It is the last week of the year and I took some time to look at the S&P500 monthly chart.
Three things sounded alarms bells when I saw the chart!
They are:
1. Weekly chart indicators have bearish divergences observed as the S&P500 (see linked idea) as well as divergences in the monthly chart indicators over the last two years;
2. Monthly chart has a candlestick breakout pattern but the momentum is about 20% of previous monthly candle. This candle is also way out of the extended Bollinger Band range (using 2.2 standard deviations instead of 2 SD), as shown by the cyan lines. A very dangerous reversion to mean combi, if you ask me.; and
3. The lowest panel is the Net positions of Non-commercials and if you see clearly, the circled area is where there has been massive offloading into a net short position for the month of December. Combine this with the price action, this really appears to be distribution... at the top, at the all time high, at the over-extension outside a 2.2 Std Deviation level.
Projecting foraward... January 2021 should be heading for a new all time historical high, and then watch for the intraday, intraweek reversal pattern. We do need a trigger event, which at this point, appears to be something of a surprise. Hence, a sharp pullback may be in the order to the region of 3200-3300.
Oh... watch the VIX and the USD for early indications too.
Taken together... it is very ominous.
Caveat Emptor!!!
Three things sounded alarms bells when I saw the chart!
They are:
1. Weekly chart indicators have bearish divergences observed as the S&P500 (see linked idea) as well as divergences in the monthly chart indicators over the last two years;
2. Monthly chart has a candlestick breakout pattern but the momentum is about 20% of previous monthly candle. This candle is also way out of the extended Bollinger Band range (using 2.2 standard deviations instead of 2 SD), as shown by the cyan lines. A very dangerous reversion to mean combi, if you ask me.; and
3. The lowest panel is the Net positions of Non-commercials and if you see clearly, the circled area is where there has been massive offloading into a net short position for the month of December. Combine this with the price action, this really appears to be distribution... at the top, at the all time high, at the over-extension outside a 2.2 Std Deviation level.
Projecting foraward... January 2021 should be heading for a new all time historical high, and then watch for the intraday, intraweek reversal pattern. We do need a trigger event, which at this point, appears to be something of a surprise. Hence, a sharp pullback may be in the order to the region of 3200-3300.
Oh... watch the VIX and the USD for early indications too.
Taken together... it is very ominous.
Caveat Emptor!!!
