Posts Tagged ‘slope of hope’

Understanding Robert Prechter’s ‘Slope of Hope’

Understanding Robert Prechter’s ‘Slope of Hope’ 

By Elliott Wave International

Almost everybody who follows financial markets has heard about climbing the "wall of worry": the time when prices head up bullishly, but no one quite believes in the rally, so there’s more worry about a fall than a rise.

What’s the opposite condition in the market?

Bob Prechter named it the "slope of hope," meaning that as prices head down, no one wants to believe the market really has turned bearish, so there’s more hope for a rise than fear of a fall.

The market has been rising recently, following a bearish decline from late April through the end of June, which makes now the perfect time to learn more about the slope of hope.

* * * * *

Excerpted from The Elliott Wave Theorist by Robert Prechter, published June 18, 2010

According to polls, economists are virtually unanimous in the view that the “Great Recession” is over and a recovery is in progress, even though “full employment will take time,” etc. Yet mortgage writing has just plunged to a new low for the cycle (see Figure 1), and housing starts and permits just had their biggest percentage monthly drop since January 1991, which was at the end of a Primary-degree recession. But the latest “recession” supposedly ended a year ago. How can housing activity make new lows this far into a recovery? The answer is in the subtitle to Conquer the Crash, which includes the word depression. The subtleties in economic performance continue to suggest that it “was” not a “recession.” It is a depression, moving forward, in punctuated fashion, slowly but inexorably.

Number of New Mortgages Plunges Again

Despite this outlook, keep in mind what The Elliott Wave Theorist said last month: “Even though the market is about to begin its greatest decline ever, the era of hope is not quite finished.” For as long as another year and a half, there will be rallies, fixes, hopes and reasons to believe in recovery. Our name for this phase of a bear market is the Slope of Hope. This portion of the decline lasts until the center of the wave, where investors stop estimating upside potential and start being concerned with downside potential. Economists in the aggregate will probably not recognize that a depression is in force until 2012 or perhaps beyond. That’s the year the 7.5-year cycle is due to roll over (see April 2010 issue). Stock…
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Timeframes and Actions

Latest thoughts by Tim Knight at The Slope of Hope

Timeframes and Actions

Since – and I’m being my typically overly-polite self here – some people seem confused as to my attitude toward the market, allow me to explain. Again.Short Term (Hours/Days)

  • Open to the possibility of S&P getting as high as 1120
  • Have opened up about 10% of intended short positions already. Vast majority of accounts in cash.
  • Have a small number of long positions, and a pretty big SSO position to soften the blow if the rise continues; occasionally briefly trading ES for pops and drops. Long /ES as of this writing.
  • Opportunistic day-trading ETFs when risk/reward seems heavily in my favor

Medium Term (Next Few Weeks) 

  • Think likelihood of trend change very strong;
  • Going through all stocks in advance and preparing target entry points and stop prices;
  • Intend to hang on to already-established positions and ratchet stops down as needed

Long-Term (Months/Years) 

  • Believe people who are planning on a new bull market are incorrect;
  • Think slow, grinding bear market will continue several years;
  • Believes major government policy shifts and social unrest will accompany bear market;
  • Will trade infrequently once bulk of positions are in place

Got it? Good. Thank you.

A Close Look at the Russell 2000

The /ES continues to grind uncomfortably and annoyingly along its descending trendline of resistance. It could, of course, pop above it at any moment. Given the fact the trendline isn’t even a week in length, a break above it wouldn’t be explosive, but it would be another carpet tack in the coffin of the bearish argument.Some might assume, based on my disposition, that I am massively short the market. I’m not. I have about 10% of my buying power deployed in short positions. I’ve got 3000 shares of SSO to ameliorate the market’s strength. I’ve been spending virtually all my time getting ready for, but not executing, the trades which interest me.The Russell looks like this right now:

1007-rut 
 

Operating in the favor of the bulls……… 

  • Broad uptrend still very much intact;
  • There’s about 8% upside from here before the major resistance at that rectangle
  • And, just now, AA reported earnings which the market seems to really like.

In the bears’ favor…….. 

  • Trendline breached;
  • Massive resistance overhead

Looking closer, we can see the series of lower lows and lower highs, but one good strong day higher could break this:

1007-rutclose 
 

 


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Everything’s Coming Up Roses

Everything’s Coming Up Roses

Courtesy of Tim Knight of Slope of Hope

As regular readers know, I’m counting on a countertrend top between 1050 and 1200 on the S&P, and we’re within spitting distance of it. Today’s high was barely 1% underneath 1050. I maintain my belief that this is nothing more than a countertrend rally unless (God forbid) we were to cross above 1200.

The folks over at Elliott Wave provided a very interesting graph on sentiment today:

0824-optimism

Not to put too fine a point on it (.…..say I’m the only bee in your bonnet…….), investors are now even more doe-eyed optimistic about the prospects for equities than they were when the S&P peaked at 1576! All this crap about tons of cash on the sidelines and people waiting to pile into the market is just that: a load of crap. They’re already in! And they’re expecting things to keep soaring! (Just like, ummm, in October 2007).

