The Dow Today in a Nutshell 10-15-2014

Flight-To-Quality

 

We seem to be in a race to see who can ask government to hold their money. This is the classic flight to quality (i use that word loosely). The talk on the street is always trying to find a fundamental to fit to the price action. Plunging oil prices are signs to economic slowdown, the potential impact of global economic weakness on U.S. earnings is another issue thrown into the pit, and the spread of Ebola will be devastating wiping out chocolate lovers as well. The Swiss, after handing over anyone with money to foreign governments were reduced to chocolate and watches. Well now the chocolate may vanish.

We elected the Daily Bearish Reversal in the Dow yesterday and we have fallen out of bed from 16313 to 15945 in the first 15 minutes. The next support lies at 16131 for the close so if that holds we may have a low today temporarily. The weekly support lies at 16170 and a weekly closing beneath this level warns we should certainly move into that 14470-15560 area. A weekly closing below 15960 will warn of a move down to 15284.

DJIND-D 10-15-2014

Nevertheless, today is 17.2 days down  This raises the possibility for a temp low if the Dow closes back above yesterday’s closing at 16315.19 but at the very least 16170. The technical support lies at 15934 today and the resistance is up at 16723. We need to see a closing above this area to relieve the selling pressure.

DJFOR-D 10-15-2014

Our timing array shows today as a turning point with the next coming in two days. We see this week still as a target for a turning point and thus we may have a temporary low this week. Only a daily closing below 16131 would warn of a further drop for the next two days is possible whereas a daily closing below 15970 will be the next sell signal.

DJTRD-D 10-15-2014

 

So far the market has been electing the Daily Bearish Reversals including last night. Much of the panic selling is done right now, but this remains to be seen. This is the first day the few retail players in the market have gotten scared.

DJIND-D 10-15-2014 Trading Channel

 

The bottom of the broad trading channel lies at 16080 today. Holding that level on a closing basis is rather important for the panic selling to subside.

All – in All, this appears to be the bubble in government confidence. Why anyone would rush to buy government debt when it is obvious governments are in trouble – well who knows. This certainly appears to the end of the flight to quality underway. This is what we need to set the stage for 2015.75. You have to have the bubble form and it appears to be in government. Thereafter, look for the crash and burn and such a pattern would then push the phase transition in private assets into the declining wave of the ECM as confidence in government collapses.