Ominous Stock Market Technicals

stock market collapseSubmitted by Morris Hubbartt:

At this point, quantitative easing is pumping about 85 billion electronically printed dollars a month, into bonds and other “quality assets”. Without the artificially low interest rates that QE creates, the economy would probably implode.  I view the current market as a dangerous place to allocate investment capital. I targeted 13,500 initially, for the Dow.  Now I’ve added a 2nd target, which is 12,200.

Down-day volume is beginning to overwhelm up-day volume, which is extremely bearish. The Dow could soon form a huge double top pattern, just as the infamous “Sell in May, and go away!” period of time arrives!
Overall, the stock market continues to be a huge beneficiary of QE policy. How long can this stock market rally continue? To help answer that key question in more detail, I am focused on two leading indicators.

 

2013 Silver Eagles As Low As $2.59 Over Spot at SDBullion!

 

Dow Time Out Chart

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  • At this point, quantitative easing is pumping about 85 billion electronically printed dollars a month, into bonds and other “quality assets”. Without the artificially low interest rates that QE creates, the economy would probably implode.

 

  • I view the current market as a dangerous place to allocate investment capital. I targeted 13,500 initially, for the Dow.  Now I’ve added a 2nd target, which is 12,200.

 

  • Note the volume boxes that I placed at the bottom of the chart.  Down-day volume is beginning to overwhelm up-day volume, which is extremely bearish. The Dow could soon form a huge double top pattern, just as the infamous “Sell in May, and go away!” period of time arrives!

 

  • Overall, the stock market continues to be a huge beneficiary of QE policy. How long can this stock market rally continue? To help answer that key question in more detail, I am focused on two leading indicators.

 

Stock Brokerage Warning Chart

 

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  • The first one is the broker-dealer sector. As you can see on this chart, RSI became massively overbought. It went to about 90, which is extremely high.  Now, the price has continued to rise, while RSI has declined.  That sets up a glaring negative divergence.

 

  • Huge money flows have gone into equities throughout the course of this technical meltdown. The danger now, is that a correction could take the form of a flash crash.

 

  • Note the rising wedge pattern in play, and what appeared to be heavy insider selling.  Volume has dried up now.  If everyone is in, and the insiders are out, where is the price likely to go?

 

XLK (Technology Proxy ETF) Chart

 

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  • The second sector that I have looked at is the technology sector, where is substantial underperformance against the general market.

 

  • Much of the underperformance can arguably be laid at the feet of Apple, but the whole “tech” sector is showing a huge head & shoulders top pattern, with ominous implications for the average investor.

 

US Dollar Public Opinion Chart

 

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  • The latest public opinion poll shows the public is loading up on US dollars. Rallies in gold tend to begin at these points of extreme bullishness on the dollar.

 

Gold Cycle Chart

 

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  • I am a bit of an unapologetic bull, when it comes to physical metal, because I won’t sell much of my physical gold bullion at any price.

 

  • As the gold price has consolidated now for nearly two years, sentiment has become overwhelmingly negative.

 

  • The seasonal cycle price for gold is nearing a key low, and the April-June period often features substantial buying from India. There is solid support on the chart in the current price area, which I’ve highlighted in blue.

 

  • Note the slow Stokes and the RSI oscillator.  They suggest that this rally could be just starting!

 

  • Still, as the gold price (hopefully) approaches the end of this long consolidation, it pays to be prepared for a quick punch lower.

 

  • The next major move should be to the upside.

 

GDX Volume Analysis Chart

 

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  • The volume patterns in senior gold stocks suggest that a changing of the guard has quietly taken place.  As many investors sold in a panic, it looks like smart money has bought.

 

  • So far, there is little fanfare surrounding this small rally, which opens the door to the possibility of something bigger!
  • Note the high position of the slow Stokes oscillator, while RSI is around the 50 level.  Strong momentum-based moves tend to occur with this type of oscillator set-up in play.

 

GDXJ Volume Analysis Chart

 

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  • I have some pretty good news for junior gold stock investors.  The “changing of the guard” price & volume action is even more pronounced on this GDXJ chart, than it is for GDX!

 

GDXJ Head & Shoulders Bottom Chart

 

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  • The GDXJ hourly chart is very impressive. I’m anticipating a breakout above $17, on heavy volume. That would generate a huge buy signal, for long-term investors.

 

  • I have a tentative target of $19, but GDXJ is not a “hot money” trade. It’s a long-term play, and investors should hold on for respectable capital gains.

 

Silver Squeeze Me Chart

 

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  • The technical situation of the silver chart is improving. Volume looks good.  Since late February, more up-days have started appearing on the chart.

