smoke-screen for these mad markets than reality, but they did help push prices where the real manipulators wanted prices to go, but they don’t have their $600 extra a week to invest and moreover if they have anything let will soon have to take it out.

    The Fed will soon have to make up that loss of liquidity too. I wonder what they will do now? Don’t doubt they don’t have another mad tool.

  15. …. a simple tool, they’ll just buy the stocks directly themsleves instead. Don’t need investors or a market. Stock prices will just be the new currency that the billionaires assets will be priced in. They want that stable with no participants and constantly inflating.

Comment:

This site uses Akismet to reduce spam. Learn how your comment data is processed.