There are a lot of weird things afoot in the SPX. First, we have a big bearish divergence with the RSI making lower lows as the SPX has been making advances towards all time highs. Second, we have a very interesting volume indication here where down-day volume is substantially higher than up day volume. Third, we have been rejected in the 4700-4740 zone many, many times. Fourth, we have hit the 50 day moving average something like 10+ times on this advance over the past year. Fifth, we have a schiller-pe ratio near dot-com bubble highs (44.19 @ dec 1999; we are at 39.30 right now. historical average is about 17.)
The bull case here would be something like "we are going to form an inverse head and shoulders" (blue squiggly line). There's also a good case for seasonality here - santa rallies and all that. We also have the notion that higher inflation is being tolerated by consumers so far and businesses are not seeing resistance increasing their prices. We also have a tremendous amount of cash - both on sidelines and waiting to find that next investment - which could continue to push multiples higher, especially for names which are large index components and not really outrageously valued by PE, PEG, or PS - notably AAPL.
My overall sense is that we have seen the highs for some years to come (~~4740). I am not calling for a major crash but I think we could continue to move sideways to slightly down for the coming years in a range of 3500-4750.
Overall it feels to me that we are just waiting for a "bad thing or two" to kick this one over. Could it be russia/ukraine, china/taiwan, supply chains, covid/omicron, terrorists from the southern border -- idk, but there seem to be a lot more potential downside catalysts than upside ones.
The bull case here would be something like "we are going to form an inverse head and shoulders" (blue squiggly line). There's also a good case for seasonality here - santa rallies and all that. We also have the notion that higher inflation is being tolerated by consumers so far and businesses are not seeing resistance increasing their prices. We also have a tremendous amount of cash - both on sidelines and waiting to find that next investment - which could continue to push multiples higher, especially for names which are large index components and not really outrageously valued by PE, PEG, or PS - notably AAPL.
My overall sense is that we have seen the highs for some years to come (~~4740). I am not calling for a major crash but I think we could continue to move sideways to slightly down for the coming years in a range of 3500-4750.
Overall it feels to me that we are just waiting for a "bad thing or two" to kick this one over. Could it be russia/ukraine, china/taiwan, supply chains, covid/omicron, terrorists from the southern border -- idk, but there seem to be a lot more potential downside catalysts than upside ones.
Comment:
simply noting that another possible bullish development here is possibly an ascending triangle formation. this could also form over the next month or so. obviously a break would lead to all time highs. typically there is declining volume indication during this pattern which I dont see here, but to me, price always trumps volume. here is what that might look like if it were to form -- with a break in mid to late january.
Comment:
interesting. this is the same chart as above. lets see if we are able to clear 4740ish.
Comment:
after the move today and in conjunction with the bearish divergence forming on weekly charts -- RSI making lows highs while the market made higher highs - I think we are done for. Game over type of thing. 4550 short term target. No ascending triangle here.