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Thursday, 30 October 2014

As markets resume plunge, a neat parabola top is defined by 3 peaks

As the markets resume their plunge after a week of rallying, we note that the parabola top formed by the S&P 500 is defined by 3 peaks. Early in the summer I had surmised that their would be a double-peak.

Friday, 17 October 2014

Word that Quantitive Easing may be extended brings temporary market rebound

 Word that Quantitive Easing may be extended in order to quieten the Markets may have been the cause of today's great rebound. However, the trend is still downwards.

Perhaps the slope of the downtrend will moderate. On the other hand, once the Bulls see that the QE rumour is not bringing a full recovery, the down-plunge could become as sharp as before.

The fall of the SPX500, according to my graph, from 19 Sep to 17 Oct 2014 was 9.4%. The rebound over the last two days was a creditable 3.6%, but falling back as I type.

The problem with extending QE once again is that it would be another temporary respite. Unless they decide to make QE permanent, in other words, instead of raising revenue required for government by taxation, to keep on printing Dollars. The end-result would be to continuously increase prices, with a proportionate continuous decrease in value of money.

Thursday, 16 October 2014

Two weak signs of down-trend faltering

Two weak signs that the current Downward plunge of the markets may be faltering: A Break-out of the Resistance Line and a levelling of Bottoms. I guess today's vigorous up-swing was a reaction to yesterday's vertical plunge; that it will peter out and the down-plunge continue.

News Reports notice market fall and misinterpret

Yesterday's 3% or so drop in many indexes across the world made News Reports wake up to the fact that the markets are falling.

The Reports blame the slump on the Ebola virus and unsatisfacory reports on global economic growth. Alas, they are misinformed. These items in the news may have been an extra sitmulus to a correction that is already under way. Zero interest and Quantitive Easing pressed prices to their present unsustainable levels, from which they must fall irrespective of economic performance.

However, if the economic report continue bad, the bottom of the correction may be lower than we would otherwise expect. Well-performing economies would arrest the correction at around 1300, whereas economic bad news could do as it did in 2007-8 and send the price crashing through the long-term support line, wiping more than 50% off prices at the apex.

Wednesday, 15 October 2014

Recovery peters out over-night: sell-off continues

Yesterday's recovery of the markets was short-lived. Overnight, the down-turn resumed. The effect of yesterday's bounce-back was only to widen the range of the down-trend slightly. Line D of my previous charts shifts slightly to the right.

Tuesday, 14 October 2014

Markets to Bounce or Fall!

Let's recall how we got here:

There are many conflicting indications as to what will happen next. Recalling how we got here may have some benefit.

The economic collapse of 2007/ 2008 brought markets around the world to their knees. The vertical pink line marks the point in time that Quantitive Easing and Zero Interest Rate Policy were introduced.

These policies intended to put cash back into the market place and stimulate the economy. Whatever about that, a side-effect was that people took their cash out of bank accounts and bonds and put them into equities. The stock markets of the world responded positively. Share prices shot up without a sufficient increase of production to substantiate the rise.

Economies are now growing, and eventually production will catch up with prices. For the moment, however, what the market sees is Quantitive Easing ending and Interest Rates rising. Inevitably, equities must fall in proportion.

Yes, there is scope at the present moment for a bounce-back to answer the great slump of the last week, but this recovery, if it occurs, will be short-lived. I see the S&P returning to its natural upslope in due course after a significant correction. There is scope for the correction to happen suddenly or to be spread out in time.

Click on the image to enlarge.

S&P decline: a note of warning

As the American markets continue to plummet, it is no harm to listen to a note of warning (from Kazonomics on

After the drop we have seen for the last week, a sudden upturn could happen. However, I believe the fear factor will remain high for he present, as the market gears itself up for higher interest rates in the New Year.

The Stock Trader's Almanac 2015 (Almanac Investor Series) last year predicted that the Dow Jones would collapse by 30% or 40% at some time in 2014, and most likely in October. I believe that this correction is now in process.

