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THE GREAT BEAR IS UPON US

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The worst is yet to come?  US GDP growth down to 1.2%?  Inflation back to 2%?  Check out the video link below, hot of the press.  Got something to say about USD vs Bitcoin too...  and Tom Lee's Bitcoin predictions and a few other thoughts besides...  And MSM...  Good segment on Retail too and a general comment on what to do with the profits you may have made on your investment portfolio over the last few years ("book it for gods sakes!").  And a comment on the Santa Claus rally...  Segment on restaurant sector and a comment about gourmet burger brands, I know for a fact that these types of chains are in bad shape in the UK too...  Interesting observation on Treasury bond yields, especially connected to a previous video (above) from Real Vision.

Watch out for the punchline near the end!

Check out the video below courtesy of HedgeEye (you may have to register but it is free to view)

https://app.hedgeye.com/insights/71693-hedgeye-webcast-quad4-the-worst-is-yet-to-come?type=macro&utm_medium=email&utm_campaign=Webcast MB - Actives 11262018&utm_content=Webcast MB - Actives 11262018+CID_20d884af997dfa7d7a95e21045f8ed45&utm_source=campaignmonitor email&utm_term=CLICK HERE TO WATCH

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18 hours ago, Mercury said:

think maybe the link you posted works fine without registering. thanks will have it on in the background.

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Going back to the Credit Crunch price action (re-posted below) I am still struck by the similarity to the price action playing out currently.  While markets are going to do what they are going to do, human behaviour remains unchanged over time.  The current rally is highly exuberant, especially vs that we saw coming off the Jan/Feb correction.  Additionally the entire price action from the Oct high to date is highly compressed to date, like a coiled spring...  If over exuberance is a signal of the end then this is surely setting up accordingly... 

Of course several scenarios are present, including this over exuberance driving out a mega Santa Claus rally to fresh all time highs but like the HedgeEye guys, I don't believe in Santa Claus...  If there was one in 2007 it was a rather anemic affair, just a few days in the last week or so run up to Christmas and it put in a lower high at that and then the crash really got going in the week between Christmas and New Year.

Being of a Bearish bias on stocks (and the wider economy) I am only looking at Shorting stocks on the right set ups at these levels.  While I would ideally like a clean and obvious A-B-C, the price action from the Credit Crunch shows this may not be the case so a much thinner (hard to spot) A-B-C may be occurring (alternatively a complex retrace but I'll leave that for the market to decide and assess later it it shows).  The first up scenario is the simple thin A-B-C, which would be the current rally phase we are in.  So the thing I am looking for is a high probability turning point to get Short (we can worry about whether there will be another rally higher later but close stops are the order of the day for me on this type of trade to guard against another leg up).  Note from the Credit Crunch example that "sell the rally" opportunities were few and far between on the drop from wave 2 (blue) turn point so for me recognising this turn is important to kick off the bearish move well.

If this first scenario plays out, which is both legitimate in and of itself and consistent vs the Credit Crunch pattern, then either the Fib 76/78% or the Fib 88% are favorite turning points.  Obviously a breach of the Pink 2 brings up other scenarios.  Normally I would not be looking at a Fib 88% but these are not normal times, we seem to be getting lots of retraces to Fib 88% levels and even lots of doubles and Bulls and Bears slug it out across many markets.  This isn't surprising as most markets are correlated in some fashion.  Additionally the Fib 88% is also a retest of the Triangle breakout from the previous rally, which is also consistent with the Credit Crunch scenario.

Trading Strategy:

  • Simply go Short off a rebound from a suitable resistance zone with other signals aligning to the Short set up and keep a close stop just above the high to guard against another leg up then go again.

DJI-Daily2007CreditCrunch.thumb.png.b3262eae686a6aa8170d4c39ec696d30.pngDJI-Daily_011218.thumb.png.8e73d84940b1fd36f57864e9fb6b96c0.png

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