Greatest Divergence of All Time

2020년 6월 3일

S&P 500 broke 3,000 and 200 day moving average. All things aside, without any secondary technical indicators and bad news, it does look like a bull case. However, with Coronavirus around, historical high jobless rate, bad economy, protest turned riot, MACD divergence, trade war tension, one has to wonder how far this rebound can go on. Fed has created a stock market bubble and the greatest income inequality of all time through its near 0 interest rate and QE Program. Not to mention ECB and BOJ. When that many people are out of jobs, they have less to lose and the riot situation may turn for the worse, making re-opening of the economy difficult and higher chances of a Wave 2 Infection. Probably one should pull out the financial reports of market leaders and also see their sky high valuation. The market is predicting a V-shaped recovery but in reality, it is just out of sync with the entire situation and has created the greatest divergence of all time. If history is of any guide, when the market turn lower, it could potentially penetrate the March 2020 low as many who do not have to conviction to buy the current bear market rally will be simultaneously hitting the sell button.

While I do not advise heavy shorting against an uptrend, shorting based on short term weakness (for instance below 20 day moving average) or close the the all time high may be a better bet.

2020년 6월 3일

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