Monday, 13 October 2014

Not a Black Monday after all, but markets continue slide

I thought that the Bulls would be panicked by Friday's late plunge. Instead, they fought bravely back, pushing prices up for a time before they fell back to Friday's closing level. The graph of the S&P 500 kept within the bounds of trend line D that I drew on this morning's chart, and the downward slide continues as strongly as ever. There will undoubtedly be a flood of defections from the Bull army in the face of the continuing downswing.

No sign of Black Monday today yet, but it's early

This mornign early (6.30 Greenwich Mean Time), the HANG SENG took a sudden dip, but quickly recovered to finish a little up. Later the DAX and the FTSE had a slight recovery. Outside of trading hours, the S&P at first had a good recovery (but ot now, at 3 hours before opening) is beginning to weaken. If the American indices are to follow the Euorpean and Asian, today will see a slight recovery today instead of a drastic drop I predicted yesterday. However, I guess the sharp drop will actually continue or intensify, in accordance with trending line D.

Friday, 10 October 2014

Announcing the date of Black Monday 2014: it's 13 October

Given the dramatic drop in share prices as closing bell approached today, 10 October, I guess we can now announce the date of the next Black Monday: it's 13 October 2014.

Nasdaq to drop back from outer space

Nasdaq 100 has a tendency to take wonderful flights into outer space, but ultimately to be brought back to earth. I venture that the orange-tinted polygon represents its natural range. The blue triangle depicts the amazing surge in the late 90s and its collapse right back to ground zero between 2000 and 2003. The green polygon represents the top portion of its present flight into outer space. Its emerging downtrend could be quite as dramatic a plunge as happened in 2000. There are two major spots of resistance on the way.

Range of the S&P downtrend

The green polygon indicates the proper range of the S&P500 Downtrend. The highlighted peaks fall outside the range and are aberrations. Because markets anticipate lowering interest rates, a breakout at the lower bound is more likely than one at the upper bound.

A Battle the Bulls can't Win

Click on image to enlarge.

This is a Battle
The Bulls won't win.
Each time they throw
More money in,
The Bears are back in town
Driving prices down.
Next step: the Bulls lose heart,
Throwing in the towel
And markets fall
Vertically down
Thirty or forty
Per cent.
What do you think of the poem?
Why do you think I sing
In face of this disaster,

What is the difference between the present dip and previous dips this year (Feb/ Mar and Jul/Aug) shaded on the chart? This time the markets know that reduction in interest rates is imminent.

Thursday, 9 October 2014

The Bulls fight back, temporarily halting the emerging downtrend

The green parabola shows yesterday's almost vertical upswing followed by today's almost vertical downswing, halting the emerging downtrend. However, since the Bulls are failing to raise the top, the halt must be temporary.

Wednesday, 8 October 2014

Strong market upswing, but down-trend continues

Betting on the S&P down-swings, I had a few small successes early in the day, but unexpected upturns took the wind out of my sale and left me down on the day.

I expect today's upswing to be followed by an equally-strong downswing tomorrow, as the trend identified in my last post continues.

Down-slope emerges as market swings wildly up and down

The Bulls have yet to throw in the towel. Each slump in prices is followed by a vigorous recovery, but the emerging trend is nevertheless strongly downwards.

Graph shows the emerging slope of the new (down) trend of the S&P 500. As it trends downward, the graph swings wildly and almost vertically up and down as the Bulls continue to put up a strong fight against the ever more triumphant Bears. The battle could calm down to a pattern of gentle swings, or the Bulls could throw in the towel and allow the index to head vertically down.

This morning's punt: Short on the FTSE

An hour and a half after the UK stock market opened this morning, it seems clear that the plunge of the FTSE is continuing. This morning's punt is, accordingly, against the FTSE100:

The chart shows the FTSE 100 since 2010. The uptrend that commenced  in July 2011 has come to an end and a downtrend commences from here. At present prices are plunging. The plunge may continue, or the index may swing back, to moderate into a more gentle decline. At the moment it looks like plunge continuing.

