The Market Does Its Slinky Impression – Desperation Time

Do kids these days know what a Slinky is?  Do they have those on Facebook? Is there an Iphone app for that? (business idea!)

I’m guessing that everyone in my generation (30-somethings) is familiar with the concept of a Slinky traversing a set of stairs.

 

That’s what the market is doing these days. Here’s a one month chart of the $SPX ($SPY):

Like a Slinky Going Down the Stairs

The irony, of course, is that there’s an old saying: stocks take the stairs up, and the elevator down.  Well, this market is taking the elevator down -but it’s stopping every 5 floors to give people the opportunity to get on or off.

Last week, I wrote a post asking “where do we go from here?” where I noted that when trying to predict where the market is going, we need to approach it from different time horizons.   On the short term, it looked like the market had a disastrous, merciless, rapid decline from the 1350 level.  Over a slightly longer period, however, we saw that the market had come from the 1050 level with equal ferocity  – spread over a longer time period, of course.  When I wrote that post, the $SPY was at $120, and I pointed out the technical significance of the $117.50 – $118 level, which held temporarily as the intraday low for exactly ONE day (August 5th).

Now, the current $SPX close of 1120 is our key support level, as the chart above indicates pretty clearly.  Once we break this level, SPX 1050 seems impossible to avoid.   I can’t decide which one of these two pictures is a better depiction of the market’s desperate attempt to hollllllllllllllld 1120. Is it the helpless kitten who is guaranteed to fall – it’s just a matter of when?

SPX 1050 - Is That You Down There?

Or is it the rock climber who will pull off a miraculous escape and lift himself up, ascending further?

Don't Worry - I Have This Under Control

To me, it positively feels like the kitten.

I hope I’m wrong.

-KD

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