Thursday, May 31, 2012
Wednesday, May 30, 2012
Tuesday, May 29, 2012
Friday, May 25, 2012
Thursday, May 24, 2012
Wednesday, May 23, 2012
Tuesday, May 22, 2012
Monday, May 21, 2012
Sunday, May 20, 2012
Thursday, May 17, 2012
Facebook IPO May Break the Market and Initiate a Free Fall Crash
Let me start by clarifying something. I am not saying that the market could crash spectacularly in the next few days and that in that event the Facebook IPO would be a major contributing factor. I am not saying that. The market is saying it.
Facebook boosts IPO size by 25 percent, could top $16 billion
NEW YORK/SAN FRANCISCO (Reuters) - Facebook Inc increased the size of its initial public offering by almost 25 percent, and could raise as much as $16 billion as strong investor demand for a share of the No.1 social network trumps debate about its long-term potential to make money.
Facebook, founded eight years ago by Mark Zuckerberg in a Harvard dorm room, said on Wednesday it will add about 84 million shares to its IPO, floating about 421 million shares in an offering expected to be priced on Thursday. http://finance.yahoo.com/news/facebook-expands-ipo-size-aims-011714...
This mammoth dumping of shares onto the market is coming at the exact moment that global financial markets are teetering on the brink of disaster. Technically and psychologically this market is as weak and poorly positioned to absorb a new float of this size as it could possibly be. As every market across all asset classes breaks majorl bearish technical levels, as the fundamental news flow accelerates and worsens by the hour, Wall Street if fixated upon "the biggest IPO ever". Few ask why Facebook owners are rushing for the exits now. Few observe that the markets began their current crash on the day of the Carlyle IPO. Even few wonder what the potential effect will be of sucking the remaining air out of the room even as the markets gasp for breath.
Bulls will presently argue that the market is very oversold and positioned to rally. Under conditions of a healthy bull market, they would be correct. Every indicator you could think of is positioned for a rally in the context of a real bull. The trouble is that the last bull phase ended in February of 2011 and the market has been falling apart internally for over a year. In fact, technical deterioration has run far ahead of of price declines in much the same way in 2011. The result then, as now, is that market price sprints to catch up to the technicals and the result is a crash.
Here's just one example of many. Prior to the 2011 crash, the ratio between Down Volume and Up Volume began to expand dramatically even as the market made new highs, creating a divergence between market price and the indicator:
Take note that if this pattern repeats itself for a fourth time (and there are many compelling reasons to think it will as we will see later in this posting), then we are yet very early in the process. This suggests that although we could be considered "oversold" at this time, a market crash is pending. And it is important to further note that serious market crashes come from deeply oversold, deteriorated technical conditions such as those prevailing right now. When comparing 2011 and 2012 levels, the indicator also made a higher low while the market made a higher high which is a divergence.
The ratio between Advancing and Declining issus is set up very similarly and is also highly suggestive of a pending crash with a breakout move just beginning:
This indicator also created a divergence at the 2011 and 2012 price highs. Keep in mind that both of these indicators are just now beginning their big moves.
One of the hallmarks of a crash is a rapid expanison of New 52 Week Lows:
Note the huge divergence between 2011 and 2012 as more New Lows were being registered at a higher price level in 2012. Also notice the rapid expansion of New Lows as price breaks the neckline of Head and Shoulders tops in both 2011 and 2012.
Many will argue that the price of the 30 Year Treasury Bond is "too high" and that the recent flight of capital to the perceived safety of that market is "irrational" or even "stupid" and that it "must reverse". Right now, the long bond is blasting through the upper resistance band that has contained it for several decades:
Note that this very long term breakout move is coming after a six month long consolidation. Also note that this is the first time ever that this market did not return to support after visiting its upper resistance band. Traders should respect the intelligence of the market. Clearly it is saying that there is a real need for safety and that the need is so urgent tha a multi-decade technical level needs to be completely taken out. Also note that this breakout move is only just beginning.
The ratio of SPX to the 30 Year Treasury Bond has very recently plunged through its multi decade uptrend while simultaneously violating its 20, 50 and 200 monthe exponential moving averages:
Clearly this is a move that is only just beginning. When such long term technical events occur is far more likely to mark the onset of something rather than the end of something. The presence of a clear Head and Shoulders formation suggests an immediate crash to the neckline and beyond.
