SPX Down for the Count

2020년 5월 3일

The CURRENCYCOM:US500 looks to have reached a top in what I believe has been a bear market rally.

After its best month in 30 years a natural pullback should be in order, however, given the history of bear markets and bear market bottoms we are more likely to see a retest of the low in the coming months, rather than a simple bull market retracement.

The fundamentals are clear.
> Terrible GDP
> Global Contraction and recession likely
> Highest unemployment since the Great Depression
> An insane amount of liquidity and a decoupling from underlying fundamentals

Why I believe this was a bear market rally...
> It had serious, ripping upward movements, like nearly 14% in a week movements, way too much to be sustainable.
> Almost all bear markets have face ripping relief rallies
> There have been fundamental economic changes because of Covid-19
> It only takes 21 days to form a habit, and people who have survived without the cinema, restaurants and other luxuries may have had an actual psychological spending habit change.
> All it takes is for a small percentage of the population to be changed by this event for the consumer economy to take a really hard knock.
> The bear market rally was unable to breach the 200d MA, a key level, from a trading and psychological standpoint.
> Bear markets bottoms are found on retests of the lows and flows into more risky portions of the market, not just the large caps...Im looking at you AMAZON, TESLA, FB, MSFT etc...

Where to from here?

While I obviously cannot tell the future, I'm pretty good at reading charts, sentiment and understanding economic fundamentals.

> The fundamentals are trash; the US Consumer was keeping this economy going, we've already had a manufacturing recession in the last 12 months and now the consumer is about to join in.
> What else can the Fed actually do? The answer, not much, they don't have more room to cut. They seem to be committed to not buying equity ETFs and they've already declared QE Infinity...you don't get more than infinity.
> The market is about to start pricing in the real economy, and that is a scary prospect for the bulls.
> On several occassions in the last few years, high vol conditions and equity market crashes have positively correlated to bond market sell offs.
NOT A GOOD SIGN
This is a risk parity unwind, waiting in the wings sign.
> Imagine when the majority of the big boys decide, "Hey this whole bonds and equity portfolio thing isn't working out, what do I do now?"

Price Targets
> 2800
> 2750
> 2720

If we break 2720 we have a path to 2600 and to 2400 off the rising wedge price target.

I will be posting Elloitt Wave and Fib analysis in the coming days. Stay Safe and remember that there is a big difference between making money in the markets and being right in the markets.

RushinTrader