I have witnessed many nutty periods in history that vomited incredible events in a very brief period of time. I must say that the past week or so is over the top, and it continues in earnest as I pluck away at my keyboard this afternoon. Care to add a caption to the Star Trek Enterprise checking out SpaceX’s Starman? “We’ve been all over the Milky Way, and that is the best they can do?” Shameful. Especially when at least $21 trillion has been spent by the Deep National Security State on black projects, fostering a space economy and interstellar capability ever since anti-gravity propulsion systems were brought online back in the 1950s. Must keep the peasants busy and entertained!
Back to the present. Let’s start with… the FISA memo and other events. Then on to DOW and S&P 500 chart technical analyses.
“A cabal of arrogant, condescending employees of our government thought we didn’t count. POTUS was right from the beginning. They were spying on him. They were wiretapping. They were listening in on Trump Tower.” – Judge Jeanine Pirro, Feb. 3
- Jerome Powell sworn in as new Fed Chair amid stock market sell-off – ABC News, Feb. 5
DC “Plunge” (PPT) team may have halted unprecedented Dow Jones spiral… “Did Washington save the stock market on Monday?
It may be hard to make the case that anyone or anything helped Wall Street as stocks lost about 4 percent of their value and the Dow Jones industrial average tumbled 1,175 points — after a 666-point decline on Friday.
But the Dow and other indices were in complete collapse right before the start of Monday’s final hour of trading. At one point the Dow, which represents only 30 stocks but is still a widely followed indicator, tumbled to a loss of about 1,600 points. That’s as big of a decline as ever. But then something happened. Someone arbitrarily and aggressively started buying stocks and halved the loss. Monday will still go down as a Wall Street massacre but that superhero buyer made it half as bloody. Who was the market’s superhero? Toward the end of his time in office in 1989, Ronald Reagan created something called The President’s Working Group on Financial Markets.” – NY Post, Feb. 5
Bitcoin daily Feb. 5, low of day 6,651 (rounded off to 666 points)…
How Two Tiny Vol Products Helped Fuel the Sudden Stock Slump… “Two exchange-traded products that democratized access to one of Wall Street’s most tried-and-true strategies — selling volatility — had just $3.6 billion in assets on Monday. That’s a tiny fraction of the roughly $2 trillion estimated to be linked to short-volatility strategies — and a speck of dust compared to the $23 trillion in market value of S&P 500 companies. Yet the popularity of these vehicles might have contributed to one of the most violent moves in U.S. equities in history: one that saw the Dow Jones Industrial Average slump more than 6 percent in a span of six minutes. After the dust settled, the combined assets in the two exchange-traded products shrank to $135 million. One of them — the VelocityShares Daily Inverse VIX Short-Term ETN, known as XIV — will soon be extinct.” – Bloomberg, Feb. 7
- Just A Coincidence?: The Dow Goes From Being 567 Points Down To 567 Points Up At The Closing Bell – Michael Snyder, Feb. 6
- The Truth About The Stock Market Crisis. Prepare Yourself… Video. – Stefan Molyneux, Feb. 6
Reality Returns to Wall Street… “Today the Fed’s balance sheet is over $4 trillion. If the current rout becomes a full-blown panic, or even if it is delayed until later, the Fed’s capacity to cut rates is only 1.5%. And its capacity to expand the balance sheet is basically nil, because the Fed would be pushing the outer limits of an invisible confidence boundary. This conundrum of how central banks unwind easy money without causing a recession (or worse) is just one small part of a risky mosaic. For now, think of 2018 as the year of living dangerously.” – Jim Rickards, Feb. 6
SpaceX’s Falcon Heavy’s first launch…
Whoopsie, it looks like the intended target of Mars is now off the table! What exactly is Musk up to?
“This is the most predicted sell-off of all time because the markets have been up so much and they have had so many days in a row without meaningful down days, so it is probably not surprising that something that has gone up 40% like the S&P tech sector would at some point have a sell-off. Before there was a selloff, people said repeatedly some day this will sell off. What is more interesting is it has been very fast, it’s been possibly aided and abetted by technical trading algorithmic trading. I’d be interested to see an analysis and see what role that played.” – Bullard
“Market rout has virtually no consequence for the economic outlook. If it continued to go down sharply, that would affect my view. This wasn’t that big of a bump in the stock market and is not a big story for central bankers, yet.” – Dudley
- FBI lovers’ latest text messages: “Obama wants to know everything.” – Fox News, Feb. 7
- Flashback: Obama Insists He Doesn’t Get Involved in FBI Investigations (Video) – Grabien, Feb. 7
On to the Dow weekly and daily charts, as of the Feb. 7 close…
The Dow began rolling over during the last week of January. Most folks are passive investors and were not paying attention. The MSM hubris was busy at a high pitch, touting the all-time highs and FOMO. On the weekly chart, you can see that the price plunge almost tapped the 50 EMA on its worse day, but closed today just above the 21 EMA, and on the trendline drawn up from September 2017 where you can see the parabolic move initially gained traction. Also notice on the weekly chart that the price closed where price movement hesitated for a couple weeks back in December of 2017. The studies (DMI-ADX, StochRSI, and RSI) are now skewed due to the sudden price jolt and cannot be read with any accuracy.
I find the daily chart to be a bit more revealing. The price plunged and nailed the 200 EMA, which wiped out all the gains since October of 2017. The MSM focused on a “2018 loss of any gains” storyline. There is not much price support below the 200 EMA. The price has not closed back above the 50 EMA, but we must give it an A for effort. If the 50 EMA is not taken out decisively and soon, the price will likely revisit the lows, then the next Fibonacci level at 38.2% and the 300 SMA. The DMI-ADX is primed negative, but the StochRSI looks like it’s begging for more bounce to the upside, and the RSI is possibly rolling over for further losses in price. They’re mixed messages for sure. Given the veracity of the price collapse, I remain Neutral to Bearish on the price action until that 50 EMA is retaken decisively.
On to the S&P 500 weekly and daily charts, as of the Feb. 7 close…
On the weekly, the S&P 500 nailed the 50 EMA. The price has now closed above the 21 EMA, above the trendline drawn up from September 2017 where the parabolic move gained traction, and above the 23.6% Fibonacci level. That is all positive, but the studies are very skewed due to the sudden price jolt. Once again, the daily chart is a bit more revealing. The price violated the 200 EMA, retested the 50 EMA, and is now sitting on the 100 EMA. On Friday and Monday, the price opened and closed on the 23.6% Fibonacci level, which is also positive. The DMI-ADX is negative and a mess, and the RSI and StochRSI look like they want to roll back over after the bounce for further losses in price. As with the Dow, the 50 EMA is a huge sticking point and must be retaken decisively for any bullish fever to assert itself. I must remain Neutral to Bearish on the S&P 500, too.
A lot of technical damage has been done to both indices in a very short time period. The weak volumes and parabolic moves (as seen on the $SPY and $DIA ETFs posted in my January 24th article) did not provide any meaningful, structural price supports, and they don’t offer much resistance, either. The charts were primed for a HFT algorithmic free-for-all. Anything goes right now.
Plan Your Trade, Trade Your Plan
TraderStef on Twitter