The Dollar ETF, UUP, is rapidly approaching the neckline of a clear reverse Head and Shoulders formation:
This is coincident with a triple bull moving average cross. The bull cross together with a breakout from the formation neckline would be the beginning of a very strong move.
Volatility Index has broken out from a six month long inverse Head and Shoulders pattern and has closed four consecutive sessions aboove its 200 EMA:
This is the beginning of a very large move for VIX, which can only correlate with a significant bearish event for stocks.
I could post many more charts which show that the market is far nearer to the beginning of a major event than to an sort of end. Oversold is likely to become much more oversold as panic selling takes hold.
While we could argue that RSI is now well below 30 and therefore oversold, historical precedent shows that it can go much lower:
The incidents when RSI started at 70 and went below led to an average bottom for the indiator of 16. My take is we will see that reading on this decline and it will reflect a serious bearish market event.
In this context, Wall Street will be dumping an enormous new float of a new "darling" stock into the market on Friday. Market participants still largely regard the recent price decline as a buying opportunity and the expectation is that the FB shares will be "snapped up" by eager investors. Recent dip buying behavior has only served to expend what little available cash there is in the market. The Facebook IPO will suck the remaining air out of the room, leaving a vacuum. While the effect may not be immediate, it could take only a few sessions for the real selling to begin. The setup for a Black Monday is there. And I do not mean that metaphorically.
I will leave you with the following chart study comparing the period immediately prior to the Friday before Black Monday 1987 and the period leading up to today, Friday, May 18, 2012:
Day by day, tick by tick, technical event by technical event, the two charts are nearly perfect replicas. Will the fractal echo complete on Friday and Monday?
Any long position under these circumstances is sheer folly. And I'm not saying that. The market is saying it.
Facebook IPO May Break the Market and Initiate a Free Fall Crash
"Facebook IPO May Break the Market and Initiate a Free Fall Crash" http://bit.ly/KmVxxa
Wednesday, May 16, 2012
FACEBOOK FLOAT WILL LIKELY CRASH THE MARKET
"FACEBOOK FLOAT WILL LIKELY CRASH THE MARKET" http://bit.ly/Jw8nOI
Monday, May 14, 2012
Bullish Consensus Creates High Risk of Potential Near Term Global Financial Market Crash
Here's the latest from Steven Vincent of TheBullBear.com.
Source article: http://www.thebullbear.com/profiles/blogs/bullish-consensus-potentially-setting-up-a-near-term-global-finan
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Bullish Consensus Creates High Risk of Potential Near Term Global Financial Market Crash
High Risk of Near Term Global Financial Market Crash
At each juncture, I look at the available information as represented in the market price and technical data. I approach the body of evidence without preconception and with an open "beginner's mind". I see what I see. I analyze. I develop a set of probabilistic outcomes and then rank them. Then I write my report. I simply report my findings.
There is an extraordinarily high risk of some variety of global market panic in the relatively near term. In fact, I would say that there is a extant setup that is as perfectly aligned for an extreme market event as could be dreamed of by the most bearish of permabears. I'm no permabear, but a thorough review of the current price and technical charts has revealed an inordinate confluence of data points which collaborate to represent a very high risk profile. The current extreme risk profile is amplified by a nearly total lack of recognition on the part of market participants. A deflationary episode, potentially on the scale of the 2008 event, is presently on the table. Investors would do well to at least consider the facts, analysis and conclusions of this report.
(NOTE: Click the charts to see the full size images)
BULLISH CONSENSUS
I generally place Sentiment and Psychology at the bottom layers of my analysis since it it the softest and least reliable data to consider, but in this case I am going to lead with it simply because there appears to be not merely a significant gap between perception and reality but apparently a widening chasm. Bulls are repeatedly citing "excessive" or "extreme" Bearishness as a primary basis for an ongoing Bullish outlook, but the evidence strongly suggests this is not only not warranted but that the exact opposite conditions prevail.
There appears to be nearly total complacency in the present market environment. Few if any analysts are currently willing to consider a market top of any kind, much less a crash. Based on the findings in my current BullBear Market Report, the continued bold bullishness of the overwhelming majority is simply not supported by the technicals of the market.
Of late many Bulls are citing American Association of Individual Investors poll data which they view as proof positive of extreme bearishness in the market. First, let it be said that this data is soft and its interpretation is highly subjective and as such it is rarely useful and its best use comes when one side of the market is leaning heavily on its perception of the data to justify its market position.
