P&F Chart School

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Man, that is one ugly P&F chart.

I thought we were going to get the bounce. But it did not materialize yesterday, and today is looking weak as well.

So I am going to bite the bullet and move to "relative" safety today, with a split of 80% "F", and then a little in "I" on the off chance I holds out better than US funds are going to.

I looked at the long term weekly P&F chart, and it's even uglier than the daily chart is. Your right on that readjustment to 1090 being a bad omen. When you look at the weekly P&F chart, you'll see just how bad it could be looking.

On the postive side, VIX climbed up above 25 this morning, but it's still not anywhere near the 30 level. So I think we'll have a drop yet to come before capitulation, and even then, the retrace after that is looking ugly too.

Good luck.
 
Well, the VIX didn't do anything today- still closed below 25. The last couple days the market has been TRYING to bounce, without success.

Now, let's talk about that weekly P&F chart, which goes all the way back to the last recession of 2002-2003.

Here is what is scary:

View attachment 4175

You'll notice two things right away:

1. The top line on the weekly has changed from a bullish support line, to a bearish resistance line. That just happened this week. And we haven't seen that since the recession of 2001-2003. So it tells me we have a LONG way down ahead, not just a quick turn and burn back up. It's simply not going to rebound back up high- this IS going to be a Bear market for a while to come.

2. We've now seen the 6th readjustment downward for the price objective. That's the point at which the P&F chart theory holds we'll end up. Today it dropped again, this time to 1090. That's more than 10% MORE down than where we are today. That would mark at least a 30% pull back from the highs last October.

I'm feeling this is a train wreck happening in slow motion. It could be next year before things turn around.

We'll just have to wait and see.

But isn't that "weekly" chart scary?


​
 
Thanks for your input James, you're always a daily read for me. The next few days will be a nail-biter for me. I hope we catch a quick rally, and then I can go back to G and catch more shares later on the down-slide.
 
I'm still waiting for my bounce... :sick:

I noticed we pierced through Tuesdays low...

They are bleeding me dry...
 
Main Entry: scary Pronunciation:\ˈsker-ē\
Function: adjective
Inflected Form(s): scar·i·er; scar·i·estDate:1582 1 : causing fright : alarming <a scary story>
2 : easily scared : timid
3 : feeling alarm or fright : frightened
— scar·i·ly \ˈsker-ə-lē\ adverb
4: The P&F chart on July 2 2008, in anticipation of what comes next.

View attachment 4179

There is no change at all in the results today of the P&F chart. I had expected a retracement pop a few days ago, and talked about it. You heard me talk about that 1270 number being important- that the market would take a pause at 1270, and then climb a tiny bit, before going into freefall again.

Well, I can tell you today that we did get the cycle. But it was too darn weak to really do anything much above the 1270ish are it was. It couldn't break back above the 1300 level. Which bodes VERY BAD for the next wave down.

And now we're about to get another bear market downside here. At least all signs are pointing in that direction as I write this. The next resistance point comes around the 1220-1230 level. We'll pause there, ever so slightly, and then continue down even more.

That is unless something- anything, breaks the chain here. I just don't see it stopping for a long time.

We've got the gasoline shock blues.
Oil hits $144 today.
We've got subprime.
We've got credit cards coming up that will make the subprime look small.
We've got housing values tanking.
We've got unemployment shooting up.
Dollar going off a cliff.
Steel prices going through the roof.
Food prices shooting up.
Inflation being hidden by the authorities that track it.
We've got one war (Iraq) dragging on, a second war getting worse (Afghanistan), and now Israel practicing 180 plane maneuvers simulating a run in Iran.
We've got the big boy investors begging for government help to keep their multi-billion dollar companies afloat.
GM shares fall below $10 for first time since 1954.
Warrewn Buffet's Berkshire Hathaway lost $1,45 dollars a share today.


and headlines like this:

Dow hits worst June since Great Depression



And yet, we've got a VIX level that still shows nobody is panicing yet. It only got up to 25 today.






All those are signs of a market that isn't ready to hit bottom yet.



Yes, I believe we'll see lower- much lower- at least 10% lower- ahead.
​

​
 
Inflation excluding food and energy is per the core PCE at 2.3%. The European rate that includes food and energy is at 4%. These are whimpy rates - I remember rates of 14%. And believe it or not the world didn't end. As long as we don't have a wage-price spiral the economy will be fine.
 
Birchtree said:
Inflation excluding food and energy is per the core PCE at 2.3%. The European rate that includes food and energy is at 4%. These are whimpy rates - I remember rates of 14%. And believe it or not the world didn't end. As long as we don't have a wage-price spiral the economy will be fine.
Click to expand...

