January Bull vs Bear

2022년 1월 2일

This chart is a general overview of the SPX for the past year, broken into quarters with a few croissant crumbs in it.

Either bull or bear should respect the 20d MA and 2 standard deviation channel above and below.

It is to help me measure risk and how well my trades will perform. If I’m buying short-term calls outside the blue line after DEC 28th, it's probably not going to pay well because the indexes were already at the top of the 2stdev over the 20d.

There are cases in the past that the index does break above this trend and stayed near the top/bottom of this resistance level, but not for very long. This means bears will be looking to push lower on the indexes the first half of this month.

Bulls however have proved formidable through the most recent bearish news and hawkish outlook from the Fed. With new flows coming in for the new year and institutions having a war chest available there is still a strong Bull case and we could see more short squeezing into all-time highs (ATH) for the first half of the month.

The feds policy plans for 2022 should serve as a warning that the bull run may be over. Elon was mocked for predicting a recession in late 2022/2023. He is in good company though because most of fintwit is predicting steep declines for the year ahead.

However, never try to tell a BULL that. When you know it can only down is the most likely time it will continue to grind up on the blood of BEARs.

BULL CASE
Santa rally traditionally continues into the first 2 days of the new year. New inflows of money and short squeezes may continue to grind the S&P higher along the top of the 2stdev of the 20d followed by some sharp selling off on or just before JAN 19th VIX OPEX.

JAN ATH ~4907
END JAN ~4763

BEAR CASE
What could be lining up as the year of the Bear I would expect to see more sideways trading and periods of large corrective moves downward. These moves would likely start arriving around windows of weakness in the options market like we saw in the 2020 feb/mar correction. Some speculate this would be a much harder of a drop because the fed can not lower the interest rates any longer. I do however anticipate the pow may already have a plan to facilitate a more transitory approach to tapering.

As for my Bear Case, I see an early decline into the 20d followed by lower lows and capitulation ~2std below 20d before a health correction territory in Feb/Mar

END JAN ~4534