Euro to rebound

The Euro has touched bottom (i.e., Support Line) against the US Dollar and may be about to rebound. This is indicated by the Chart. Contrary indications are that the Sterling and US Dollar areas will be seeing increases in interest rates in the coming months, which should tend to depress the EUR/USD and EUR/GBP further. For the moment, the Euro seems to be finished its downtrend against the Dollar and may be about to commence an uptrend.

Tuesday, 7 October 2014

Market slide continues today

S&P oscillated up and down as it slipped down the slope of the downtrend today.

Although now at the bottom of the range of the present downtrend, I think I might leave a position open overnight, since by now the Bulls must be getting a bit nervous and the fall therefore likely to continue after hours.

Mild Monday market means meltdown coming

Monday 6 October was no Black Monday. After rising early, prices slipped back later to show a slight drop overall.

As astute investors pocketed profits after a long summer ascent, the Bulls did not believe the uptrend was ended, but saw opportunity in the reduced prices.

You and I have, however, sold our stocks and will see investment opportunity when prices fall forty percent, or level out at thirty.

Sunday, 5 October 2014

Review and renewal of Black Monday pledge

I expect the markets to fall this coming week.

This image shows the shape of the FTSE 100 since 1990. It has kept within the range described by the shaded polygon. Having reached another apex in line with the previous 2, it has commenced to drop along line D. Early in the week, I made good gains, but lost them when I was too eager to get back in on Friday before its little bounce-back had come to an end. In the  coming week, I must be ready to re-enter as soon as it resumes its downward movement, which could, as I speculated in a previous post, become a crash.

The S&P 500 faces an even bigger drop, having twice broken out of its polygon, first on the down-side and, this year, on the upside. It is not quite so clear that it has started the down-trend: as I indicated in a previous post, it may have a double or treble peak at its present level before dropping.

The rise of both indexes to their present highs was driven by quantitive easing and low interest rates. The Quantitive Easing programmes are being wound down, and interest rates mus rise from their present abnormal lows. Sterling has signalled that the interest rates will rise in 2015, but the American Fed has indicated that the low rates will be continued for the present.

The markets know that, whatever words issue on the matter, interest rates will rise. They won't wait, but anticipate. Therefore, I expect both indexes to tumble sooner rather than later.

As to forex - EUR/USD and GBP/USD:

My polygon suggests that GBP has more ground to lose against the US Dollar, before a rebound is due.

My polygon on the EUR/USD suggests that the present downtrend might be coming to an end. However, the raw facts that the Eurozone is only commencing a programme of Quantitive Easing and that there is no prospect of an interest rise in this zone for the foreseeable future, indicates that there will be another substantial movement to the downside, whereupon the polygon will need to be redrawn to show the previous extreme dip (from 2000 to 20003) as the normal bottom.

Thursday, 2 October 2014

FTSE downtrend has started

The FTSE downtrend has started. The American markets will follow suit, no doubt, when they open later today.

Click to enlarge image.

For 3 years the FTSE100 has kept above Support Line C. It has now crashed through that support, indicating that a downtrend is under way. The last FTSE Bear-market lasted from October 2007 to February 2009. The present one may be swifter than that, being, perhaps, a response to expectations of increased interest rates rather than economic recession.

Wednesday, 1 October 2014

Today's plunge in the markets presages a great sell-off

I have joined the bottoms for the last year on the graph, giving me a Support Line. Today the graph plunged downwards to kiss this line.

First day of October and already the Markets are plunging. However, it is not yet conclusive that this is any more than a down-swing within the range of the present uptrend.

The graph will either bounce off the Support Line, indicating that the uptrend will continue for the present, or break through the line, signalling the beginning of the great sell-off. If not now, undoubtedly the sell-off will take place later this month.

Only one Wager now: Black Monday to Win

October is a month when investors review their portfolio. After a sulggish summer, this often signals a new period of growth. However, this year the summer months have seen an exceptional rise in share prices. Many traders will now be inclined to take profits, a fortiori because Interest Rates are due to start rising soon. Should the sell-off drive the chart through Support Line S, there will be a massive exodus, reminiscent of previous Black Mondays. This may not happen on a Monday, but is coming soon. To have anticipated a Black Monday would be the punt of a lifetime!