 

  • Note the extreme tightening of the Bollinger bands.  This kind of “squeeze me” movement usually suggests a turning point is imminent.  Since gold has already moved up, I think there’s a solid chance that silver breaks out to the upside, too!

 

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Comments

  1. Most of these charts are simply over my head. There were rumors not long ago that insiders were selling, even as the Dow was rising. The one chart seems to confirm that. I only hope it isn’t mutual funds investing 401Ks into those stocks.  If it is then it will be the moms and pops, the working class that takes the hits again and robbed again.

    • @Rocket: You are correct! It is ALWAYS the little guy that gets the shaft…if not, we wouldn’t hear about all the strife.  Its the masses who get screwed.

    • “Its the masses who get screwed.”
       
      Indeed, for when the wolves prowl, they are not looking for another wolf but a nice plump sheep!

  2. I am waiting for a stock market crash similar to the one in 1929.  Maybe I will be waiting for a couple of years?  The problems in Europe should be good for our stock markets?  Who knows?  Here’s the thing about old school stock investors.  You will never be able to talk them out of owning stocks.  Its just too ingrained in their mindset.  They believe that PM is a ridiculous investment.  Even the thought of owning a small amount of PM’s is not appealing to them.

    • Ya’ know Chicken, I couldn’t agree more with your statement.  But, I believe many of those dyed-in-the-wool types are slowly changing their minds to incorporate PMs because they see the track record over the past dozen YEARS, and that is a difficult pill to swallow…especially after 2008.  I also believe they (investors) are leery of the next big drop being a doozie.  My figure is 5600 on the Dow.  And with that, we will have the historic 1 to 1 that only a few on the outer limits will talk about….Dow 5600, Gold 5600, 1 to 1!  And silver at THREE digits.  To me, only the first silver digit is a mystery.  I wonder just how high that first digit will go.  Some wizzard awhile back said 936 was the peak….then sell it fast! Only time will tell.  Oh, it won’t be two years to wait.  I think it could happen before Jan 2014!!!!!

    • I think we got a while to wait before we see any orgasmic metals moves.  Which is OK because we still have to opportunity to buy more.  I am thru buying for now.  However, once silver gets going I will look into lightening up on silver  quite a bit and evening up my stash with gold.  I am convinced that silver is too volatile to have all your holdings there.  About a monster box of silver is all I want to be stashing.  The rest needs to be in gold in chicken mans view.  I will use the silver to buy more chickens when SHTF.  Gold is no good for that use.

    • “ Here’s the thing about old school stock investors.  You will never be able to talk them out of owning stocks.  Its just too ingrained in their mindset.  They believe that PM is a ridiculous investment.  Even the thought of owning a small amount of PM’s is not appealing to them.”
       
      On the other hand, Pollo, there ARE some hybrids on the scene who appreciate making money regardless of source.  Yes, I own stocks and I also own physical gold and silver.  I like both but for different reasons.  Am I inconsistent or complex? ;-)
       

  3. Here’s some solid info on COUNTERFEITS for you eagle accumulators….http://www.brotherjohnf.com/archives/146584

    Personally, I LOVE 90% junk..

  4. Rockets That’s a point people don’t see. Insider selling is 50 to 1. Rats are fleeing the ship. What Morris does not take into account is what Mark Grant in Out of the Box said recently and this relates to the above charts. “You can have all the right data and make all the right decisions and all it takes is one person saying or doing something that throws all those estimations in the tank’
    Last year Draghi said everything was peachy in the Euro zone. All the problems were solved. 3 weeks late Greece blew up again and Spain was on the radar big time. The big problem with equities is that the big money is moving out and the small money is moving in at the top of the market, like now, as it’s HFT algo driven with QE Infinity money flooding in. Fools rush in and the fools are the small investors seduced by dreams of Dow nirvana. They always come in at the top and get killed. The market is an ass and fool.

