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BMO: We Now Expect A Full Re-test Of The S&P Low At 2,346
01-29-2019, 01:37 PM,
BMO: We Now Expect A Full Re-test Of The S&P Low At 2,346
BMO: We Now Expect A Full Re-test Of The S&P Low At 2,346

<p>Picking up on a theme that Nomura's Charlie McElligott has been pounding the table on for the past few weeks, namely that the market is poised for a potential steep drop in the coming days, especially with the $7.5BN MBS rolloff from the Fed's balance sheet on Jan 31, this morning BMO's chief technician Russ Visch writes that after highlighting the deterioration underway in his short-term timing model for more than a week<em>, "it appears as if the rubber is finally beginning to hit the road in a real way with respect to the “re-test” phase of this bottoming process</em>."</p>

<p>Specifically, Visch notes that yesterday the S&P 500 reversed back to the downside after failing at a declining trendline and warns that "<strong>given the history of how the bottoming process plays out for declines of this magnitude we expect the index is now likely to retrace most, if not all, of the rally since late December. i.e. – a full re-test of the low at 2346."</strong></p>

<p><a data-image-external-href="" data-image-href="/s3/files/inline-images/visch1.jpg?itok=8qe52wva" data-link-option="0" href=""><img data-entity-type="file" data-entity-uuid="3c72b2f3-cc3d-4966-816a-00b60780ee77" data-responsive-image-style="inline_images" height="329" width="500" srcset=" 1x" src="" alt="" typeof="foaf:Image" /></a></p>

<p>During this phase Visch would want to see "less volume...</p>

<p><a data-image-external-href="" data-image-href="/s3/files/inline-images/visch5.jpg?itok=6-pxSC_I" data-link-option="0" href=""><img data-entity-type="file" data-entity-uuid="666f5da5-1de5-4ea4-8fd7-8c29cd92b33b" data-responsive-image-style="inline_images" height="318" width="500" srcset=" 1x" src="" alt="" typeof="foaf:Image" /></a></p>

<p>... less volatility, less bearish sentiment, fewer stocks making 52-week new lows and positive divergences developing on short-term breadth and momentum timing oscillators"...</p>

<p><a data-image-external-href="" data-image-href="/s3/files/inline-images/visch4.jpg?itok=gS_-SthJ" data-link-option="0" href=""><img data-entity-type="file" data-entity-uuid="fad47345-e375-44ae-be5e-5db0dd6aa9fd" data-responsive-image-style="inline_images" height="325" width="500" srcset=" 1x" src="" alt="" typeof="foaf:Image" /></a></p>

<p>As a drop within these parameters would indicate this is merely a re-test, "and not the next leg down in an ongoing bear market."</p>

<p>How to evaluate in real-time if the bearish chartist is correct? Visch says to look at crude oil, which is a key risk indicator, one which took a big hit yesterday as part of this developing "risk off" phase in global markets. The technicians urges clients to recall that <strong>during the last two cyclical bulls in 2011 and 2015 WTI bottomed on the same day the S&P 500 did...</strong></p>

<p><a data-image-external-href="" data-image-href="/s3/files/inline-images/WTI%20continuous.jpg?itok=akElykVy" data-link-option="0" href=""><img data-entity-type="file" data-entity-uuid="0dc1ab29-c0a9-4f41-8f43-0bbf33cfc986" data-responsive-image-style="inline_images" height="324" width="500" srcset=" 1x" src="" alt="" typeof="foaf:Image" /></a></p>

<p><strong>... </strong>and "If history is any guide we should see it come back to test support near $42.25 in the weeks ahead as part of this bottoming process."</p><img src="" height="1" width="1" alt=""/>

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