As I’m typing this I have watched the usual players across much of the business/financial media salivating to explain this sudden surge that took place in the “markets” from the lows created in the overnight session to basically end the day almost as if it never took place. I would caution you to remember one very crucial fact: They never expected such a thing even possible to begin with.
Again, what I’m hearing and reading goes something along these lines:
See, this market wants to go up! Once the market digested the news that the arrest (e.g., the daughter of a high ranking Chinese CEO arrested in Canada to face extradition to the U.S.) was possibly not that consequential to the trade deal and buyers stepped in and blah, blah, blah.
Maybe it is, maybe it isn’t. But here’s what I believe is far closer to an explanation:
The initial reaction had more to do with a confluence of other things. The arrest was just a triggering for the move to start, not the entire cause. And the subsequent buying may not be for the reasons being touted.
But here’s what I do know. And it is a very poignant observation with implications that may end up being the start of something far worse than the so-called “smart crowd” even realize.
Here’s what I’m currently focused on and I feel it is demanding attention to be paid. To wit:
From a technical perspective this latest move, a move that is near identical in its formation across a myriad of other markets, is a near text book example of what one would use to show how an initial move down that occurred with size and speed then followed with a subsequent fast rebound can fake out most analysts. The reason is simple:
They (much like you’re hearing right now across the media) think the rebound means something it did not. i.e., people want to buy. Hint – it usually is for other reasons entirely and it provides the perfect opportunity for those initial sellers to sell even more dragging in additional sellers while simultaneously making all those that thought “This is it! BTFD!!” wrong and turn them into panicking sellers.
This is where things can feed upon themselves creating a “doom loop.” That’s why this needs to be pointed out, for that’s precisely where we might now be teetering. And the reasoning is manifold.
As I iterated above, this pattern or, market move is nearly identical across all sectors. What that implies is that everything is in lockstep. And if that is the case? Everything is in peril. Or said differently: A wave of selling in the broad indices could turn into a tsunami of panic selling across entire sectors and global markets. Not hyperbole.
If you look at the above chart you don’t need to be a technician to understand what I notated. All you need to do is watch for the “markets” to suddenly reverse and start heading lower, once again, and just how low they go. For that’s the key. Below 2620 with follow through is the trip-wire-zone for lack of a better descriptor.
Again, what that oval on the chart represents is what is known as an area that via certain technical formulas would satisfy a technical view that a reversal has high odds for it to develop and would be in order should they do just that.
The reason why this is important to watch is because you may not understand the technical terms, math or such – but that’s what the machines use. And if the machines think they’re important, need I say more?
To be clear: I’m not saying this will happen, I’m saying that the odds of such a thing are very high in nature, along with if they come to fruition the resulting gyrations could be of a force no one is prepared for, let alone, considering.
As always, we shall see. But one things for sure…
We are going to know very, very, very (did I say very?) soon.
© 2018 Mark St.Cyr