Whatcha Thinkin’ 10/8/13

10/8/13 . . .  by Bob Karrow

  • If you don’t understand my unorthodox wave counting method,

Read Me First   (corrected link)

  • Otherwise continue on to see what my squiggly lines are saying at

“My Charts” at StockCharts.com

  • “Follow” my tweets to stay current, because I’m frequently too busy to do a blog update.

My Tweets

  • Below the recap of my recent Tweets, I’ll have thoughts about today’s market.

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I’ve had 22 Tweets since my last blog update.  Read from the bottom up to follow the timeline.  Start at #22 and read to #1.  After that return to below #22 for more thinkin’ projects.

  1. Jeff Saut’s 1684 level on the SPX is behind us. The market went right through it with no effort late Monday and hasn’t looked back.

  2. Evicted from Yosemite last week, while traveling we saw this sign on a small town bulletin board, brazen advertising

    http://wp.me/a1DRwF-2Fv 

  3. Jeff Saut said: “following the drama of the alleged fiscal cliff “crisis”; the SPX rallied 100 points before experiencing a decent pullback”

  4. Futures down 12 points Sunday. It’s the government shutdown. Is another debt downgrade possible? Easy to figure who the voters will blame?

  5. Since 9/19 new low every day as we wait on Congress. Higher debt interest if we default. Who will we blame? Congress can’t be that dumb???

  6. Are we in a sideways correction after recent decline? If true, would be bearish. Are we waiting for 1 more step up before more decline?

  7. Jeff Saut watching 1684 SP 500. Significant close below this level would mean lower prices. No significant move down PRESENTLY, later yes.

  8. @NatlParkService What happens if government shuts down on Oct 1. If I’m camped inside the park on Oct 1, will I be kicked out????

  9. 5th step down bottoming tonight in futures?? 5th step low in same area as 3rd step low earlier today. Triple bottom?? Rally tomorrow??

  10. Beginning Sunday, I’ll be traveling & out of touch. Watch 1st chart on My Charts for a channel break ending step 5.

    http://stockcharts.com/public/1169350 

  11. Today, a small rally and a small 3 step correction into the close. Market is resisting more rally. Is the 3rd step overhanging the market?

  12. Possible only completed 2 steps down by 11 AM 9/23/13. If rally fizzles, watch for more decline. 5 steps down would not be bullish

  13. Did we complete step 1 up or all of step 5 up 3 steps down completed 9/23/13 Failure make new high “could” indicate significant correction

  14. The Aug peak & the next peak (September??) are exhaustion peaks (steps #4 & #5). When this rally is finished, “THE” correction will begin.

  15. Relative weakness in banks. A steep yield curve and loose monetary policy should benefit banks. No bounce with positive news is negative.

  16. The Question? Do we have 1 or 3 steps up from August 30th? Either one is possible. Market most overbought in over a year, correcting now.

  17. Watching the channel for a break. Count appears right for a break. There “could” be a misinterpretation on Sept 6th

    http://wp.me/a1DRwF-2Fp 

  18. Next significant channel break should yield larger correction into Hurst Oct – Jan lows. Wait for the peak.

    http://wp.me/a1DRwF-2Fn 

  19. Jeff Saut says: SPX is now above 1684 pivot point, although not decisively. Needs to stay above 1684 more than 3 days & by at least 3%

  20. BIG NEWS Summers Pulls Name From Consideration for Fed Chief And the SP futures are up over 15 points on Sunday’s opening.

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I had no intention of doing a blog update today, but blog reader, Michael asked “what’s your over all view of the market right now?”

A simple reply turned into lotsa stuff and I decided to put the response into the blog.

I’m watching the market VERY CAREFULLY as the count is ripe for a correction of consequence.  The indexes are displaying the typical saw-tooth pattern of a top.  See my charts at the link above.

Jeff Saut has a tipping point of SPX 1684, which was broken late Monday and isn’t looking back.  Jeff had no update today and won’t tomorrow (Wednesday), so we’ll have to wait until Thursday to hear him tell all to abandon ship.  Of course the market MUST remain below the 1684 level for 3 days to be valid and we need another day to validate the break.