    Cyprus is going to smash this market. Even if it’s contain by some FIAT magic, the problem will resurface and within a few weeks to a month or two. Cyrpus will get crushed by the IMF and ECB. The blowback to Greece and then Spain and Italy cannot be contain by all the ECB funds or the trillion plus Berenanke sent to the ECB to shore up the liquidity crisis everyone in the know knew what going to happen. The depositor haircut tax fix was in weeks ago and Bernanke sent tons of fed funds to the Eurozone IMO He was snookered by the ECB and IMF into sending Fed funds and left beside the road when the IMF decided to rotoscrew Cyprus. What he did not know was this confiscatory tax was being proposed. He thought he was just trying to help with the bank runs already under way. When the big dogs in Euro yank his chain he ships tax payer money to the banksters. No amount of fed money will stop the bank runs coming in next week and the following ones.
    The entire capital base of the ECB is wrapped up in the Cyprus government’s guaranty of the Cyprus banks Greek debt. That’s about $12 billion Euros.
    If the Cypriot banks default, and they will, the Greek bonds will be seen as valueless and the Cypriot government willbe on the hook and have to make good on these bonds Cyprus and Greece are almost the same country. The reason the ELA can’t bail out the Cyprus situation is that the bonds are worthless collateral in an emergency tranche of capital. So everything in Cyprus goes in the tank unless by some miracle someone bails out the entire government. I think that this will result in Cyprus leaving the Euro and proving the Euro to be a completely bare ass naked pile of crap.
    This will hit our markets really hard, just like 2 years ago when Greece defaulted on their first set of bonds and the market tanked. I don’t remember the exact effect on gold and silver but do think it had something to do with the silver price rise to $49 an ounce. So this could be much bigger even though the Greek bond default and haircut cost nearly $100 billion after all was said and done.

    • silverrr  I’ve been following this for a while and the dots connect themselves.
      2 billion rounds of JHP 40 cal antipersonnel pistol ammo
      7000 new full auto M4s and ammo to boot
      2,700 MRAPS   These are curban warfare tanks used to pacify the Iraqi  insurgents
      Some say that the DHS is Obama’s internal brown shirt army
      It makes no sense to arm the DEPARTMENT OF HOMELAND SECURITY unless that department is planning to secure the homeland.  That means us.
      I’ve devoted consderable time to the study of MRAPs.  They are very vulnerable.  More on that later   Like Willie of the WWII Willie and Joe cartoons said about tanks. “I like to dig a hole, moving foxholes attract too much attention’
      These measures devoted to internal control and urban  pacification will be used soon enough as a long hot summer combines with a cyber attack on or a shut down of SNAP, EBT, Veterans, Social Security and Medicare benefits collpase due a Cyprus-like event.  Even NOAA and Social Security have hundreds of thousands of rounds. I guess the Gray Panthers needs to armor up if granny is to get her benefits.  My wife is locked and locked too.
       The two things a fascist regime to well
      Lie about their weaponry
      Lie about their intentions
      They always end up using both against the people

  5. I’m with the above posts, charts drive me crazy but I don’t see a Stock Market crash but a Derivatives Collapse the one thing that nobody talks about. I don’t have much knowledge about the Derivatives but I know that’s what’s going to bring everything down.
    Anyone with knowledge on the Derivatives Market please post your comments.

  6. @AGXIIK:  Let me tell you that .40 round is a devastating sonofabitch.  I know, I have been reloading those bad boys for the better part of three years.  I have had shooters tell me that they much prefer it to any .45 round.
    I’m on my way to buy some more powder  shortly…

    • I heard about that round.  The FBI and a lot of agencies use it.  I skipped the 40 cal for 9mm and 45 cal.  The 40 kicked pretty hard and I didn’t want to spread my gun buys over 3 calibers.  Supplying one more caliber gets expensive.
      Are you having trouble finding small pistol primers.  My local ammo reloader is out and has about 40,000 rounds of reloads to spread out over 5 gun shows. Mary B hasn’t been able to find primers and I’m on some web site searches to see if I can relocate some and help supply my local guys. Do you have any sources that are untapped or did you stock before the shortage. I’m going to scour the Reno gun show for primers as part of my scrounging expeditions
      I’m out at the range today doing some run and gun drills with a few friends and trying out my new/used 20 GA Mossberg. That’s be fun

    •  
      The market for primers has had sporadic shortages over the years. When you find a supply, buy them. Primers can be stored for a very long time in a good quality zip lock bag. Add a few moisture absorbing devices.

    • My favorite handgun of all time is a Ruger Single Six in .41 Remington Mag.  It has a 6.5″ barrel and is very accurate and flat shooting out to about 100 yards.  With a bit more than 1000 ft-lbs at the muzzle, it is a match for just about anything in North America.  The 10 mm round is almost its equal.  The .40 is like a 10 mm short.  Not bad, better than a 9 mm, but no .41.  lol
       

    • I still haven’t found small pistol primers. Should pick up 2k more shotgun, have 2k large rifle

  7. @ Marchas45
    How do you use http://www.thefisch.com for testing of silver coins?
     

    • @Silvermail by weight, size and balance. It is one neat tool. If you go to that site it will show you how it’s done. I’ve already found at least a half dozen fake eagles in my stash.
      If it slips through the first slot then it’s a fake, if it doesn’t fit in the circle holder snuggly then it’s a fake, If it doesn’t balance the Fisch then it’s a fake. It’s a great tool.
      Each tool is made for a different coin such as, Eagles, Maples, Philharmonics and dollars. I have a set off them.

