So we got the Filthy Rally I alluded to ahead of Xmas. The imbalances I highlighted on December 23 called for a reconnect to shifting averages off of the 2340 $ES zone and the 2001 analog framework prompt a 10% rally into late January. And a 10%+ rally we obtained, a rally even far more aggressive than expected courtesy a all of a sudden dovish sounding Fed (see also The Hideous Fact.)
Illustration $NDX futures reconnected with their 50MA yesterday:
All good and effectively? Correction around? Get a China offer and all is well? Perhaps.
But there’s a sign chart that may well propose an intrigue to arrive. As I outlined in 2018 Sector Lessons extremes come to be more severe and we saw some of this in the sign charts. In my 2019 Sector Outlook I highlighted the $BPSPX chart demonstrating oversold readings in December as intense as for the duration of the money disaster. But it’s not the only chart that’s performing excessive.
$NYMO has gotten a ton of interest in the past several times as its extreme oversold readings achieved serious overbought readings inside just 11 times.
How excessive? Perfectly, the only other reference point all over again is the 2008/09 economical crisis:
+117. It is a sample sizing of 1, but let us dig a little bit further below. What transpires when $NYMO goes from over -100 to above +100 in a issue of times as it just has?
The only historical past we have to go by claims this takes place:
People may possibly forget about, but that rally from Nov 2008 into January 2009 that created that huge excess fat $NYMO study was an intermittent major prior to markets dropped 30% into 666 on $SPX by March. Other than this time the $NYMO browse has arrive considerably speedier, but each $NYMO reads occurred in early January adhering to a late yr correction.
With a sample sizing of 1 it’s not a substantial more than enough statistical sample to give this correlation any solid predictive weight, but it is well worth pointing out and a little something to be informed of. After all massive corrections generally see the first robust counter rally are unsuccessful and produce a retest with new lows:
There is 1 other change perhaps of observe. In 2008 and 2009 Q1 served as the basis for the top market low. Bailouts, QE, mark to current market suspension, you title it, it was all component of the active steps.
All we’ve had so considerably is communicate. QT is nonetheless going on. So for all the dovish talk by the Fed there has not been any dovish motion that we know of in any case. And why really should there be? We’re not in a recession but.
Which helps make for an intriguing dilemma: In which is the crisis? But if there is no disaster, why did Treasury Secretary Mnuchin hold crisis calls around Xmas? Why did Fed Chair Powell cave final 7 days and kick this technological reconnect rally into vertical overdrive?
If there is no disaster why are they performing like there is one particular? One wonders. We have no overt disaster reminiscent of 2008/2009, but we have various technical signals that are performing like they did back then. And maybe that is anything worth shelling out consideration to in the times and months in advance.
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