Jeff Saut thinks when the crisis atmosphere has ended, the market will wake up to rising expectations for business and the market will resume its bull market rally.  I don’t argue much with Jeff, but I do like to see the market take a breather occasionally.  I do have a scenario where Jeff is correct and my outlook for a significant correction is also correct.  The timing aspect is where the clash takes place.  I have mentioned this scenario before, but comment right now isn’t pertinent.

We aren’t likely to produce a Dow Theory sell signal for awhile, so there is nothing overwhelmingly bearish on that front.  The Dow Industrials are very near to lower closing lows (missed it by 40 cents today), but the Transports have a ways to go before they have lower lows.

The Hurst cycles are looking for a bottom somewhere between now and the early months of 2014.  Several months ago, the Hurst cycles were limiting the bottom to no later than January, but the delayed correction has pushed the cycle bottom further out.  We have some significant cycles bottoming in the upcoming months.

The current steps 4 and 5 remind me of steps 4 and 5 in 2011.  I was deeply suspicious of those steps in 2011 and likewise for the present.  You can see these steps in my charts, #10.0, I have labeled the May 2013 peak as the traditional peak.

If you look at my charts, #10.05, you can see how divergent the weekly RSI is performing.  The last times the RSI looked like this was 2011 and 2007.  John Murphy was talking about this exact subject in his comments today and he said:

” . . . the RSI has turned down from an overbought reading over 70 for the first time since the start of 2011. The second point is that the RSI shows a pattern of lower highs during July and September which forms a “negative divergence” from the rising S&P 500. Below the chart, you can also see the weekly MACD lines in negative territory and forming their own negative divergence. Those are warning signs that the market is vulnerable to a downside correction.”

So I’m a cautious bear waiting for lower lows.  Also I’m watching for a “possible” last gasp rally that could provide a decent shorting opportunity.  Resolution of the Washington crisis could be the formula for a decent rally.  But that’s so obvious that it may be a false assumption.  Reminds me of Joe Granville’s quote, “If it’s obvious, it’s obviously wrong”.

Joe was quite a showman and I had the good fortune of seeing him “perform” once.  Unfortunately Joe passed away recently.  His books were among my reading material during the early 60s.

So what happens if Washington continues on the course of stupid?  If the US defaults, all bets are off for anything.  But really, are they that dumb???  I don’t think so, but the Tea Party seem to think the consequences of a default would be minor.  Somebody needs to set those guys straight on the impact of international economics.  I never cease to be amazed by the ignorance of some of our elected representatives (not all, just some).

Reminds me of the Will Rogers quote: “American has the best politicians that money can buy”.

I don’t think anyone has an exact picture of what a default would look like.  But the government didn’t have a clear picture of what would happen when Lehman Bros was allowed to go broke (anyone remember Sept 2008?).  In a 2008 retrospect, it would have been much cheaper for the government to bail out Lehman instead of coming to the rescue of most of the banks, GM, AIG, etc.

There would be many consequences of a default, but one would be reduced sales of bonds to international investors like China, Japan, Britain, etc.  How reduced is THE question.  But reduced international debt sales would require the FED to buy the remaining unsold debt to fund our spendthrift ways.  That wouldn’t be long term good.  This is exactly what happened during the Vietnam war when the FED monetized the debt.

Can anyone imagine the anger directed at Washington if we defaulted???  But we aren’t going to default because Washington doesn’t have a death wish.   Besides those guys want to get re-elected and that might not happen if we default.

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  • Click on any chart to enlarge it
  • A chart denoted as “ES” is a SP 500 futures chart.  YM is DJ Industrial futures, NQ is NASDAQ Composite futures.

Leave me a comment or question just a few inches below here.  If it says “Comment”, click on the comment and you’ll see “Leave A Reply”.

All Rights Reserved  © ™

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3 Comments on “Whatcha Thinkin’ 10/8/13”

  1. Bob Says:

    Not a real fan, although there is an “occasional” date that has relevance. Besides those dates, there are many, many dates that have absolutely no significance. It’s the numerous failures that makes me not a fan.

    Bob

    Like

  2. focus12345 Says:

    Bob I don’t think I asked this before but what are thoughts on the Bradley turns dates?

    http://forbestadvice.com/Money/Gurus/DonaldBradley/BradleyTurnDates.html

    Like


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