Let's have a look at the current AAII data. Theoretically, a reading of 25% bulls and 43% bears tells us that most individual investors are bearishly aligned and therefore out of the market or short, setting up a bullish resolution. Let's backtest that a little:
In late May of 2011 there was a reading that exceeded the current poll. While it did mark a short term bottom and a sharp rally ensued (and the current setup could be similar), it was very brief and was immediately followed by a market crash. At the 2007 top, there were multiple readings which exceeded the current poll and yet that turned out to be a spectacularly good time to be Bearish. In 2008, just before the main leg of the crash, there were readings which exceeded the current poll and yet that was certainly a time when the smart money was Bearish. It only took a glance at the actual data to discover that drawing a long term Bullish conclusion from a single week's AAII polling data is entirely unsupported by the facts.
One might also want to look and see if there is some supporting, corroborative data. I did, and there isn't any. In fact, the exact opposite appears to be true. Other similar sentiment data appears to suggest excessive Bullishness in the market at this juncture.
Investor's Intelligence Bull/Bear ratio remains relatively high with a slight increase in Bulls and a sharp drop in Bears to very low levels:
In addition, the percent of II respondents calling for a Correction has surged to a 12 year high as the percent who are Bearish has dropped to levels seen at the 2007, 2010 and 2011 tops:
In this context those calling for a Correction are in fact long term Bulls who are looking to buy this dip. For the contrarian, this can be interpreted as a strongly Bearish setup.
National Association of Active Investment Managers poll surged to over 60% bulls last week and increased yet again this week:
Consensus Inc survey is certainly in the sell zone:
Market Vane is at levels far more correlated with significant tops than bottoms:
Hulbert Stock Sentiment is closer to its Bull extreme than its Bearish extreme:
Now let me be clear. I am not basing my Bearish market view on this sentiment data. I am merely pointing out that, contrary to current popular perception, sentiment polling data supports a Bearish rather than a Bullish view.
A survey of the financial news media and popular blog sites also reveals very little in the way of bearish psychology. Few if any are calling a top of significance while some grudgingly admit the possibility of a "pullback" or "correction".
BEARISH ASSET ALLOCATION, LOW CASH
A little more digging into the AAII data shows that the same investors who are supposedly "extremely bearish" have allocated assets in a pattern that closely resembles that which has been found at important tops:
Stock allocation is at the same levels found immediately preceding the 2008, 2010 and 2011 crashes and only slightly below levels found immediately preceding the 2001 and 2002 crashes. Investors were similarly allocated to bonds just prior to the 2010 and 2011 declines. Cash allocation is identical to that found at the 2007, 2010 and 2011 tops and only slightly higher than that found at the 2000 top.
Rydex fund asset distribution data corroborates the AAII data:
Available cash in Money Market funds is nearly at a 3 year low. Rydex Bull fund allocation is hovering near the highs while Bear fund allocation is at the lows. Total assets in all Rydex funds is falling as money exits the markets.
Rydex asset ratio also corroborates the AAII data. It has surged to the bullish side recently to levels above the 2011 highs and is at levels far above those found at the 2007 and 2010 tops:
It appears that market participants have clearly chosen to view the recent decline as a buying opportunity and show no sign of fearing a significant bearish turn in the markets. This smacks of late bulls desperately seeking an entry point at the top of the market, trying to make up for having missed the big run. In light of the technical analysis I present in the current BullBear Market Report, this behavior may represent a dangerous misalignment with reality.
Much ado is currently being made of equity Mutual Fund outflows and Bond fund inflows. In my view the evaporation of public interest in stocks in the current environment is not bullish. Bulls argue that this means that the public is not invested and therefore represents latent buying power on the sidelines. While this may be true in the context of a healthy bull market, we will see later in this report that this market is not technically sound. In this context the flight of public capital from the markets represents a dearth of available cash, not a surplus:
Mutual Fund cash is at all time lows.
The available cash sitting on the sidelines in money market funds ready to be deployed is near record lows:
The 200 EMA of Total Market Volume peaked on the first decline of the 2007 bear market:
It has been declining steadily since then. Declining volume during the 2007-2009 bear market was not Bullish. 
Upside volume is now at levels seen in 1997:
How does the behavior of market volume during the current Bear market compare and contrast with prior bear markets?As we can see, volume on the Dow has fallen off a cliff since 2007 and since 2009 volume has come in well below the 50 Quarter EMA. Volume declined in every quarter sequentially except in the down quarters during major market pullbacks in 2010 and 2011.
