Upside -- 1155, 1220
Downside -- 1102, 1039
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We could either be at 1039 or 1220 by next Monday.
Our few hours of additional room for selling has turned into a days worth. However, we did hold above yesterdays intra-day low and we closed just slighty above the close 2 days ago.
A break of those levels on close could have opened the gates of hell, but we held them. The benefit of the doubt must be given that we held those and we have a chance to put in a real bounce here.
SPX Daily (15 years)
Here i want to show you the extreme level of oversold we are on the daily now.
The MACD has only been this low 3 times in the last 15 years and each time it became a major reversal point in a major selloff. It was only exceeded once in the last 15 years and that was during the worst of the 2008 crash.
The RSI has never exceeded this level to the downside in 15 years and was only equaled twice, both times during the bear market that followed the tech boom.
SPX Hourly (10 weeks)
On a much shorter timeline, this is what i think we are dealing with.
I think we will eventually form a channel somewhere in here. I've put trendlines in the places where it will likely form. I would not be surprised to kick off a rally here that tops somewhere around 1250.
The alternative is that we fall out of the bottom of this potential channel and take out 1102 to the downside, at which time we could potentially go straight to hell and not pass go or collect 200$.
Everytime in the past when it seemed that we were surely going to crash.. we haven't. So it's a long shot and the risk here is to the upside. You can risk 20 points for a potential 200 point win on the long side here.
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The 50 day moving average closed on top of the 200 day moving average today. That means it is now unavoidable that the 50 will cross under the 200. Forming the dreaded "Death Cross."
We are now nearly certain to be in a bear market and will experience another recession at least.
Only a rally of epic proportions that goes nearly straight up and manages to get back above the 200, 100 and 50 day moving avearges can save what looks to be certain bad times.
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Lots of rumors of banks imploding in Europe and on this shore we have Bank of America trading at 6$.
No doubt we also have some very very very damaged pension funds out there, assuming most of them came to the conclusion that 3% 10 year treasury rates would not keep their funds solvent over time and most likely took on a lot more risk in equities just as Uncle Ben was forcing them to do.
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My guess is that baby boomers, after 2008 and now this, will have very damaged retirement funds and may now swear off the market for the rest of the lives. That means we've likely lost a very large percentage of their money from ever entering the market again, EVEN IF this ended right now and went straight back up.
This may be a very long bear market time wise.
If the baby boomers refuse to ever put money back to work and the last 10 years has left Generation Y and younger in positions with little savings or no jobs. That leaves only Generation X as a group that will need investment return to provide any type of decent retirement, since they are likely to see 50% or less of the current benefits from Social Security and Medicare.
I predict now, with almost no chance of being wrong...
There will be an epidemic of poor senior citizens in this country 15-25 years from now. Families will go back to old school ways in which the grandparents move back in with their children to take care of the grandchildren while the parents work to feed everyone.
The standard of living will be far lower than it is now. Explain that to your child.. he/she will be living a far lower standard of life than you are right now. Thank our "leaders" of the last 30 years for that.
GL
CJ
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