Stock Market breaking key resistance levels...

[tradephoric]

All 3 major indexes have dropped below their February lows from earlier in the year.  Now that they have broke the lows the market is looking for support.  It appears the strongest support level will occur around DOW 21,000.  From that point technical traders may be looking to buy back into the market and we can get a short term rally and retest the 200 DMA.   Also, the DJIA was the last major index to experience the death cross... now in all 3 indexes the 50 DMA has dropped below the 200 DMA.

[hotdogPi]

I noticed a 350 point drop in 5 minutes yesterday, apparently due to the Feds raising interest rates.

I'm still not sure why raising interest rates would cause a drop, though. Can someone explain?

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[MNHighwayMan]

I'm currently experiencing a serious level of deja vu.

[NE2]

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But I want this flaming turd locked.

[kphoger]

flaming turd

[tradephoric]

I noticed a 350 point drop in 5 minutes yesterday, apparently due to the Feds raising interest rates.

I'm still not sure why raising interest rates would cause a drop, though. Can someone explain?

(Note to everyone: If you don't want this thread to be locked, focus on content, not personal attacks.)

Powell made the statement that current quantitative tightening was on "autopilot", suggesting that the fed shrinking its balance sheet would continue for the foreseeable future.  I think this spooked the markets more than the fed hike itself.. the fed hike was pretty much priced into the market, but Powell's comments after the rate hike was seen as too hawkish by many market participants.  An economy that has been pumped up with cheap lines of credit doesn't like quantitative tightening and higher interest rates.

[tradephoric]

To put things into perspective, the fed has really only started to unwind its balance sheet.  If the market is already nervous about taking half a trillion off their balance sheet what is it going to do when they try to take an additional 2 or 3 trillion off it to return to pre-recession levels?

[Scott5114]

I don't know much about the stock market. My money is in index funds. But I've always kind of felt like the analysis of candlestick charts like these where you look for an inverted pennant or downward trapezoid or flagging peak or waxing gibbous or whatever the hell is probably psuedoscience. Like stock market astrology.

Because these patterns are made looking backward and there's no guarantee that they'll continue to behave that way in the future. Using any kind of analysis to try to predict or time the market is hogwash anyway. If there's specific information for a specific stock that indicates it's time to get out (like  Verizon cutting Tumblr off at the legs, or any news about Sears coming out) then sell, but in general the smart money is to just invest long-term and be done with it.

But then again, the first time I saw this kind of analysis was connected to Bitcoin hucksters. I put $100 in Bitcoin this spring. At one point I got up to $124, but now I'm at $52.01. Investment of the future, I tell you what.

[wxfree]

I don't know much about the stock market. My money is in index funds. But I've always kind of felt like the analysis of candlestick charts like these where you look for an inverted pennant or downward trapezoid or flagging peak or waxing gibbous or whatever the hell is probably psuedoscience. Like stock market astrology.

Because these patterns are made looking backward and there's no guarantee that they'll continue to behave that way in the future. Using any kind of analysis to try to predict or time the market is hogwash anyway. If there's specific information for a specific stock that indicates it's time to get out (like  Verizon cutting Tumblr off at the legs, or any news about Sears coming out) then sell, but in general the smart money is to just invest long-term and be done with it.

But then again, the first time I saw this kind of analysis was connected to Bitcoin hucksters. I put $100 in Bitcoin this spring. At one point I got up to $124, but now I'm at $52.01. Investment of the future, I tell you what.

I also like the Warren Buffett approach, using low-cost broad-based investment instruments.  That way you get built-in diversification, and your returns aren't eaten up by management fees.  The market beats most of the people who try to beat the market, and at a lower cost.

The patterns are interesting, and if you have money to play with you might get lucky with it, but for most people the fundamentalist approach is best.  The most important element is time, getting started early and using a long time horizon, not stock-picking or market-timing.

[tradephoric]

Because these patterns are made looking backward and there's no guarantee that they'll continue to behave that way in the future. Using any kind of analysis to try to predict or time the market is hogwash anyway. If there's specific information for a specific stock that indicates it's time to get out (like  Verizon cutting Tumblr off at the legs, or any news about Sears coming out) then sell, but in general the smart money is to just invest long-term and be done with it.

I'd say don't bet the farm based on technical analysis, but it can give you a general idea of where a market is likely heading.  For instance, when looking at the MACD the last time the DJIA has been in this much of a downward momentum condition was in October 2008 right after Lehman Brothers collapsed.  That at least suggests that we could be reaching a short-term bottom in this market.  IMO, DOW 21000 is the most logical short-term bottom... and as you can tell from my original chart it's not based on any crazy technical indicators... it's just based on some simple support/resistant levels.  A lot of price action on the run up in 2017 occurred around the DOW 21000 level... and that seems like the most logical support level that market participants will be looking at.

