Bear Flags Flying!
I am seeing the same bear-flag pattern on lots of charts! What does this mean? It means that last week’s deeply over-sold condition is being worked off with a low-volume, short-covering rally. The big players are not buying in.
Here is an update of the XLF chart showing today’s move being rejected at the blue resistance line, and puncturing the lower green bear-flag line (click to enlarge):
Here is SPY with its own bear-flag, note the purple line highlighting the declining volume:
(I’m not quite sure how to draw SPY’s top resistance line, but any way you draw it, it’s not far overhead.)
Now it’s your turn! See if you can spot more bear flags. Hint, you can start with QQQQ and IWM.
Expiration? FOMC meeting? Who cares! The bear army is marching!
June 18th, 2008 at 11:36 am
The main risk to the bears now IMHO is is the possibility of a sharp drop in oil prices which still are very extended short-term.
A drop in oil to $115-120 probably would send the S&P 500 above 1400 — even if just briefly.
June 18th, 2008 at 12:10 pm
Crimson Ghost,
Oil has held its June 6th gap-up for 9 days now. That is a very bullish technical pattern.
It might take a crack in the global economy to crack oil now, and that wouldn’t be good for stocks. Bulls praying for a drop in oil to get them out of their under-water long positions will likely be disappointed.
I’m thinking that the more likely scenario is for oil to crush the global economy (just as it has crushed ours), demand will fall further, and then oil and stocks will fall together. That will be a slaughter for the bulls.
Matt
June 18th, 2008 at 2:50 pm
I am nearly 100% in treasury money funds
Do not have the guts to go short here, and waiting for a real washout before going long.
Would not surpise me if some non-treasury money funds “break the buck” before long. There is a huge amount of debt out there that is GROSSLY OVERVALUED and unpayable except via Ponzi schemes.
June 18th, 2008 at 3:23 pm
Matt said, “the more likely scenario is for oil to crush the global economy (just as it has crushed ours), demand will fall further, and then oil and stocks will fall together. That will be a slaughter for the bulls.”
I would be very surprised if the politicians, who are under serious pressure now from the public to do something, would allow such a scenario. They can turn oil down if they have the political will to do so. The only question is whether they have that will.
There are a number of ways to turn the price of oil down. Some of them include requiring 100% margin for speculators, forcing speculators to deliver on long contracts, changing the rules where speculators can only sell their long position, and many more.
June 18th, 2008 at 3:46 pm
Hi Bob,
Yes, there are certainly things that could be done, but politicians are almost always way too late. A global recession might already be locked in. Just look at the auto industry - it’s already chaos. People are trying to trade in their SUV’s for smaller cars, but the SUV’s have no resale value, and the showrooms are still filled with SUV’s. Detroit is shutting down the SUV plants, sales are at 15-year lows, etc.
Maybe the politicians can reverse that, but I’m not holding my breath. And that’s only one example; the airlines are shutting down, food prices are soaring because tractors run on oil, etc. It’s already a global disaster.
Matt
June 18th, 2008 at 8:55 pm
Crimson Ghost,
Can’t see anything wrong with your strategy. One washout coming up!
If you have a link on the money-fund thing, please post it, I’d like to read-up on the subject.
Matt