With continued uncertainty in global markets, today two legends in the business sent King World News powerful pieces covering everything from the plunge in global markets to W.D. Gann, Jesse Livermore and the reason investors need to be cautious.
From Art Cashin’s note today: “Those Were The Days, My Friend – We have two potentially interesting days this week. On Wednesday, we will have the Autumnal Equinox, which in some trading circles is known as “Gann Day”. The other is Yom Kippur, the most solemn day on the Jewish calendar.
Gann Day – One of the most celebrated traders in the first half of the 20th Century was W.D. Gann whose reputation rivalled that of Jesse Livermore. To say Gann was a technical analyst is like saying Einstein was a mathematician.
Gann developed an amazing system for projecting and predicting prices and other things in the future. Some adherents claim that months before, he predicted the resignation of the Kaiser and the end of World War I to the very day. Another group claims he predicted the Japanese assault on Pearl Harbor but not with such calendar specificity.
Early in his career, he allowed reporters to monitor his trading. In a little less than 300 trades, he increased the money invested by 1000% and less than 8% of the trades produced a loss. Said another way, in this run, Gann was right 92% of time.
Anyway, based on his studies, Gann claimed the most dangerous day for market swings and pivots was September 22nd. Since his death, disciples have adjusted the date to the Autumnal Equinox, which can fall on the 21st, 22nd or 23rd. This year it is Wednesday the 23rd. See if you can find a tinfoil hat.
Yom Kippur – The day of fasting, reflection and atonement begins tonight at sundown and ends Wednesday at sundown. That makes the first chance to buy after Yom Kippur will be on the opening. That’s when we will know whether piety was rewarded or punished this year. What was the result of sell Rosh Hashanah (close 9/11) and buy back after Yom Kippur (opening 9/24)? So far it’s close.
Overnight And Overseas – Markets were relatively calm in Asia and Tokyo remained closed. When markets opened in Europe, however, there were strong deflationary influences.
Crude plunged as did many other commodities. Miners got whacked as gold came under renewed pressure. The Euro weakened against the dollar. The European stock markets are down the Dow equivalent of between 300 and 450 points. Selling seems intense, suggesting it may be margin related – maybe a spillover of the selling in VW.
U.S. futures have caught the deflationary bug from across the pond with the Dow looking to a possible -200 opening in the Dow.
Consensus – Depending on how badly they open, traders may look to S&P support around 1937/1941 area. As noted yesterday, these are historically two very tough weeks. Keep your head down and stay wary, alert and very, very nimble.”
“The illusion of randomness gradually disappears as the skill in chart reading improves.” — John Murphy, technical analyst/author
The above quote and the following note is Jeffrey Saut today: “It is often said that technical analysis is more of an art than a science. And while this is, admittedly, a classic refrain by technicians any time a certain “call” does not go the predicted way, the phrase is, nonetheless, true and has been coming out of my mouth quite a bit recently whenever I am pressed on whether or not we have already experienced the bottom in stocks.
With all these market questions hitting our inboxes, we have almost been as busy as the Dallas Cowboys’ medical staff lately, and I always like to preface my technically based responses with a reminder that we tend to deal in probabilities when charts and indicators are involved, lest my inquirer believe I have some sort of magic crystal ball at my desk assisting with the financial soothsaying we are expected to perform as market strategists. Sometimes, though, the stars do align and it can seem as if stocks are behaving in an almost axiomatic or scientific manner, turning the art into something more substantive.
Take, for instance, yesterday when the S&P 500 rallied right up to a pair of trendlines I had drawn on its chart and then stopped almost to the penny before retreating to close near the lows of the session (see chart at right). As a technician, this made me happy, giving me that same warm giddiness one might experience whenever loading up a car with luggage and fitting everything inside perfectly like a big game of Tetris. However, as an investor, the price action worries me in the short term since it now looks like the charts are suggesting we might have lower prices ahead.
Frankly, the last three days have not been good from a technical perspective, with yesterday’s failure at resistance creating yet another negative-looking candlestick that leads me to believe we just might see that retest of the recent lows. The pattern that has formed in the S&P 500 looks an awful lot like what is called a bearish pennant or flag, which is particularly troubling because pennants/flags usually form near the middle of a move, meaning that the sharp decline we got in August (the pole of the pennant/flag) might have been the beginning of something greater.
Of course, technical analysis is more of an art than a science (see what I did there?), so this doesn’t mean you should panic and get out of everything, but I am becoming more cautious again in case we are due for another leg of selling. I still believe that the extremes we saw late last month in most of the indicators I follow signal that the worst is probably behind us, but price action trumps my opinions and I will be watching closely if we do fall to 1900-1910 (first support level) and then 1867 (August low).
A successful retest would actually be a good thing, as we have mentioned that “W” bottoms are normal market behavior, but I won’t really start getting too optimistic again until we get a daily close above 2000. In the meantime, I continue to watch for good individual stock set-ups and for signs of increased demand in the broad market. Some progress has been made in the breadth indicators I follow (NYSE A/D Line, % Stocks > 50-DMA, etc.), but I will want to see these hang in there even if the major averages do dip again here.” ***One of Michael Pento’s best audio interviews ever has now been released, where Pento shows why he is one of the greatest economists in the world by giving one of his most important interview ever discussing the coming financial carnage, what to expect from key markets next week, including gold, silver, stocks and bonds, what people can do to protect themselves and much more and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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***KWN has also now be released the incredibly powerful Eric Sprott audio interview. Sprott discusses the coming financial carnage, a shocking event that only occurs once in 333 million lifetimes, a gold and silver tsunami, why the endgame will be so incredibly destructive, what people can do to protect themselves and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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