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When Bottoms Fail, Markets Crash 5/12/21

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When bottoms fail, markets can crash. So any time we see the makings of a bottom setup at the lower reaches of what is potentially a big top pattern, it's time to be vigilant. If support breaks, shoot first, and ask questions later. If the market reverses after breaking support, creating a false breakdown, I consider the cost of re-entry at a higher price an insurance cost. An alternative would be to go out and buy protection with puts. Whatever we do, it's a risk. That's trading, right?

For those of us who are short, we also have to be flexible and nimble, 

So here we are. Let's look at the 4 hour bars for perspective. We're right at the bottom of this ominous pattern going back to mid April on the ES fucutures. If this doesn't hold, it could start a step down process where the red horizontals are the steps. Or it could crash right through those to the first significant support level around 3970, to start. Because we could very easily see a V launch out of this. It would not take long to get back to the top of this meat grinder range.  

The 4 hour basis oscillators at the bottom of the chart, represent a nonstandard time input for MACD, momentum, and True Strength. They suggest that a cycle low is at hand, or at least near. But this again is the danger. When setups like this break down, crashes happen. Not all the time, but that doesn't matter. Once is enough to wipe out a trading account. 

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Our usual hourly view also suggests 5 day cycle bottoming, with a projection of 4102 having been hit. Indicators have turned up, creating positive divergences. On an hourly basis, these presage a rally most of the time, but again, not all the time. The challenge for the market here at 6:30 AM NY time is to break the downtrend lines at 4130 and 4145. Do that, and we're looking at a likely upside reversal. On the other hand, break 4104, and it could be Crash City. 

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Gold Breaks Out and We Hold the Picks

Here’s Why We Should Sell In June, Before the Swoon

 

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Yields are going way, way up. 

SInce the 10 year has gone from 0.5 to 1.7, the TLT has lost 22%. 

No surprise, bears won yesterday's screen game. But surprise, not by much 26 sells to 21 buys. That compares with Monday's 37 sell signals and 9 buy signals. 

The 5 day totals are 156 buys and 101 sells. The net positive of +55. Uhhhh... Surprise? That's more than Monday's spread of +32.

Is this just lag, or presaging some upside evil to be sprung upon us? I don't know. Using these screen results as a market indicator is something new. We'll just have to see. 

I screen all stocks and ETFs from the NYSE and NASD, excluding those with less than an average of 1 million shares per day traded, and selling for less than $6 per share.  The table below shows swing trade buy signals and sell signals from yesterday's action. The numbered columns represent the time frame of the support or resistance trend around which the signals were generated.  

Here is today's  output. The number 1 indicates that the condition is true. 0 is false. The numbers on the right half of the chart represent the time frames in days of the support or resistance areas where the signal was triggered. 

Symbol Buy Sell 500 200 125 50
AMKR.O 1 0 0 0 1 0
TECL.K 1 0 0 0 0 1
ETSY.O 1 0 0 1 0 0
FEYE.O 1 0 0 0 1 0
MUB 1 0 0 0 1 0
KOPN.O 1 0 0 0 1 0
MCHP.O 1 0 0 0 1 0
MU.O 1 0 0 0 1 0
MSFT.O 1 0 0 0 0 1
NLOK.O 1 0 0 0 0 1
ON.O 1 0 0 0 1 0
PYPL.O 1 0 0 0 1 0
PENN.O 1 0 0 1 0 0
PVG 1 0 0 1 0 0
PTC.O 1 0 0 0 1 0
XLK 1 0 0 0 0 1
TMO 1 0 0 1 0 1
TSN 1 0 0 0 0 1
SLCA.K 1 0 0 0 0 1
VRTX.O 1 0 0 0 0 1
WB.O 1 0 0 1 1 0
APH 0 1 0 0 0 1
COG 0 1 0 1 0 1
CHKP.O 0 1 0 0 1 0
CLVT.K 0 1 0 0 1 0
DAR 0 1 0 0 0 1
TECS.K 0 1 0 0 0 1
ERIC.O 0 1 0 0 0 1
MJ 0 1 0 0 1 0
EB 0 1 0 0 0 1
GM 0 1 0 0 0 1
GBOX.O 0 1 0 0 1 0
HBI 0 1 0 0 0 1
HIG 0 1 0 0 0 1
HFC 0 1 0 0 0 1
IR 0 1 0 0 0 1
EWJ 0 1 0 0 1 1
MARA.O 0 1 0 0 1 0
NRZ 0 1 1 0 0 0
NKE 0 1 0 0 1 0
OXY 0 1 0 0 0 1
RDSa 0 1 1 0 0 1
LUV 0 1 0 0 0 1
VTR 0 1 0 0 0 1
VET 0 1 1 0 0 0
WELL.K 0 1 0 0 0 1
XRX 0 1 0 0 0 1
Totals 21 26 3 6 17 26

This is raw data. These are not recommendations. They represent charts that have triggered short term signals near key cyclical support or resistance levels. Pick through these and see if there are any that you like using your own charts. Feel free to post your charts here with comments. 

Every weekend I use the previous week's screens to select charts that have potential for a move, and I post them for subscribers.  

Second Wind – Swing Trade Picks For Week of May 10, 2021

 
You can see which ones I actually pick each week by subscribing to Technical Trader. Try it for 90 days risk free (first time subscribers).

Here are a few that look interesting. Again, these are NOT RECOMMENDATIONS.  
Click the chart to enlarge

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10 year Treasury got bombed on the news. yield spiked. Doubt that will stick with all the cash coming over the next week. 

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Having a problem with file uploads today. Working on it. If you can, give it a try and let me know if you can and what error message you get, if not.

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Started happening for me about mid-day yesterday. I assumed it was operator error on my part. I get a white box, with a gray triangle at the top with an exclamation point in it, the phrase "There was a problem uploading the file" below that, and a blue "OK" box underneath that to check that clears the message. 

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to any Bond guru out there.

my Daughter and hubby will close on the sale of their business shortly...she mentioned putting a portion ( say 1 million) into 10 yr Treasuries....and i said stop...no way...but i am ignorant as to a concrete example of what a .25% increase would do to a position of that size... what would be the capital loss....

 

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5 minutes ago, DrStool said:

SInce the 10 year has gone from 0.5 to 1.7, the TLT has lost 22%. 

so that is 1.2% increase, say 1.25 to simplify...1.25/5=.25   so 22%/5= 4.4%.....so 1000000X 4.4%= $44000....give or take....is it that simple

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1 minute ago, No Einstein said:

so that is 1.2% increase, say 1.25 to simplify...1.25/5=.25   so 22%/5= 4.4%.....so 1000000X 4.4%= $44000....give or take....is it that simple

44000 loss

 

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If they invested the million when the 10 year was at 0.5, it would now be worth $780,000. 

 

By the time the bond market crash is complete, they'll lose half their capital. At least. But if they hold for 10 years, they get it back. The question is how much purchasing power it will have. 

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1 minute ago, DrStool said:

If they invested the million when the 10 year was at 0.5, it would now be worth $780,000. 

 

By the time the bond market crash is complete, they'll lose half their capital. At least. But if they hold for 10 years, they get it back. The question is how much purchasing power it will have. 

i understand the holding part...and the purchasing power part... i was trying to get a handle on the effect  a .25 increase would have on the bond price @ 1 million....u have answered that with a concrete example...Thanks

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