  8. @ Marchas45
    Thank you! I will buy this thing. I was sure that this is not working for the coins of silver. I was sure that it works for gold coins only. I was wrong?

  9. Cyprus, Troika agree to 20% tax on deposits over 100,000 euros at Bank of Cyprus
    http://rt.com/news/cyprus-bailout-tax-troika-730/
    Get your Fiat out of your Bank!

  10. AGXIIK: 
    You indicated your .40 had hard kick.  I don’t know what manufacture/model you were using but for information for the stackers out there, the Glock Model 23 (Comported barrel) does not kick!  The 23 is an inch shorter barrel than the Model 22 and a few ounces lighter.  Its beautiful for concealed carry (its the one I carry).  With the comported barrel, the pressure is dissapated through the slits in the barrel.  It works like a champ.  I’ve had more than one shooter at a range take a step back when they see flames shooting out the slits, but I swear, as a shooter of thousands of rounds I never saw flames except the first time!  I guess your concentration is down range to notice.  But, there is no kick.  Actually, the Model 22 doesn’t kick either.  Just thought I’d throw that out there.
    As for primers, I stocked up some time ago.  My range sells them to Members Only.  Next shipment I’ll pick some up in case there’s a need “out there”.
     

  11. According to my information, the talks in Brussels came to nothing. For Cypriots, again was offered unacceptable conditions, from which they refused. According to my information, there was a scandal. The delegation of Cyprus stated that it will look for solutions to other countries. After that, cypriots had left the room negotiations.

    I can not insist on the fact that this information is reliable 100%
    The source is reliable, but he could be misinformed from up level.

    • There are a lot of conflicting stories out there, here is another story. I guess we will just have to wait and see what happens instead of trying to guess.
       
      http://www.bbc.co.uk/news/world-europe-21916102

    • Interesting story, Charlie.  That makes me wonder what will happen if the Cypriot government cannot get the bailout worked out.  Will they throw up their hands and resign?  Maybe.  But what happens then?

    • But what happens then? @Ed_B  Maybe More Tourism? Lol

    • I dunno, Charlie, maybe.  Their economy is pretty much toast but if they get out of the EU and have their own Cypriot pound again it would be sufficiently devalued that vacationing on that very pleasant island would be quite inexpensive so more Europeans and others could afford a nice trip there.  Heaven knows, they could sure use the business for their hotels, restaurants, tour guides, and other businesses that cater to tourists.

  12. @ Marchas45 
    They simply have no choice. They can not tell the whole world that the Cypriots have sent them in the ass. So they invent stories about the delay. LOL

  13. Now they will change the terms of the ultimatum on gentler – to save the face of Europe.
    Now they think, how to fix the situation. People in Cyprus do not want to see Cyprus in the Eurozone. Anti-European sentiment among the people is very strong. And they are supported by the church.
    The church sees only one way – the way out of the eurozone Cyprus and return the Cyprus national currency.
    Church said, that he would give everything to the skin in order to pull out his people and his country from EU slavery.
    I think, that today we all is Cypriots.
     
     

  14. Claim to Cyprus exaggerated.
    At this background look interesting report data for 2009-2010 Financial Action Task Force (FATF).
    FATF is the key international institutions dealing with the development and implementation of international standards on money laundering.
    These data show that in Germany, the issue of money laundering is more serious than in Cyprus.
    FATF with MoneyVal (FATF colleagues in the Council of Europe) published a survey of 17 countries in the eurozone.
    It implies that Germany (2009) is fully consistent with the recommendations of FATF in five areas. Cyprus is fully compliant with the FATF in 12 areas, and Germany – only five!

  15. silverrrr  if you have or know a source for small pistol primers let mary B know   As for the 40 cal  I shot someone else’s Springfield XD  Nice pistol but without compensator it did kick a bit.  I have to admit is was a few days into the 4 day defensive handgun class at Frontsight and my hand was thrashed.  So don’t anyone rely on my assessment of the 40 cal. I was blasting away with my XD 45 andit kicks to.    I think I was an easy sell on not going with a 40 cal since nearly everything is now 9mm 45, 38 and 357  in pistols.  I could use about 100,000 of 22 long rifle rounds, CCI Mini mags are like copper washed rounds.  That is scarce as hen’s teeth in the Norther Nevada area.

  16. Anyone still in paper needs their head examined…

  17. The question is who is receiving the amount of 85 billion dollars per month? I did a simple calculation and discovered that if you combine the population of Canada, USA and Mexico, each person will receive about 170$ per month! That shows how much dollars this actually is!

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