Monday, June 22, 2009

What Is Mightier, The Channel, The Trendline Or The Golden Cross?

Well, apparently the bear market is over. The Golden Cross is upon us. All is well in the world and CNBS and their happy little mouth pieces can report the great news. Surely the Golden Cross will occur and drive the VIX under 30 and all will be right in the world of finance.

First a recap of the current situation.

Let's get ready to RUMBLLLLLLE. We have a challenger to the Golden (Boy) Cross. In the red corner weighing a ton is the primary channel of the /ES. As seen below, this channel is well established. Can it withstand a beating from the Golden Boy? The futures have an ally in the indicators on their side. The daily and weeklys are headed south and will assist in the corner. I assume it will be a good fight. Could not locate Vegas odds.

But wait there are two more challengers looming in the path of the Golden Boy's ascent to the title if the channel should fail. The trendline twins lie just above along with historical 954 and 1007 resistance. The futures were possibly (YTBD) no match, but in a more fair SPX vs. SPX fight the trendlines twins will prevail. In the below chart if resistance and double top at 954 is over run, the pink and blue trendlines lie waiting for a good fight. Aiding these trendlines vs. the Golden Boy will be all of the atrocities that our government has done to fix the problems since the RE bubble was put into action and the residual effects of a world in peril. A virtually undefeatable combination. See my last post - It's Only Gonna Get Worse From Here for more ammo fighting the Golden Boy.

The web is kind of quiet on the Golden Cross issue right now. The studies I am reading vary. Some are bullish and sound like CNBS cheerleaders on acid, so I am not presenting those. The more neutral reports on the subject follow. Bottom line, it's historically not that big a deal when the 200ma is in a solid downtrend.

The MarketSci blog has done some good work analyzing the Golden Cross. The following links have several blogs on the subject all worth reading.

MarketSci Blog - Testing the Rare Downtrending Golden Cross.

MarketSci Blog - Moving Average Crossovers Debunked?

MarketSci Blog - Which Golden Cross is the Best Golden Cross?

Pragmatic Capitalist has this - USING THE 200 DMA AS A BUY/SELL SIGNAL

Only time will tell, and if there is a severe move south, this will all be for nothing. Remember they have not crossed yet.

GL trading.


  1. Good review. Might see a right shoulder coming in.

    Trenline and TA vid:
    (Notice his linear scale!)

  2. Shanky,

    Your second chart above looks like P2 is over!

    How strong is the resistance of that topmost trendline that goes back a few years?

    In other words, do you think 956 can be exceeded, or do you thnk P3 has begun?!


  3. Shanky,

    Compare your second chart with Schweizer's chart "Time Is Running Out," on StockTock Social.

    Same channel, says P3 has started, says July 2010 will be end of P5 and Supercycle C.

    What do you think?

  4. Playa - welcome back. I'm still very stubbornly on the 846 then pop to new highs bandwagon, BUT that does not mean this could not be P3. I am very open to both scenarios. Looking at Dan's stuff this is where he is as well. Formation from here south will tell us the key. P3 is coming. Not if but when. Taking a note from DE, volume characteristics are not there for big impulses down just yet. I think the weeklys need to set divergences. We'll see. Thanks for the comments and the visit.

  5. Shanky,

    Thanks for the welcome back, and thanks for your reply. I agree with you and Dan: I'm expecting a significant pullback in P2 (finally!) to 875-880 or 845-850, then P2 to finish at new highs around 1000-1050. But I'm open to P3 starting any time (and like everyone, watching for it like a hawk!).

    Your chart and Schweizer's chart (and the fact that both your charts agreed) made me wonder if the top trendline of the channel was so strong that 956 could not be exceeded. If so, that would mean that either P2's top has been made (and P3 has begun) -- or -- P2 will have a double top around 956, and then down we go!

    So, you think P2 will exceed 956 and break out above the strong trendline (resistance) of the channel -- right? Thanks, Shanky.

  6. Shanky,

    I just noticed that on your chart the channel is RISING (so P2 could hit new highs above 956 and still be inside the channel). On Schweizer's chart, the channel is FALLING (so P2 cannot hit new highs unless it breaks out above the top trendline of the channel).

    Sorry for my not noticing (at first) this key difference in your and Schweizer's charts.

    Good luck trading P2 and P3!

  7. Playa - If it goes to new highs the channel will be violated and we'll have to look for a new one. Tough call, but like I told S135, channels are made to be violated (eventually). You are right IMO to presume the channel will hold IMO at this time.

  8. Shanky,

    Ha! I'm back again! (Sorry.) I just examined Schweizer's chart again, and noticed ANOTHER big difference with your chart: unlike your and my (and Dan's and Kenny's) belief that we are in P2 of at least 3 (and perhaps 5) primary waves of Supercycle C -- Schweizer appears to believe that we are in the final Wave 5 of the final Wave C in a giant ABC correction. BIG difference!

    Sorry again for my not noticing "the fine print". That's what happens when I get up at 4AM, don't get enough sleep, and try to comprehend complicated charts, while also trying to watch a whip-sawing market like today, while also trying to calculate different entry and exits points! Too much ATTENTION to multi-tasking leads to too much INATTENTION! Ha!

  9. Shanky/Schweizer, I believe that if you look at my chart posted here: you may see the long trend line extending down from May 2008 to our June 8th high. Moreover, I chose the May 2008 peak as a start for the Fibonacci retracement as it bounces off of support/resistance around the low 1400 area of the double tops of July/OCT 2007. I consider myself an amateur TA so forgive me if my trendlines are not 100% accurate. Wanted to get your comments on them as the trendlines may explain the hard turn on 8June2009 and my belief that we will not see 956 ever again for quite some time....when we have actual green shoots and an economy in recovery. Look forward to your comments....


  10. Michael -

    That is the same trendline we are showing.

  11. SRS Player: When are you looking to start pressing the SRS? Anytime soon? Thanks! :)


Keep it civil and respectful to others.