As the S&P500 approached its all-time high last week, it was met with massive resistance in the form of more EM problems. I strongly believe you do not need to know current news to analyze price action, because they commonly work together. Price has been attempting to get over this ket resistance zone in the past six months, and has not been able to do it. Whether it be trade fears, EM inflation disasters or US foreign policy changes, the market has not responded in a positive way. This has led to my bold prediction that we have seen the top of the markets for the next few years.
A possible double top has emerged on the S&P500 between the 2870 - 2860 region. This could lead to a significant downtrend in the coming weeks. EM problems seem to be emerging themselves which could rattle markets further. The vast majority of financial analysts and experts have been calling for a major summer rally, which they claim could push major indices another 10-15% higher from January's high. However, I think this move would have already begun if it was ever going go. Whenever the crowd is calling for the same thing, it is important to examine the other side, because most of the time the market behaves opposite of what the crowd thinks.
Technical indicators are not bullish either. RSI is significantly lower than January's high, while price is only slightly lower. This is a sign of weakness in the market known as bearish divergence. MACD looks to be headed for the south side as a bearish cross reently occurred. It will be essential to keep a close eye on the 50 (yellow line) and 200 (blue line) day moving averages. If price falls below the 200 day moving average, it will be safe to say the bull market is over.
Similar signs can be seen my looking at the charts in 2000 and 2007. The technical indicators pointed to the end of a market cycle, while many financial experts called for higher highs. There is a good chance the market rallies to higher highs and this prediction is completely wrong. However, for the time being, I have good reason to think it will be mostly downhill from here.
A possible double top has emerged on the S&P500 between the 2870 - 2860 region. This could lead to a significant downtrend in the coming weeks. EM problems seem to be emerging themselves which could rattle markets further. The vast majority of financial analysts and experts have been calling for a major summer rally, which they claim could push major indices another 10-15% higher from January's high. However, I think this move would have already begun if it was ever going go. Whenever the crowd is calling for the same thing, it is important to examine the other side, because most of the time the market behaves opposite of what the crowd thinks.
Technical indicators are not bullish either. RSI is significantly lower than January's high, while price is only slightly lower. This is a sign of weakness in the market known as bearish divergence. MACD looks to be headed for the south side as a bearish cross reently occurred. It will be essential to keep a close eye on the 50 (yellow line) and 200 (blue line) day moving averages. If price falls below the 200 day moving average, it will be safe to say the bull market is over.
Similar signs can be seen my looking at the charts in 2000 and 2007. The technical indicators pointed to the end of a market cycle, while many financial experts called for higher highs. There is a good chance the market rallies to higher highs and this prediction is completely wrong. However, for the time being, I have good reason to think it will be mostly downhill from here.
Today, President Trump agreed to a new trade deal with Mexico that boosted the entire market significantly. The S&P500 broke out with great strength and the double top was averted. This prior analysis is invalidated. The market will most likely rally to higher highs in the coming weeks.