We Fully Engulfed the Maribuzu Today

It looks like it took two days instead of one day to fully engulf the maribuzu candlestick of two days ago.  This is a bearish sign.

Other bearish signs today include the VIX confirmed MACD histogram buy signal, the heavier down volume and what appears to be a MACD that wants to curl over to the downside soon below the zero line which is usually very bearish.  The VIX made a big move again but we need to see it blast above 48.20 to get into the hyper panic zone.  Also bearish is the skyrocketing US Dollar Index.

Despite the bearishness, I still have to say that we made another higher low today since August 9, 2011 low.  This is the 5th higher low since that time and one has to wonder why the bears did not take the ball today and stop that trend.

As bearish as I am, the fact that we have a 5th higher low is still bothersome.  I still think we will bust down next week however and maybe even jump to 1010 or 1050.

The most ultra bearish possibility seems to be a drop to the low 900’s in the sp500.  It seems absurd to even consider a number in that range could be reach so quickly but we are in unchartered territory here.

In the past, Fed meetings have led to the huge upside market bounces and managed to halt very severe market declines on the psychology that the Fed will put a floor under the market with whatever rescue plan.

So we know that the next fed meeting is 7 to 8 trading days away.  We also know that the initial decline in early August was about 7 to 8 trading days (the worst of it).  So to me it is not a stretch to conclude we could see symmetry of another 7 to 8 days hard down right into the Fed meeting either at 1010 or 1040 or maybe a lower number on sp500 and that will mark the next floor in the market.

It all seems too perfect?  But that is what I see from the current juncture.

I suppose there is an outside possibility we do an 87 style and get to 900 right away but we will just have to watch the tape on the day to day and see how it evolves.

I am quite shocked honestly that the FED has not stepped up to the plate early and said they will hold their Fed meeting early this week and do this or that and get in front of the curve.  Who knows maybe they still will, but for now it looks like we are about to bust to the downside big time.

P.S. For the bullish scenario to still stay alive we need to see the market not bust today’s low and just drift sideways and then try to jump higher again.

Posted in SP500
10 comments on “We Fully Engulfed the Maribuzu Today
  1. Geoff says:

    the “pug” blogsite indicates that S&P has got to decide direction very soon. his target for the first downleg was 1095 to 1025 before bounce up to 1175-1225

    the TZA and VXX technical graphs on Yahoo lk very interesting and enticing.

    the 10 moving average of AD has 8 days of positive readings so it has taken a lot of pressure off the oversold condition.

    you point out to higher lows which is true, but the highs very recently are also lower.

    i have been following WFM and TFM and both look like interesting potential shorts with possibly not too much damage if the market goes higher and potentially a very lot of potential if market heads south

  2. Tom says:

    I have seen stocks like WFM and TFM and they are quite scary to look at in terms of the bearish case. A lot of other defensive type stocks look like that. A V Bottom.

    I don’t know if you can see this link but the FT.com had an interesting article about how a high percentage of stocks are now moving together at 81%, the highest since 1987 which was at 88%. Seems to be an indicator of herd mentality.


  3. ed says:

    There are technical indicators that say the next big move is up and there are those that point down. Many are indecisive and show we could go either way

    Monday is a Full Moon. Call me loony but based on passed experience I will go with the moon for the tie breaker to the upside

  4. Geoff says:

    i hope you are right. i REALLY do, because i will take an up day to go short more. Please up.

    But – – – in today’s Barron’s (page M4) there is this interesting sentence which purports to be a fact: “In the 3 other years when the market fell by 4% or more in its first 3 days of September trading (1931, 1946, and 2002) the results were even worse: an average decline of 13.5% through the rest of the month. In 1946, the loss over the remainder of September was 4.83%. In 2002 it was 8.35%, and in 1931, a stunning 27%.”

    The Dow declined 4.08% in the first 3 days of September 2011. “When the market declines by 2% or more in the first 3 days, it has averaged a 6.31% decline for the remainder of the month.” Ouch! !

    This is the sort of fact that usually pushes me over the edge to follow preceding trends. In the past such “facts” have tended to be balderdash in the time that I follow them. But, it will probably push me over the edge again tomorrow. I will probably put on more shorts. Soooooo, “loony”, I hope your hunch is right and the market, is at least briefly up, even if not for the whole day – – – hopefully the goodwill from the 10th anniversary of 9/11 and no attacks will help your hunch.

  5. Tom says:

    Moons do often mark turning points.. but in some cases I have seen them lead to mega gaps both up and down..

  6. Tom says:

    I continue to be quite fascinated by this Global_Macro twitter guy who is saying there is a 100% chance of a crash and that it will be worse then 29, 87 or 2008. I have never heard any forecaster in this biz say 100%.

  7. ed says:

    Yes maybe just a 2 or 3 day bounce corresponding with a pull back to the trend line of the Dollar breakout on the daily chart.

    Tom, who is the Global_Macro twitter guy? Sounds similar to this guy:


  8. ed says:

    As far as the moon goes, my limited research has shown full moons tend to be positive while new moons are more of a negative influence.

    And Blue moons, although rare, can also be very negative.The last one on July 30th having marked the beginning of a larger decline

  9. Geoff says:

    thanks for link to Hussman

  10. Tom says:

    Here is the Global Macro guy.


    He seems quite a bit under the radar, but I found a couple of his patents on forecasting and they are quite sophisticated.

    A lot of his forecasts make sense.. and they seem to match what my own charts are saying.

    I think we could go down hard Tuesday and engulf our mini rally. Too many are still trying to buy bounces.

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