Do you really believe that 2.3% number?:blink: The real number is probably closer to your 14%......maybe more.
 
Back to chart school:

We MAY be getting closer to a quick rebound here. Not a reversal in direction, just some evidence that we may have reached a level where we will soon get a quick minor change in direction.

As evidence: Exhibit "A". The VIX chart for today. We hit above 26 on the VIX, almost 27.
View attachment 4225

We've been saying for a few days now that it will probably take a VIX reading of near 30 to create conditions for a slight bounce. And that post noon dive this afternoon frightened the meek, and made the VIX bounce a bit.

And you combine that with the five day view of the VIX, and you'll see the trend is increasing anxiety. Definitely what we need to break the downward spiral, if only for a day or two. The trend is for more anxiety.
View attachment 4226

But where does that put us? As of today, 19 units below the top of this downward leg, and we came within a hair (I'm going bald, by the way) of a 20th "O" appearing, when we bumped up against the 1240 level today.
View attachment 4227

Let there be no mistake- everything continues to say "BEAR MARKET" for the rest of the month, even if we have one little spring back upwards. This is NOT a buy-and-hold time, although this probably IS a good time to start watching very, very intently for the opportunity to appear to make a quick in and out move to capture a swing up. That depends, however, on the opportunity to be just right, and for the reward to exceed the risk taken. That's not today.
​

Now, if there were NO trade limits, I would be watching closely the next day or two for signs of a rebound taking shape. Really.

19 units down without a breather is a LONG way down, and tomorrow there is a good chance it will break the 20th unit.

However, we also saw a slight kangeroo tail today, and the VIX is creaping up.

So now would be a good time to watch closely, but remember- I only get ONE SHOT A MONTH now, so I have to make sure it's going to be worth expending the ammo if I want to take the risk.

Once I have taken the shot, it's nothing but sidelines till the end of the month, and there is NO EVIDENCE that the BEAR is nearing the bottom. In fact, exactly the opposite is true. All evidence points to the BEAR on a feeding frenzy, with at least another 7 or 8% down. I doubt we'll make it all the way down to the 1050 level, but the charts are darn scarely, and I'm sitting mostly in "F" right now, preserving cash for the right moment to get back in.

When the Bear is done gobbling up everything in sight, it will be ready to spring back up a bit. It may take YEARS to get back to last October's levels, or it could only take a short time. With $4 + gasoline, there is nothing that portends a quick return to a healthy economy, however.

So, we'll sit on the sidelines, watch the inexperienced people go nutso, and wait for a good opportunity to make some money.

Watch the VIX.

​
This is where patience pays off.

One must have stamina and patience.

Main Entry:1 pa·tient Pronunciation:\ˈpā-shənt\

Function:adjective

Etymology:Middle English pacient, from Anglo-French, from Latin patient-, patiens, from present participle of pati to suffer; perhaps akin to Greek pēma suffering

Date:14th century

1: bearing pains or trials calmly or without complaint
2: manifesting forbearance under provocation or strain
3: not hasty or impetuous
4: steadfast despite opposition, difficulty, or adversity
5 a: able or willing to bear —used with of b: susceptible, admitting <patient of one interpretation>
— pa·tient·ly adverb




​
 
Well, that was a nice bounce up today. But it wasn't enough to stop the bloodshed downward markings of the series of "O"s that denote a descending trend.

The relief of oil falling a few dollars helped fuel the market yesterday. But I am thinking that won't be enough. Oil needed to come off it's perpetual skyward trajectory, but it may be only for a day or two- and then oil MAY settle back upward again. If it does, the markets are not going to like that.

Here is yesterday's closing P&F chart:

I marked two things I see in this chart. #1 is that yesterday's jump was not enough to break from "O"s into "X"s. It may be that by early morning trading, we got some more positive action. That COULD be a sign- I say it could be because we saw the kangeroo tail the day before. So we MAY be getting a little relief here.

However, I also marked a "Point #2" on this chart. You remember back in March or so, we got a reversal of "X's form, but it only went up four units before it turned right back around into a freefall again. This is why we have to be careful here.

They say "the trend is your friend". Well, the trend for the last three weeks has been nearly straight down. So there is no use arguing with the trend, at least for now. There are still enough variables out there that I am cautious and not ready to jump back in just yet for that expected bounce. And, at least in this cycle, it may be too late anyway.

I'm going to mull things over for a bit longer.

The one GOOD indicator I saw tonight- Steven Colbert mentioned the bear market on the Colbert report. If it makes it into popular culture like that, then we MAY be ready to rebound for a bit.

Just my 2 cents for the day.

Happy investing- and stay safe out there!​
 
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