The drop in the last few days was not entirely unexpected (recall I had bought TZA but then got stopped out on a bounce–oooh, I’m still pissed about that…) but the extent of it is rather surprising. I have, however, been of the opinion that the market was substantially overvalued and that the rally of recent years was a fake rally artificially induced by the Fed. Lesson for the Fed? Don’t touch the market, let, the natural forces work. I was saying this several years ago. Indeed when the first interventions from the Fed started to happen I was ranting and raving on my blog (http://www.teggatz.com/blog —I later moved all financial commentary here). So I’d say here we see natural forces reasserting themselves…?

First, don’t even try to pick a bottom here. Wait.

The drop has gone outside our trading system, leaving us no reference to work with:

With the ichimoku daily, same:

Note it has pierced through the kumo very quickly and easily. Bad sign. Expected a bounce at the chikou, didn’t get it. Bad sign. Turning to the weekly you’ll notice the RUT is just starting to pierce the kumo, which may provide support, need to wait and see:

Looking at support and resistance levels, 730 has been the major flash point of recent times and the RUT has just pierced it. We may see a bit of a bounce here:

However I certainly would not put any money on a bounce. I said before and I’ll say again, the market is likely to be very volatile through the 9th (Fed meeting). This volatility is evidently downward and we should presume it will continue downward until proven otherwise. Trying to pick support for a long at this point is just gambling.

As I predicted, the Swiss treasury intervened, but unfortunately this was to little effect because the market crashed at the same time:

I suppose the key observation here is that SNB intervention prevented the franc from rocketing higher.

I am holding Sept puts and have time to wait. I am confident in this short, and the SNB has said it will continue to intervene. It will bankrupt itself but that’s not my problem. However market forces will push the franc down once this storm has passed.

Silver. The collapse I’ve been waiting for? Perhaps but perhaps not. It may be because the dollar has shot up, and on very high volume too:

Note the dollar has pierced the 50EMA, now we need follow-through. The dollar has pierced the kumo and generally we would expect some difficulty here:

but if the market continues to crash we may see it slice quickly through the kumo. Also note the CCI zero-line cross, though we need follow-through.

The dollar rise was partly because of yen and franc intervention, N.B.

The question with the dollar is, “Is it getting stronger?” Not on the charts, but in a fundamental sense. Something to ponder.

One the weekly chart, the dollar is still in the chop and has the 22 flash point to deal with before we can state in a technical sense that it’s in an uptrend. Also note the dollar is bumping its head right on the downward trendline, so we need follow-through above it before we can start talking bullish:

So back to silver.

The RUT and silver have an 89% correlation and so if the RUT continues to tumble, so should silver:

Note the failed kumo breakout:

On the weekly chart, silver has the key 32 support below it:

On the weekly ichimoku it is quite evident that silver has a long way to fall before it hits the kumo:

A fall to the kumo would be absolutely delightful for me. I’m short Aug silver. However with silver, like with the dollar, we need follow-through before we can be confident in our short position actually paying (op-ex in 14 days). The good thing here is that when silver falls it tends to fall good and hard. And look at PL and PA:

Same with copper. Metals, except for gold, are crashing. Silver being a poor-man’s gold will probably follow the other metals, though with less exuberance (silver is most closely correlated with gold). So anyway hopefully this is the silver crash I’ve been waiting for. However I’m not getting excited until I see real follow-through.