My old, dog-eared copy of Technical Analysis has been one of my better friends in trying to understand the market. And one of the most interesting of stock pattern formations is something called the “Double-Top.”
To save time (and because its summer and I’m lazy and this ain’t Peoplenomics), here’s the short-version of it from Wikipedia:
“The double top is a frequent price formation at the end of a bull market. It appears as two consecutive peaks of approximately the same price on a price-versus-time chart of a market. The two peaks are separated by a minimum in price, a valley. The price level of this minimum is called the neck line of the formation. The formation is completed and confirmed when the price falls below the neck line, indicating that further price decline is imminent or highly likely.
The double top pattern shows that demand is outpacing supply (buyers predominate) up to the first top, causing prices to rise. The supply-demand balance then reverses; supply outpaces demand (sellers predominate), causing prices to fall. After a price valley, buyers again predominate and prices rise. If traders see that prices are not pushing past their level at the first top, sellers may again prevail, lowering prices and causing a double top to form. It is generally regarded as a bearish signal if prices drop below the neck line.
The time between the two peaks is also a determining factor for the existence of a double top pattern. If the tops appear at the same level but are very close in time, then the probability is high that they are part of the consolidation and the trend will resume.
Volume is another indicator for interpreting this formation. Price reaches the first peak on increased volume then falls down the valley with low volume. Another attempt on the rally up to the second peak should be on a lower volume.”
So, how is this useful in today’s world? Well, let’s take the Wikipedia sourced chart (by Altafqadir) and lay it into a graphics program and then adjust the scales of the S&P 500 to see if the pattern looks, oh…you know….similar:
Obviously, this is not financial advice.
I figure, if my view is incorrect on this, there will be a larger-than-zero (try four-figure trading loss) in one of our accounts. Such is the price of continuing financial education. $5-grand is not insignificant tuition.
On the other hand, we know a couple of things that increase my confidence in the notion that this fall could “end badly.” The general outline I’ve presented in the past has been based on a kind of “intuitive approach” but now I’ve gotten up early, spliced the two charts together, and I think my outlook for the fall is abundantly clear. Besides, that $5-grand “downer” is an unrealized loss. Which simply means that if I do (in some wild quantum alternate-future) turn out to be right in my outlook, then a five-figure gain is the other possibility. To me, that’s an “interesting risk” if you’re a mad man. Which, conveniently….
When Do I “Reform?”
That’s simple enough: When we get a weekly closing high that is significantly (1-2% might do it) above the old all-time highs. Remember, though, all three indices have to break higher since I look at things in an “aggregate view.” This means sure, some fund can arbitrage the Dow higher. That’s only 30-stocks.
For now, though commodities are screaming that the “end is near” for the dollar rally. And as evidence, we’d point you to the German DAXI which was up about 1 percent yesterday and as I write this morning, it’s up a further 2/3rd’s of a percent. This doesn’t have the “feel” of runaway “strong dollar” European disintermediation, at least to me.
Moreover, the metals….well, more on that on the Peoplenomics.com site tomorrow.
For this morning, the majority of the “investing herd” doesn’t see it, and instead = absent meaningful data until the Fed notes tomorrow – they remain with their noses planted directly in the herd-member in front of them. Which is why the market may drift up a few more days – and I don’t mind some additional bloodletting on my account in the interim. When it turns, things should be spectacular….or I get the realized loss.
I’d point out – for fans of the inflation is here club that no such thing is happening. The 10-year Treasury note saw the yield drop to the 2.82 range in Monday trading and, as Don Bondi – our senior bond trading whiz in Houston says – the kind of pricing we see in the markets right now is almost insane. At some point, he and I both figure, something’s gotta give.
That’s because if the Fed was really going to raise rates again this year, there would be moves already to begin to drift up to higher yields – which would be dropping the price of bonds and that would push money from bonds and intro stocks. But, when rates are coming down? No such movements will have legs.
On the longer-term charts there is a caution, too: There’s no technical reason why the PoG (Price of Gold) can’t fall to under $1,000 late this fall or in early 2019. Sure, that would mean some “flight to safety” of the US Dollar to some, but it could simply mean the beggaring of the American Middle Class.
Markets Telegraph the News in Advance
When one is lucky-enough to see the future as it MIGHT play out in the charts, it becomes an easy task to look for “big news.”
What we see is “Big News” will arrive in the first week of September, or so, and when it comes everyone will be caught off-guard. Well, almost everyone.
By the first week of October, we should be into the right shoulder rally and a short-term “solution” to whatever the September crisis should SEEM to be passing. But, no, it comes back with a vengeance prior to Turkey Day – which I will leave for you to discern whether than means Elections or Thanksgiving. The double entendres around here are sometimes intentional. We’ll get turkeys, in either case.
But which turkeys?
That question is really the only one that matters, so lets get the baseball bats and go take a couple of swings at….
