I decided to make a little thread to share my macro view thoughts on the market. I will post my thoughts on potential forward scenarios and intermittently I may make a post about a potential massive move higher or lower in the markets. Sometimes large events are very predictable... Sometimes they are not! Fed programs from 2009 to 2011 screwed up long term predictability of the market, however... Markets are normalizing, for now...

I actually can statistically prove that because I have some cycle analysis tools which completely desynchronize with the market through those years. They only had "slight" desyncronization through the 2002-2003 policy shift.

What drives markets? Fear, Greed, and Manipulation. Central bankers and their economists with their grand delusions are always coming up with stupid ideas... That is the manipulation element. If Bernanke had not stepped in and strongly defended the credit markets in late 2008 into 2009 markets would have continued to around a 90% decline.

Unexpected events that influence the markets... Everything that is known is baked in and priced into the market. If the majority know about it, it's priced. New things like Ebola take a little while to price in. The models on Ebola's potential spread and rate of spread will take about a month until they are high accuracy, so it's effects on investors and traders emotions will be mostly priced in soon.

Here is the most probable forward scenario at the moment in the big picture long term...

The bull market in the S&P and NASDAQ is unbroken so far. There is a very high probability to a return to around 1950-1975 on the S&P by January. Probability would normally be 99% in this situation, but the Ebola situation needs to be watched carefully... If short term speculators bid up prices strongly in the near term it will lead to spectacular collapses. If you see any fierce 3-5 day rallies in the near term... Beware! Stable drift higher isn't in the cards for a month or so.

Good trading conditions will last for a while. If your an investor and have been holding shares for years... Definitely lighten up once fear burns off and optimism returns.

Now, on a longer term note... Mid/Later next year effects of the bear market in European stocks and declining sentiment will likely implode global markets. If Ebola spreads into the EU like current models project, the economic damage has potential to finally trigger the breakup of the EU. The Eurozone situation is headed south over the next few years even without a pandemic... Ebola could make things move a much faster though!

I don't see the EU situation possibly getting bad enough to cause our markets to drop in half until late next year at the earliest. Markets and sentiment do not shift on a dime...

Oh, and for those who are curious why I was bearish early 2014, and why I called for a big drop in the markets back in early September.

I have my reasons... This is just one of them.


It's very hard to predict how high or low a market is going to go in a move, but it's pretty easy to predict when something is going to occur and how long it should last. In natural bull markets rally cycles usually last about the same amount of time. If price velocity increases duration shortens. Eg... If everyone suddenly shifts to greed and optimism instead of a slow transition, of course it's going to blow up sooner.

Markets were so strong from 2013 into this year a weak period just meant a pause. Markets really launched out of that compression pattern in 2012. Nice move with the QE programs, Fed... Kicked us to escape velocity!

Edit: Note, for those that get confused by those prices, that is not actually the S&P... It's a proprietary composite.

And, let me leave off for now with a few words of wisdom.

When markets on on the rise, next they fall. When markets fall, next they rise. The earlier you get in on a move, the less risk. Once the fools start to pile in... Risk starts to rise exponentially!

Now, here is a tip... Bring up a Quarterly or Yearly chart of a "Natural Unmanipulated" market in a non-growing economy. Late 1800's into the forties. The sixties until the major fed policy shift in the mid eighties.

A 30-50% fall every few years was business as normal. That is how natural markets in flat weak or non-growing economies behave. These Fed and central banker managed markets are mostly artificial... The 2002-2007 market was pretty natural. No major policy shifts during the bull market. Just one major shift at the start.

Oh, and for those who daytrade... Game plan for tomorrow is looking for long side trades if we get sudden early morning panic to around 1835 on the S&P.

Edit: Why I am looking for that... Lot of short term speculators jumping into this market assuming the 15th was capitulation. However, market uptrend was weak yesterday. Target levels were 0.25% higher than we were hitting on the fifteens. Emotion levels are going to rise in those holding longs. They are going to question their assumption that the market has bottomed fast. They will most likely wash out unless Yellen's speech can bring in more buyers fast.

Btw, a trader once showed me this cool trick a long time ago... Use the SPX and S&P feeds, not the ES. The ES continually ticking up/down will drive you batty. The other day we did have a cash/futures market dislocation for fifteen minutes... For the first time in fifteen years though, lol! Actually, I think we dislocated during the flash crash too.

Darn, no good long setups this morning... Gapped open at resistance. Market still has cyclic underside support into Monday.



Update: There is potential for some okay short setups if we reach around 19-1905, but it would be best to just wait until this burns out.

I don't chase...

A lot of big boys "think" this setup is identical to the early 2014 setup, but sorry... It's not! This is going to be a rough ride...

Few profit takers hitting at 50% retrace. Nobody needs to panic, yet!



Late session today there might be good reason to panic, leading indicators turning over... But, still... I would only short if I see a short covering panic after lunch.

Volatility is contracting so fast... Not many short term traders in the market today. It's not just because it's OPEX. Traders with longs yesterday got their emotions reinforced by the gap up calming them down...

These people will come to full realization they are screwed around Tuesday-Wednesday... Provided they keep it together and hold strong into Monday.