But What If The Chips Are … Down?

But What If The Chips Are … Down?
Photo by Laura Ockel / Unsplash

DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.

Market On Open, Thursday 30 May

by Alex King

Enough of a selloff yesterday to break a few of our short-term equity futures charts. What does “break the chart” mean? It means that you have to re-draw the chart with the new information ie. the new price history, and then try to once again apply pattern-recognition methods to see where price may move next. In the Dow for instance, having YM futures drop below 38,800 means that the move up from the April 19 lows to the May 20 highs was probably a continuous wave upwards, not a 1-2-3 move as previously modeled. Why does this matter? Because if that’s true then it may mean that the current selloff could find support around 38,000 - this being the 78.6% retrace of that 4/19 - 5/20 move up - and if thats true then it could mean the Dow is in for a sustained move up beyond prior all time highs. Perhaps. The thing with following price and letting price tell you what price may do is that you have to continuously re-assess your projections, because the only thing of which you can be certain is that you will be wrong. Which is what hedging is for. A topic we will revisit in detail on another day.

For now, let’s get back to our pattern recognition. As always in these notes, today we cover all four primary US equity indices (the S&P500, Nasdaq-100, Dow Jones-30 and Russell 2000); bonds (TLT), volatility (the Vix), oil (USO) and sector-specific ETFs including semiconductor (silicon being the new gold!!).

Yet to sign up?

Monthly and annual subscriptions available - right here. Market Insight gets you the entry-level stuff, Inner Circle gets you our best work.


Short- And Medium-Term Market Analysis