During the 1966-1982 bear market, volume stayed well above the 50 Quarter EMA and even managed to expand during the course of the Bear, with periods of higher volume during Bullish phases and lower volume during Bearish phases, the opposite of what we have seen during our current market. As the Bear neared its end and began to enter a new Bull, market volume began to expand dramatically, doubling as the Bull began its run. That's the opposite of the behavior we have seen in the present market. It's well known that the public fled the markets during this period, much as they have during the current phase, and famously the "Death of Equities" was declared. A dramatic drop in public participation was bearish then, until the bear market ended on expanding volume.
During the 1929-1932 Bear market, volume fell dramatically during the Bear as investors fled the market. During the early stages of the new Bull, volume in excess of the 50 Quarter EMA came almost exclusively during big rallies and Bullish phases with very low volume during Bearish phases. Again, this is quite distinct from the behavior we are seeing in the present market.
Historical precedent does not support the thesis that low volume and investor flight is a sign or condition of a nascent Bull market. The current sentiment and psychology of the market, when taken together with the rigorous and thourough technical analysis provided in the latest BullBear Market Report, shows that there is simply no question whatsoever that the overwhelming weight of evidence indicates a strong potential for a near term crash of world financial markets. Certainly, there are many times when latent potential is not realized and there is a valid setup for a near term rally as well. But in an environment of psychological and emotional complacency the probabilities become heavily skewed towards a realized bearish outcome. Global financial markets are currently in a bona fide crash window and panic events similar to the 1987, 2008, 2010 or 2011 episodes are all very real possibilities.
There's an elephant in the room and no one wants to acknowledge it.
Go here to read the full BullBear Market Report:
http://www.thebullbear.com/group/bullbeartradingservice/forum/topics/05-06-12-bullbear-market-report
Need some help staying on the right side of the markets? Join the BullBear Traders room at TheBullBear.com. You'll get this kind of timely, incisive, unbiased stock and financial market trading, timing, forecasting and investment technical analysis and commentary daily. It's free to join, no credit card is required and if you like my work you just make a donation at the end of each month.
Keeping You on the Right Side of the Market
Thursday, May 10, 2012
Wednesday, May 9, 2012
Sunday, May 6, 2012
High Risk of Near Term Global Financial Market Crash
"High Risk of Near Term Global Financial Market Crash"
http://bit.ly/IE7p1C
Saturday, May 5, 2012
LONG TERM GLOBAL HEAD AND SHOULDERS STOCK MARKET TOP LIKELY IN PLACE
LONG TERM GLOBAL HEAD AND SHOULDERS TOP LIKELY IN PLACE
A bit of economic news sparked a minor rally on Tuesday. The Dow touched a new 4 year intraday high and the financial news media celebrated the moment with banner headlines:
In spite of the fact that not one market index anywhere in the world even came close to confirming the new Dow high, market participants have greeted the move with unanimous, optimistic glee. The only thing missing was party hats and streamers. At this point in market history, virtually no one is even interested in hearing about any kind of top in any time frame and no market analysts are entertaining the notion. The bullish psychology rivals that of the 2007 top.
But the real news of the day was the intraday reversal from the high. There was a total reversal from high in Small Caps, Global Market Index and Nasdaq. If the session hadn't come to a close other indices probably would have followed. Apple reversed from a 2.1% gain to a .4% loss.
But the more important view is longer term and global. A survey of world markets shows that, outside of the US, markets have been in the process of forming a multi-year Head and Shoulders top since 2010:
A survey of the financial news media and popular blog sites finds virtually no bears or bearish market analysis. The analysis contained in my latest BullBear Market Report suggests strongly that not only have we seen an intermediate term top but also a long term top. According to my currently preferred scenario, the rally off the 2009 lows actually ended in February 2011, and the rally off the 2011 lows has been a B wave countermove. That has terminated or is close to doing so and the Major C wave decline is either in progress or soon to begin.
Let's recap some of the important market turning points leading up to the current market setup:
READ THE FULL POST HERE:
http://www.thebullbear.com/profiles/blogs/long-term-global-head-and-shoulders-top-likely-in-place
Go here to read the full BullBear Market Report:
http://www.thebullbear.com/group/bullbeartradingservice/forum/topic...
Need some help staying on the right side of the markets? Join the BullBear Traders room at TheBullBear.com. You'll get this kind of timely, incisive, unbiased stock and financial market trading, timing, forecasting and investment technical analysis and commentary daily. It's free to join, no credit card is required and if you like my work you just make a donation at the end of each month.