Those in Power Can Trigger, But Can They Sustain?

Courtesy of Lee Adler of the Wall Street Examiner

(Excerpt from the Wall Street Examiner Professional Edition)

Looking back at crashes of the past, there’s usually a day like today somewhere along the line before the thing has run its course. The power structure desperately needed a rally, and in illiquid markets it doesn’t take much to get one started. Sustaining it for more than a day or two is “a whole ‘nother story”, and there’s little indication in the charts that this one can be sustained beyond that. Short term indicators suggest a possible spike rally that could carry a bit higher, but intermediate indicators along with 13 week cycle projections and time counts suggest that the market will make a lower low within a couple of weeks.

Cycle based stock screening data The first sign of a rally would be a couple of days of increases in new short term buy signals. Today was day one. Will tomorrow be day two? Stay tuned. Note that the number of new buy signals on the 13 week cycle remained at 0, which doesn’t bode well for the expectation of a meaningful rally. ..

Look at the 2008 crash, the 1987 crash and the 1929 crash. Days like today are common. This is an illiquid market and has to be traded on a minute to minute framework at this point. It’s not the time or place to be adding to leveraged short positions.

Crash Analogs

In the 1929 crash and the 1987 crash, the first bottom was on day 12 from the prior short term peak. In 1929, it turned around that day and rallied hard on day 13 and 14, then fell to a lower low through day 19-21.

1929

In the 1987 crash a secondary, higher low was reached on days 16-18.

1987

Today

In each case, the initial bounce came when the Dow touched the 1000 day moving average. 1987 was just a violent crash within a secular bull market that resumed in 1988. 1929 was only the first leg down in history’s worst bear market. Today’s market has more in common with 1929.  

There are more charts and details on the market’s technical structure and outlook in the Daily Market Update in The Wall Street Examiner Professional Edition. Click here to try WSE’s Professional Edition risk free for 30 days! 

Picture (out of context but otherwise apropos) via Jr. Deputy Accountant, who writes "Finally I have a reason to use "Emergency Escape" by Chen Wenling."