The QE Uptrend is now broken

Think back to late 2011.

So-called “1% days” in the S&P 500 – in both directions – became commonplace. Every headline from Europe had the ability to jack e-mini S&P futures up or down to a major gap opening. Volatility was elevated for a long stretch of time and heightened correlations across stocks and sectors were breaking records.

That’s when the Federal Reserve stepped in with one of the largest stimulus schemes of all-time. An open-ended delivery of $80 billion a month going straight into the bond market and indirectly into the banking system. This QE program did several things very well:

a) drove expanded multiples on stock prices

b) ignited a historic buyback binge

c) moved a ton of investor capital flows into equity / corporate bond mutual funds

d) suppressed volatility

e) changed investor psychology toward a buy-n-hold orientation, puffing up Vanguard’s index fund AUM while giving rise to the robo-advisor industry

f) made sellers of anything look ridiculous

The dips were all automatically buyable and the drawdowns all led to v-shaped recoveries measured in days, rather than weeks toward the end. I called this the Relentless Bid Era and I was sad to see it go right around the time QE was winding down last winter.

With QE concluded at the end of 2014, stocks ended up spending most of 2015 in a sort of listless haze, with the major averages repeatedly failing at new highs. And now, a major trendline dating back to the launch of 2011’s QE announcement has been broken.

Here’s Frank Longman, CMT, of Brean Capital:

For most of us, there are two trends that matter. There’s the uptrend that began at the trough of the last 20% correction in October 2011. That one is broken. The break solidifies the notion that we’re in the midst of a pretty serious correction for the first time since 2011 and it has us believing that the current 9 percent drawdown from the highs is not likely to be the bottom…

If a 9% drawdown isn’t “enough” given the break of that trend, what is? Logic would suggest that a test, but not necessarily a breach of the next larger trend might be enough. The next larger trend would be the uptrend that began at the 2009 low. It passes through the 1700’s in October.

Josh here – In Longman’s chart below, the red line represents that trendline from October 2011, what we’ll call the QE Uptrend, which has now been violated definitively. The black trendline rising below it is the uptrend from the March 2009 ultimate low. There’s a long way to go if that is the new support.

Screen Shot 2015-09-21 at 10.30.13 AM


The Trend From 2011’s Low is No Longer Your Friend; Correction vs. Trend Change
Brean Capital – September 21st, 2015

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. 10 Tuesday AM Reads | The Big Picture commented on Sep 22

    […] QE Uptrend is now broken (Reformed Broker) see also Fed decision to hold steady was a ‘close call’ (WSJ) • China And The Revenge Of […]

  2. Tuesday Morning Links | commented on Sep 22

    […] World stocks drop on Fed uncertainty – AP The QE Uptrend is now broken – Reformed Broker Hedge Fund Exit Requests Rise in September-Data – NY Times Tax-loss […]

  3. Google commented on Aug 08


    The facts talked about within the write-up are several of the most beneficial available.

  4. 토토 commented on Sep 26

    … [Trackback]

    […] Find More Info here to that Topic: […]

  5. bitcoin era review 2020 commented on Sep 28

    … [Trackback]

    […] Read More Information here to that Topic: […]

  6. 메이저놀이터 commented on Oct 06

    … [Trackback]

    […] There you will find 73407 more Info to that Topic: […]

  7. card dumps commented on Dec 23

    … [Trackback]

    […] Find More Information here on that Topic: […]

  8. Skrota uttjänt bil Göteborg commented on Dec 25

    … [Trackback]

    […] Read More to that Topic: […]

  9. LG DVX550 manuals commented on Jan 20

    … [Trackback]

    […] Find More on on that Topic: […]

  10. LG Versa VX9600 manuals commented on Jan 22

    … [Trackback]

    […] Information to that Topic: […]

  11. Regression Testing commented on Feb 07

    … [Trackback]

    […] Information on that Topic: […]