S&P 500: Inverted Yield Curve? Overbought? Divergence? SELL?

2019년 8월 19일

"An object in motion tends to stay in motion in its direction unless compelled to change course by an external force"
- Sir Isaac Newton

Isaac Newton surmised this 100's of years ago but his hypothesis still stands today. It's called the Law of Motion. And this law can also be applied to markets. Trends tend to stay trending until some external event changes its course.

Yeah, I know you are probably saying "but I thought you were a pure TA trader and didn't care about fundamentals?". Yes and no. I certainly rely on TA to guide my trading activity but that does not mean I completely discount all fundamentals. Why? Because markets move because of the collective action of traders. Both technical and fundamental traders. It does not move because of any single event or wave count. It moves because of traders/investor's buying and selling. That's it. Nothing else. And trader's buy and sell because of their perception and anticipation of what the markets will do in response to any event in the case of FA trader's or some chart indicator/price movement in the case of TA traders.

So to completely discount Fundamental Analysis and fundamental trader's would be ignoring a large group of trader's who's trading decisions do have an influence on what prices are doing. Make sense?

But I digress. The reason I do quote Newton here is because of what you see here in the chart I am posting here on the S&P 500. A chart that shows that prices ever since prices have been recorded and tracked have more or less gone straight up with a few dips here and there. In wave analysis terms, this has been one BIG impulse wave with NO significant correction anywhere. Sure, there were some "BIG" dips like the one in 1929-1933 which was the Great Depression but in the bigger picture of things, that is not any SIGNIFICANT corrective wave.

So what we have here is one long impulse wave and for the foreseeable future, there is no end to this impulse wave. And that is my point in posting this chart. This ongoing impulse wave is NOWHERE near ending and I fully expect prices to continue higher for years to come. Who knows? Decades more maybe. Or even more!

And according to my wave count, prices are currently in a long and very strong MAJOR wave (3) (yellow highlighted). And in fact, I have the wave count as being in the wave (3) of that MAJOR wave (3)! Which of course, according to Elliott Wave Theory is the STRONGEST wave! But if you look closer, I also have prices currently in the wave 3 of that larger wave (3).

But what COULD BE happening and soon is that the smaller wave 3 of the (3) could be coming to an end. This is where Newton's Law of Motion may apply. Objects in motion stay in motion in the direction its headed unless affected by some external force. This is where TA fails and where fundamentals do come into play. Some fundamental event must happen to cause prices to change course. What it is is debatable. The sexy word out there now is the "Inverted Yield Curve".

If you want to know more about what I think about the S&P 500 and its future, check out my links below in my signature box....