SPY
The S&P 500 is just about fully overextended and we are due for a good size correction. Fundamentally, most markets are just full of froth at this point with the Fed continuing to keep interest rates near the 0% mark. Numerous fortune 500 companies balance sheets are extremely over leveraged and seem to be taking on more and more risk. An example of this would be Tesla purchasing $1.5B worth of Bitcoin with their cash reserves today. If the markets were to plummet tomorrow, and Tesla investing almost 8% of their cash into a highly speculative asset would have catastrophic implications if they both were to fall simultaneously. Rarely has Finance rewarded individuals for long when the average joe is comfortable and confident.
Technically looking at the 1D chart we can see various signs of concern. The RSI is not quite yet oversold but has been flirting with the idea for quite some time. Every time the RSI has gone into "oversold" territory we saw at least a -10% drawdown. You will also notice the MASSIVE bearish divergence between price and RSI (highlighted by the purple lines) that has been building for over a year, which has been the entire time of the "V shaped" recovery. The last technical component that stands out to me, which happens to be my favorite, is that price has been following the red fractal on the chart since late November. This fractal is an analog of price from Mar/Feb 2020 and we all know what happened there...
I see price topping out between $400-405 and having a -30% drawdown to $280 before any sort of basing bottom is attempted. After that, price has the upside potential of $500+
Be safe out there and take what the market gives you.
- PennyBags