The "cash on the sidelines" thing drives me nuts. The "cash" was destroyed in the 58% decline – remember? The notion that people:

  1. Sold at the top
  2. Tucked their "cash" away somewhere really, really safe
  3. Now have all that cash at-the-ready to buy stocks

is…….that’s right!…………utter crap.

It’s lovely that today was a good day for me, but I’ve been through the past five months and know it doesn’t mean squat. You know the last time we had a good, solid down week? June! So it pays to take it one day at a time and assume Goldman is just playing games with us all until things start to seriously, seriously crack.

And, I assure you, ladies and gentleman, that is a day to which I eagerly look forward.

****

Song for Tim :-)

 


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Phil's Favorites

Identifying a fake picture online is harder than you might think

 

Identifying a fake picture online is harder than you might think

If you know how photo editing works, you might have a leg up at spotting fakes. Gorodenkoff/Shutterstock.com

Courtesy of Mona Kasra, University of Virginia

It can be hard to tell whether a picture is real. Consider, as the participants in our recent research did, these two images and see whether you think neither, either or both of them has been doctored.

...



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Zero Hedge

Shocking Before & After Photos Reveal Awful Truth About Widespread US Crop Failures In 2019

Courtesy of Michael Snyder, The Economic Collapse

Torrential rains have been hammering the heartland of America for months, and at this point vast stretches of farmland in the middle of the country are nothing but mud.  As a result of the endless rain and unprecedented flooding that we have witnessed, millions of acres of farmland will have nothing planted on them at all in 2019, and that is a major national crisis.  But most farmers were able to get seeds planted in the deplorable conditions, and now they are desperately hoping that something will actually grow.  Unfortunately, on farm after farm what is coming out of the ground looks absolutely terrible.  Even if we get ideal weather conditions for the rest of the summer, there is no way that many of t...



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Kimble Charting Solutions

Wilshire 5000 Creating A Triple Top? An Important Breakout Test Is In Play!

Courtesy of Chris Kimble.

The stock market has been on fire of late, rallying up to the edge of price resistance on several indexes. Today, we look at one of those stock market indexes: the Wilshire 5000.

The Wilshire 5000 tracks all of the stocks in the US market, so it is a broad-based index that carries significant importance when gauging the health of the overall US stock market.

Looking at the long-term “weekly” chart above, it is pretty clear that the index is at an important price juncture.

The Wilshire 5000 spent the last 25 years trading within a rising price channel (1)...



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Insider Scoop

Jefferies Upgrades Deere, Cites 'Significantly Improved Farmer Income Outlook'

Courtesy of Benzinga.

Farmer buying power will remain pressured for 2019, but this will change for the better next year and will help support Deere & Company (NYSE: DE), according to Jefferies.

The Analyst

Jefferies' Stephen Volkmann upgraded Deere from Hold to Buy with a price target lifted from $150 to $190....



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Chart School

Formula for when the Great Stock Market Rally ends

Courtesy of Read the Ticker.

When valuations for the boring water company or the boring electric company is trading like your Facebook, Apple, Amazon or Netflix or Google (ie FANG) you know something is wrong.

This is when a seriously over valued market is screaming at you.

Of course the reader must understand in a world where money printing goes super nuts (Zimbabwe style) the stock market may go hyper inflationary and picking a time frame for a top is never a good idea, but we are not there yet. There is no Ben Bernanke helicopter money to the masses yet (ie MMT). 

To see when water company's (and such like) are nearing the crazy FANG like valuations a review of the Dow Jones Utility Index channel shows us how history can repeat. The c...

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ValueWalk

The "Tesla Killer" Car Is Nowhere In Sight

 

The “Tesla Killer” Car Is Nowhere In Sight

By Jacob Wolinsky, ValueWalk

Here’s some catnip for the Tesla bulls on this email list: my analyst, Kevin DeCamp, a longtime TSLA shareholder and car owner, took a test drive of the Jaguar I-PACE and, while it “looks great and is fun to drive… it is lacking in a few areas where Tesla really shines.” He concludes that “Tesla may end up killing itself, but the “Tesla killer” car is nowhere in sight.”

The Tesla Killer Hasn’t Arrived Yet: My Test Drive of the Jaguar I-PACE

By Kevin DeCamp

As a long-time, devoted Tesla...



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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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Biotech

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

If you’ve got the raw data, why not mine it for more info? Sergey Nivens/Shutterstock.com

Courtesy of Sarah Catherine Nelson, University of Washington

Back in 2016, Helen (a pseudonym) took three different direct-to-consumer (DTC) genetic tests: AncestryDNA, 23andMe and FamilyTreeDNA. She saw genetic testing as a way...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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