The Morning News Pinata
As I was just mentioning, “Futures gain ahead of planned U.S.-China trade talks.” So one turkey could be those talks blow-up, the Chinese storm out citing bad faith, the Chinese cancel their leader’s visit, and North Korea’s buddy-buddy-ballistic relationship with the NorK’s comes out into the public eye. This wrecks the “Trump Bump” story the GOP wants to tell and sell and the Blue Wave in November – led by socialist idiots – assures the compound-interest reality crack-up of America prior to 2028. Whew!
Our next bash with the bat on the pinata of Life scores Reuters catching up to our view of the Global Currency War in “Futures gain ahead of planned U.S.-China trade talks.” With growing jitters about when “truth ain’t truth, anymore” which Mayor Rudy lit-off in an ambush interview he could have avoided, the Rest of World (RoW) as we figure it, may be ready to dump US stocks wholesale and head back to their respective countries. This sets up the massive economic decline, rips-up any chance of a Fed rate hike until the free-fall and nose-bleeds stop and leaves democrats with a few more seats and that will insure at least two more years of do-nothing government.
In a way, we’re impressed with what the Founders mapped out: It is a political system when 25-50 conspirators of the Deep State have scuttled a large fraction of the Donald Trump presidency by pulling security clearances and delaying confirmations and distracting the real work of running the country. And if the first two years weren’t hitting on all 8-cylinders (10 if you drive a Viper or 6- if you drive a Targa) you ain’t see nothing yet. Democrats in control will shut down virtually all economic progress while promoting Mengele sex choicing for victimized children programmed by insane (what was Mel Brook’s line?) Abby Normal parents…and thus completing the work former Soviet Premier Nikita Khrushchev couldn’t get done.
(If you’re a child, you may not remember him saying “We will bury you!” (Youtube details) but no one would have believed that he’d do so by handing liberalista teachers free shovels. Hell of it is? It’s been working like a charm which is why a smart guy like Ben Carson gets eaten-alive in politics and a “ruling by division” player like Obama wins, but you know all that, I presume.
Old Newsman Note: Did I ever mention Francis Gary Powers who was shot down over Russia flew the traffic plane for the sister station of the one I was news director of? Yep, flew a Cessana Cardinal for years for KGIL in the San Fernando Valley – back in the day when Buckley Broadcasting Corp. owned the station. Gee, where’s my meds….)
So, meantime, back at the pinata….
Oil Depletion isn’t on the horizon, yet: Alaska North Slope a ‘Super Basin’ Ready for Oil Resurgence as Oil Production Expected to Grow 40 Percent in Eight Years, IHS Markit Says. But that could cause the Ruskies to get pissy up North – a seriously under-weighted future resource conflict in our view. He who owns the resource, calls the tune…
Or, how about Microsoft Uncovers More Russian Hacking Attempts Ahead of Midterms as foreplay to the above. You know, everyone thinks this collusion crap was all made up to go after Trump. But, in reality, there’s a completely off-the-wall (except here, where I study data all day) possibility.
Russia Wants Alaska Back.
Remember how we got Alaska? Again, we go to Wikipedia because people’s memories are about as long as male petchewzelwhackers – vastly over-estimated in size/length!
“The Alaska Purchase (Russian: ??????? ??????, tr. Prodazha Alyaski) was the United States‘ acquisition of Alaska from the Russian Empire on March 30, 1867, by a treaty ratified by the United States Senate, and signed by President Andrew Johnson.
Russia wanted to sell its Alaskan territory, due to the difficulty of living there, apparent lack of natural resources (gold was later discovered in 1896), and fearing that it might be easily seized by the United Kingdom in case of war between the two countries. Russia’s primary activities in the territory had been fur trade and missionary work among the Native Alaskans. The land added 586,412 square miles (1,518,800 km2) of new territory to the United States.”
You getting this? Vladimir (prince of the buff workouts) Putin has designs on getting Russia back to the size it was in Pre-Alaskan Purchase times. His nationalism is based on something like Latter-Day-Tsarism thinking. Reconstruct the old Empire, huh?
To make it simple for the social-media-deranged to follow: An American Real Estate Grab screwed Russia out of Alaska…and now we’re ruled (nominally, when democrats stop obstructing long enough) by a what? REAL ESTATE DEVELOPER!!
Yeah, I totally get why the Russians have a problem with us. They should have done a 99-year lease which would have given them the area back just before the North Slope hit.
Oh, speaking of Sarah Palin…what did I see about her this morning? Oh yes, “Bristol and Sarah Palin get candid in first ‘Teen Mom OG’ teaser.”
No, that’s not news, but not much of anything is this morning. Which is why I’m going to pig out on breakfast and then work on commodity-stock market linkage models this morning for the folks in the loge section (.www.peoplenomics.com) tomorrow.
Here – tomorrow morning – be sure to read our prepping and survival piece “Extended CPR for Shock-Induced Cardiac Arrest” – especially if you’re a ham radio operator, do solar power work, or are a power company lineman or electrician…
Now, back to finding my meds… moron da ‘morrow…