I’m not known as a technical analyst (although I play one on TV). Yet, today’s blog post is a technically-oriented look at the three-headed Hydra that emerged during today’s trading.
Head #1: At nearly the precise moment when the yield on the 10-year Treasury matched the dividend yield of the S&P 500, the market began an accelerated decline. Due to the volume and speed with which the decline occurred, one can probably attribute it to our friend the robot. If this relationship persists, it could spell a bearish omen for stocks.
Head #2: Today we witnessed the dreaded Bearish Engulfing Outside Reversal. Put simply, the BEOR occurs when today’s high and today’s low exceed the highs and lows of yesterday’s trading. If you’re charting in candlesticks, today’s candlestick has a higher top and a lower bottom than did yesterday’s. Often, this portends a reversal in the direction of the market.
Head #3: From Doug Kass… The last two times the S&P 500 hit an all-time high and closed more than 1% from that high were 10/11/07 and 3/24/00. Things got a little interesting after each of those dates. Today the high was achieved at 10:29 a.m. with the S&P touching 1687.18. By the close, the S&P had settled at 1655.34 — a decline of nearly 1.9%.
Taken individually, each of these Hydra Heads could be nothing more than interesting data points. But when all three occur on the same day, my antenna goes up.
As for why this happened, I can try to glean causation out of correlation. The market seemed to move in concert with the prevailing winds of the Federal Reserve’s signalling the tapering of POMO or not.
It now looks like we’re in a taper-on/taper-off market.
The robots are going to be quite busy.
Get it on, bang a gong. – LL