Tuesday, April 27, 2010

Supply shock ????

Here is a 30 minute bar chart showing day session e-mini trading over the past month. S&P downgraded the debt of Greece and Portugal this morning and this news triggered a high volume, selling avalanche (last red oval). There are two reasons why I believe this action is more likely to mark the end of a corrective phase than the beginning of one.

First, and less important, is the fact that volume, while high, was not as high as the volume on last week's news that the SEC was suing Goldman Sachs (first red oval). Secondly, and more important, is the fact that today's high volume is developing in the middle of a trading box (blue rectangle), not outside the box. I expect the low of the reaction which started from yesterday's 1216.75 high to occur somewhere in the green oval, i.e. in the 1175-85 range. I think we shall see this low within the next day or two.

Once this reaction is complete I expect the ES to resume its rally to 1270 and higher.


John said...

A run on Greek banks would start a shockwave here that people aren't prepared for...

Joe said...

That would make a perfect flat correction BTW.

Bill said...

It's not just a run on greek banks, Portugal is the next Greece. And then you have Spain, Ireland, and Italy that may follow suit.

I still agree with Carl that the selling may be short lived, although any time now a 10 % to 15 % correction can get started. The european debt and the Goldman investigation which can drag for some time don't contribute to a healthy bull market.

extrader said...

The END of the bull market is here!
Notice how bad news now sells off the markets!!

valeriobrl said...

Heavily shorting $Gold futures since 1163

extrader said...

BTW Carl,

I have to give you CONGRATS on ur NYX call. I had been bad mouthing it when it traded down to 24 and now its 33.

Edwin said...

Given the comments by Bill and Extrader, is it time to build a bunker and hide in there?

I bought more blue chip stocks today that pay 4+% dividend.

Adam said...


For your contrarian blog, I was wondering if you have considered the media headline impact of the Goldman coverage. All this fear factor must reinforce a bearish bias in the minds of individual investors and perhaps implies that the bull market has further room to go before we see a media top. Just a thought.


pimaCanyon said...

Anyone watching the senate grilling of the GS employees? Geez, what a with hunt. The longer I watch, the more I become convinced that many of our senators are slim ball politicians, and stupid to boot. Democrat, Republican, doesn't matter. They don't seem interested in really understanding what GS did in these CDO deals, they are only interested in political soundbites that will appeal to the idiots who vote for them.


Daniel said...


If SPX holds the 20 day moving average then I think it's going up if not we are headed down(low of the bollinger band).


extrader said...

SKF chart looks like it has printed out a double bottom which is not good for financials... I would monitor SKF to see if it can break through resistance at 18.50 which would be bad for financials and prolly the overall market!


Bill said...

It'll be interesting to see what happens over-night in Europe. Another meltdown in european markets overnight and this is the correction a lot of people have been waiting for. It'll last at least a couple of weeks and possibly 1 month. Then the bull market will resume.

The S&P is melting like snow in the spring.

Chad said...

I do not see a bottom to this trend until around the 18th of may where as the market should begin to seek 07 levels.

I do not think that this is a bear or bull market. It is more an entropic boil.

This is an once in a life time opportunity to trade without a bull or a bear bias both ways
in a very short time frame.

after all who cares what you call it as long as your making money.

Dave Narby said...

Personally, I think this is the beginning of an *actual* correction of 10-20.%

Commodities will get whacked during this correction, but not as bad as stocks.

After that, I expect a rally to new highs this Summer (maybe with the S&P making it as high as 1500!), followed by a plunge into the abyss. S&P final, real ultimate bottom target is 250-400.

Gold *will not* pull back like Carl predicts. Currency fears are too high. Silver might pull back a bit, but will resume it's climb soon. PMs are in a secular bull market which will not end until the DOW:GOLD ratio is ~1:1. I am expecting both to land somewhere around 3000-4500.

This all assumes we have the same currency and monetary system we do today. Either way, PMs and other physical assets are the only safe haven.

Adsense said...

hey Carl
just making a few comments
i have many cycles pointing down into mid may . to add to these ill also note there is a fibonaccii .382 time retracement of the prior move which points to the week of may 17th which should be a low .
typically a 4th wave comes retraces
.382 of waves 1 through 3 as well as 50 percent of wave 3 . this creates a target zone on the dow
of 10721-10714 into the week of may 17th for wave 4 . so far this week we have seen both a higher high as well as a lower low , a close below last weeks low would give a weekly reversal bar .
for me this adds to the mix that we are indeed entering a bearish cycle and if proven correct we should see a decline into the target zone noted above into the week of may 17th . there are other bullish cycles that run from early june into mid july as well as early august . from august 2010 though into march - may 2011 i have many bearish cycles .
the dow has its yearly pivot resistance at R1 11166 R2 11651
and this years yearly range should be less then last years range .
good luck

Biased said...

don't know about 1270, but I agree that selling today was climactic. Too bad it didn't go further.