[tradephoric]

Here is the current market juxtaposed over the 2008 market.  The correlation wasn't that strong in the run up to the high, but ever since the top each market has been trading nearly identical.  History doesn't repeat itself but it rhymes.  I posted this chart about a month earlier too on another thread, and since that time has continued to trend with the 2008 market. 

[Scott5114]

Bad graph–notice how the right Y-axis goes up by increments of 2000 and the left by increments of 1000? Of course you can make two lines look the same if you stretch them out of proportion like it's New Year's Eve at the OkDOT sign shop.

[US71]

I'm currently experiencing a serious level of deja vu.

It's deja vu all over again.

[abefroman329]

I'm currently experiencing a serious level of deja vu.

It's deja vu all over again.

Nobody goes to the stock market any more, it's too crowded.

[wxfree]

Bad graph–notice how the right Y-axis goes up by increments of 2000 and the left by increments of 1000? Of course you can make two lines look the same if you stretch them out of proportion like it's New Year's Eve at the OkDOT sign shop.

The columns should have different increments, because the top of the right is nearly twice the value of the top of the left.  Different increments reflect equal percentages better.  What these lines say to me is that the market goes up until it goes down, and that it goes up gradually and down quickly.  Therefore, the market goes up gradually and goes down quickly after the top.  The point of this seems to be that a top precedes a fall, which is obvious.  I think the implication is that the top causes the fall, but I would propose that instead the fall causes the top.  As I said in the previous discussion, the low temperature happens right before the temperature starts going up.  The low (and the cooling the caused it) didn't make the air start warming; the warming made the temperature stop falling and establish the low point.  A rising stock market doesn't make the market go down later; it goes down for some reason, and the point where that starts will be the top.  Because the rises are gradual and the drops are more rapid, the moving averages of different lengths will interact differently on the up side and the down side.

[qguy]

I'm currently experiencing a serious level of deja vu.

It's deja vu all over again.

Nobody goes to the stock market any more, it's too crowded.

I've never seen or heard a conversation that couldn't be improved by a Yogi Berra quote. 

[Duke87]

I'm still not sure why raising interest rates would cause a drop, though. Can someone explain?

Because it raises the return on US treasury bonds without raising the risk. This triggers investors to take some of their money out of the higher-return but also higher-risk stock market and buy US treasury bonds. Which makes the stock market go down just like any other selling off of stocks does - supply and demand.

Secondarily, an increase in interest rates from the fed equals an increase in interest rates on all loans - this raises the cost of borrowing money which, naturally, negatively impacts any business that might be looking to do so.

[TheHighwayMan3561]

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Not that those were entirely the OP's fault, but I always assumed it was frowned on to "renew"  a locked thread, much less do it twice.

[webny99]

(Note to everyone: If you don't want this thread to be locked, focus on content, not personal attacks.)

Not that those were entirely the OP's fault, but I always assumed it was frowned on to "renew"  a locked thread, much less do it twice.

IIRC, the OP is also the OP of "Crash Prone Modern Roundabouts", so there's that.

This is actually a good topic, so long as it doesn't have to be tainted by extremist views and can be discussed sensibly.

[nexus73]

If you like dividends, buying Ford (symbol F) stock at $8 and change is a good deal.  The P/E is under 6 last I looked.  $24 billion in cash reserves have been preserved for a decade.  Short of F-series pickups up and dying, you cannot beat F stock.  Compared to the over-valued tech stocks, Ford is the bargain of the present. 

Rick

[tradephoric]

The DOW dropped another 653 points today and the S&P 500 is officially in bear market territory.  Merry Christmas!  The market is very oversold right now according to the MACD and I believe a short term bottom in the DOW will occur around 21300 (just 492 points away now).  DOW 21300 has a lot of support. 

[tradephoric]

Here is a chart that lists the things the FED has done that have helped prop up the stock market by adding credit into the system.  These include QE1, ZIRP, QE2, Operation Twist and QE3.  In addition, in 2016 you had a pro-business president that deregulate the markets and reduced the corporate tax rate which helped drive up the market higher even as the FED was winding down it's loose money policy. 



This chart looks at the historic investor credit balance compared to the S&P 500.  Now the question being asked is credit drying up in the market.  It doesn't help investor confidence when you have Steve Mnuchin on a conference call over the weekend with CEOs of the 6 largest banks to discuss how much liquidity is in the banking system.  At some point this bubble is going to pop and that is not going to be good news for stocks.

[MNHighwayMan]

My god man, put down the charts and go enjoy Christmas with your family.

[tradephoric]

My god man, put down the charts and go enjoy Christmas with your family.

Don't worry, I've been spending plenty of quality time with my family over the holidays.  Just today i have some down time and it's never a bad idea to reassess your investment portfolio at the end of the year.

[US71]

My god man, put down the charts and go enjoy Christmas with your family.

Don't worry, I've been spending plenty of quality time with my family over the holidays.  Just today i have some down time and it's never a bad idea to reassess your investment portfolio at the end of the year.

Most of mine is locked in a trust for the next 5 years.