The market broke though key technical support today. More importantly
Notice the action on today's 5-minute chart.
-- Prices continually pushed lower, first to 83, then 82.60 then 82.
-- Volume increased as prices moved lower.
In other words, the consolidation is over.
11 comments:
But note that 84 likely remains an important technical resistance level -- SPY tested 84 9-11 times (on a 5-min. chart) between 12:00 and 3:00 and was rejected every time.
Two months ago, when I suggested buying some equities that had gotten thrashed by hedge fund liquidations (e.g., POT), she badgered me into Citibank's 4% 6-month CD.
Now I'm rooting for Citi to survive on life support, but it's easier than seeing $5 out of every $100 dissolve into thin air.
Thank you and goodnight.
Do you have any comment/opinion on BDI and its relationship to the current economic situation?
I don't have a technical background in finance - could someone explain what "consolidation is over" means? I see many of the SMAs are converging at close, and I guess the point is that the high volume makes this price (82) have even more support. So I guess my next question is, is this expected to break up or break down after a consolidation like this?
"Consolidation"
In technical parlance (i.e., that of folks who [try to?] predict future market moves based on past price performance), consolidation is a when a price moves within a range after a significant up- or downward move.
The theory is that market participants have a general idea of what things are "normally" priced, and that if a stock/etf/what-have-you makes a major move, it will often pause, while people grow accustomed to the new level, before it make a new move.
So when the SPYs fell off a cliff, the thinking was that it would trade within the range of 84-100 for a time before starting a new trend up or making a new move down.
Think of consolidation as the market "catching its breath" before a new trend. I think we were hoping that this was the bottom and the next trend would be a turn-around.
Unless something unusually good comes out of somewhere unexpected tomorrow, it seems that's not the case.
Why would anyone bank with Citi or BOA right now? It sounds like pure suicide.
Consolidation is when prices gravitate around a certain price, despite fluctuations.
Support is when prices fluctuate but rally upward at a certain price.
Any discussion on future prices is pure speculation, but people use charts and historic data to generate hypothesis. But it's all guessing. Investments are sophisticated gambling, in case you didn't already discover. Having a CD at Citi is another type of gambling ;)
As I said, this looked more like water building up behind a dam than a consolidation. There are no reasons, besides people feeling the market is fundamentally undervalued, for the markets to move up.
Every single piece of financial news is terrible. Every single one. Retail sales suck, home sales suck, domestic manufacturing sucks, transport sucks. 84 was a technical limit only and was being propped up by trading algorithms and people playing the markets based on technical analysis. Nothing wrong with that. But with everything being so negative, there was no way it was going to stand.
Every nation in the world spiraling into a recession right now (except maybe the Swiss). And while the market may seem undervalued (based on historic P/E, etc), remember that we're almost definitely going to see a brutal Q1 and Q2 for earnings. Which means all those P/E's around 7-8 now, will be around 12-15. This is not a good time to be in the markets.
"Why would anyone bank at Citi or BOA right now?"
The only bank right now is the FDIC. Using CDARS, you can put $50 million in the FDIC bank.
If the FDIC fails, you can kiss western civilization as we know it good bye.
"If the FDIC fails, you can kiss western civilization as we know it good bye."
What I want to know is, what's to keep the FDIC afloat if things go south? It does not have even 1% of the money it is insuring. Treasury will have to print money and there goes the dollar.
The whole house of cards is held together with faith, and faith is starting to wane right now. Even the evening news reports said the market is dismayed about the current leadership in DC with regards to efforts to shore things up.
So what has to happen to stop the spiral? I'm a newcomer here, obviously, and fairly naive when it comes to the technicalities, but the overall picture I see is quite dismal.
"If the FDIC fails, you can kiss western civilization as we know it good bye."
I think you may be watching this in any case as the West crumbles (on its own sword - by the way) and the BRIC countries keep up their higher levels of growth. Imagine in 20 years.
Myself I do not think that this is a bad thing, by the way.
growth? BRIC? Have you checked out what has happened to these miracle economies lately? Once the US went down, they've all dropped like rocks. Russia is a mess. China is essentially lying about its government spending to an attempt to prop up the Chinese stock market. One thing we have learned is that there is no decoupling in today's economy. Maybe in 20 years that will be different, but that doesn't change the pain for everyone right now.
With proper leadership there is no reason the US cannot emerge from this as the continued world economic leader. We still have a massive number of advantages in our corner. There is also no reason why we may not crash and burn completely and the Euro-block or an Asian-block becomes the dominate financial power in the world. But there is nothing coming out of BRIC right now that indicates they're going to be able to continue growing until the US turns things around.
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