You know, I rarely watch CNBC. I mean, let's be honest, probably the only thing that group is good for is, perhaps for being the preeminent contrary indicator, if you will, when it comes to calling significant turns in the markets.
But for some reason, I decided to turn on the channel a few times today, for several minutes on each occasion, just to get a feel of what the sentiment was like in the, oh let's call it the "fundamentals" crowd... Almost on every occasion, I heard what can only be described as full on cheerleading for a bounce. Several times in the last hour or two, they repeated a seemingly nonsensical claim that went along the lines of "oh, look, the Dow has bounced 20/30/40 points, off its intraday lows (when the index was down 125 points, on top of yesterday's 225-pt drop) and, since every correction over the past several months has ended fairly quickly, this one must be over - given that the indices have been able to hold the day's lows - now."
Okay, now I'll grant that even a broken clock can be right twice a day and, perhaps, the gang at CNBC might somehow end up being right this time - we, at TMM, don't claim to know (now or ever) exactly when a market might make a bottom or a top - but allow me to show you a handful of signs that may be pointing to further selling in the days ahead...
We'll use the hourly chart of the S&P-500, for this purpose...
S&P-500 Hourly Chart
There are several hints that further downside action may be in-the-offing. Let's briefly discuss each of them:
Triple Top: If you look at the action that took place between April 9th or so and May 3rd, you'll notice that the index traded within what can be best described as a hybrid double/triple top (you can even call it a rectangle, in order to keep it simple, if you like). The height of that pattern was 36 points. It's lower end - support - was at 1184. That support level was broken on the 4th of May (yesterday). Projecting the height of the pattern (36) downwards from the breakout level (1184), a target of 1148 is derived. So, in a nutshell, if the index stay below broken support at 1184, it's likely that we'll see a move to 1148 (or even to lower levels), fairly soon. That means that the index could drop at least another 17 points from the current level (1165), if the pattern is to be trusted.
Lower Bollinger Band: Take a look at the lower Bollinger Band on this hourly chart. You'll notice that the band has already fallen to a level of 1153, which is a good 12 points below current levels, and it is STILL FALLING, to boot... So, not only is there no hope of the index' finding support from the lower band, but the Bollinger Band theory is also predicting further downside action, in the near future.
Other Sources Of Support - Virtually Non-existent: The jury is out on whether the current decline is now a bearish move on the minor trend or just a correction within an ongoing bullish move. One problem that the bulls face is the lack of significant support from the most recent leg of the rally (which started in Feb.)... The fact that the move did not stop once - either for a correction or a consolidation - means that potential sources of support are few and far between. Leaving aside the level of the previous intermediate high - 1150 (January highs) - there isn't much support until the levels of 1090 and 1050. So, simply put, if support isn't found from the level of the Jan highs (1150), which is our preliminary target for this move, then the folks at CNBC are going to be calling the bottom for a while to come, not just for a couple more sessions...
Conclusion: Our goal is not to say that we're market oracles and say that we know exactly what is going to happen. We don't have a crystal ball, after all (would have been nice though. haha).
Our goal is not even to chastise the folks at CNBC (although someone should probably get on their case, given that they use evidence that is circumstantial, at best, to support their views)...
Instead, our goal is simply to keep our "Ears On The Markets" and to provide you with The Market's Message through the charts, so that you can make an informed decision when picking a side on the markets. The charts don't lie; in fact, they're probably the only thing you can trust when it comes to judging market action. Learn how to use them to your advantage...
Good evening and good luck with your trading!
Cheers,
Asher Pinto
p.s. Become a Member today and gain immediate access to our well thought out Stock Picks, Options Picks, Model Portfolio and Market Commentary.
« CNBC might be saying that the selling is over, but... »
You know, I rarely watch CNBC. I mean, let's be honest, probably the only thing that group is good for is, perhaps for being the preeminent contrary indicator, if you will, when it comes to calling significant turns in the markets.
But for some reason, I decided to turn on the channel a few times today, for several minutes on each occasion, just to get a feel of what the sentiment was like in the, oh let's call it the "fundamentals" crowd... Almost on every occasion, I heard what can only be described as full on cheerleading for a bounce. Several times in the last hour or two, they repeated a seemingly nonsensical claim that went along the lines of "oh, look, the Dow has bounced 20/30/40 points, off its intraday lows (when the index was down 125 points, on top of yesterday's 225-pt drop) and, since every correction over the past several months has ended fairly quickly, this one must be over - given that the indices have been able to hold the day's lows - now."
Okay, now I'll grant that even a broken clock can be right twice a day and, perhaps, the gang at CNBC might somehow end up being right this time - we, at TMM, don't claim to know (now or ever) exactly when a market might make a bottom or a top - but allow me to show you a handful of signs that may be pointing to further selling in the days ahead...
We'll use the hourly chart of the S&P-500, for this purpose...
There are several hints that further downside action may be in-the-offing. Let's briefly discuss each of them:
Triple Top: If you look at the action that took place between April 9th or so and May 3rd, you'll notice that the index traded within what can be best described as a hybrid double/triple top (you can even call it a rectangle, in order to keep it simple, if you like). The height of that pattern was 36 points. It's lower end - support - was at 1184. That support level was broken on the 4th of May (yesterday). Projecting the height of the pattern (36) downwards from the breakout level (1184), a target of 1148 is derived. So, in a nutshell, if the index stay below broken support at 1184, it's likely that we'll see a move to 1148 (or even to lower levels), fairly soon. That means that the index could drop at least another 17 points from the current level (1165), if the pattern is to be trusted.
Lower Bollinger Band: Take a look at the lower Bollinger Band on this hourly chart. You'll notice that the band has already fallen to a level of 1153, which is a good 12 points below current levels, and it is STILL FALLING, to boot... So, not only is there no hope of the index' finding support from the lower band, but the Bollinger Band theory is also predicting further downside action, in the near future.
Other Sources Of Support - Virtually Non-existent: The jury is out on whether the current decline is now a bearish move on the minor trend or just a correction within an ongoing bullish move. One problem that the bulls face is the lack of significant support from the most recent leg of the rally (which started in Feb.)... The fact that the move did not stop once - either for a correction or a consolidation - means that potential sources of support are few and far between. Leaving aside the level of the previous intermediate high - 1150 (January highs) - there isn't much support until the levels of 1090 and 1050. So, simply put, if support isn't found from the level of the Jan highs (1150), which is our preliminary target for this move, then the folks at CNBC are going to be calling the bottom for a while to come, not just for a couple more sessions...
Conclusion: Our goal is not to say that we're market oracles and say that we know exactly what is going to happen. We don't have a crystal ball, after all (would have been nice though. haha).
Our goal is not even to chastise the folks at CNBC (although someone should probably get on their case, given that they use evidence that is circumstantial, at best, to support their views)...
Instead, our goal is simply to keep our "Ears On The Markets" and to provide you with The Market's Message through the charts, so that you can make an informed decision when picking a side on the markets. The charts don't lie; in fact, they're probably the only thing you can trust when it comes to judging market action. Learn how to use them to your advantage...
Good evening and good luck with your trading!
Cheers,
Asher Pinto
p.s. Become a Member today and gain immediate access to our well thought out Stock Picks, Options Picks, Model Portfolio and Market Commentary.