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Charting Next Week’s Bearish Action: Goldman Warns Of A “Meaningful Decline” In Stocks

Courtesy of Tyler Durden

Goldman’s John Noyce (part of the firm’s trading desk) has released his most recent barrage of technical analysis and charts, confirming our running expectation that a drop in stocks is now widely anticipated by the charts. In addition to extended commentary on FX, Bonds, Curves, and the VIX, Noyce notes the following on the S&P: “as discussed in recent client meetings, while the timing is difficult, we remain concerned that a larger topping structure is still being  formed on the S&P – which will eventually lead to another meaningful decline.” Has everyone, Goldman included, now gone from bullish to bearish in the span of two weeks?

In the S&P:

Arguably the market could still be forming a larger H&S top; This would fit well with some further downside correction in risk correlated FX currency pairs.

If Friday’s close is below 1,101 the market will post a bearish weekly reversal from the high of the recent recovery

In conclusion, as discussed in recent client meetings, while the timing is difficult, we remain concerned that a larger topping structure is still being  formed on the S&P – which will eventually lead to another meaningful decline.

In FX:

There are certainly a number of warning signs that the last stage of the USD-weakness trend we have been looking for (EURUSD to 1.35-1.37) is unlikely on a tradeable horizon; Overall, as an overview chart this warns of a material turn in the broader trend of the G10 currencies versus that USD.

Once the market eventually broke lower in late-July (a similar time of year to now) the market [in AUDUSD] began the sharp drop into the October ‘08 lows

In VIX:

If Friday’s close is above 23.89 the market will post a bullish weekly reversal from the base of the recent down move

Beyond the significance of VIX patterns for the S&P they’re also important for broader markets as in the vast majority of cases a broader swing in  risk appetite will take place across asset classes. (not today’s implied correlation)

In Treasurys:

Following last Friday’s poor data yields broke from their July range

The multi-week chart still looks like a big double top targeting 2.2%

On the Curve Shape:

The 10-year/2-year curve is continuing to flatten: The ultimate target of the 200-week moving average now stands approximately 66bps below current levels

 

Full presentation

Attachment Size
Charts That Matter.pdf 930.96 KB

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