The S&P 500 Still Resembles 2008, Despite Strength (ES)

CME_MINI:ES1!   S&P 500 E-mini Futures
Hi friends! Welcome to this update analysis on the S&P 500 , via the E-Mini futures contract. Let's get right to it! Looking at the weekly S&P chart, we can see that price has remained above the neckline of the head and shoulders pattern (in red.) Price has been on a multi week uptrend, since it broke down from the head and shoulders , but the buy-side volume has been declining. If you recall from my previous analyses, I have been comparing the similarities of today's equity markets, to the top that was formed in late 2007 to early 2008, leading into the great recession. Today's chart is still similar, but there are a few things that have happened, which did not happen in 2008.

1. We can see that price has rallied above the neckline of the head and shoulders pattern. In 2008, price rallied off of the bottomed of the downtrend channel , after falling from the head and shoulders pattern, but found resistance at the neckline and failed to get above it.

2. We can see that price has also risen above the weekly 50 EMA (in orange.) That did happen in 2008. Back then, we saw a period of four consecutive weeks where price had gotten above the 50 EMA , after it had plummeted from the head and shoulders pattern and to the bottom of the channel. After that happened, there was a week where price closed above the weekly 50 EMA , then a week below, then a week above, then a week below and then a major fall happened. Here, price is poised to close three consecutive weeks above the weekly 50 EMA . So, there is slightly more strength in today's market, than there was at this point in the progression of the top in 2008.

With that said, we may see price fall back below the weekly 50 EMA like it did in 2008, or we may see a rally toward the top of the downtrend channel (in blue.) Looking at the momentum indicators, the MACD is continuing to expand to the upside, while the RSI is also advancing nicely. So, that does suggest that price could continue higher, while the declining volume shows that more traders are side-stepping this area of the market.

I still believe that the top is in for this market, and that we are on the cusp of a very dramatic fall in equity prices. However, until price gets back below the neckline of the head and shoulders pattern, the short term bias remains to the upside.

I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic!  Au  revoir. 

***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.*** 

Comment: Here is the last analysis, for your reference...

Comment: Ps. Sorry for the cellphone charts. I'm traveling in a place with bad internet, and I can't post from my laptop.
@MagicPoopCannon the blue line in your last analysis is slightly lower and already pierced. Is there a reason why you higher the blue line in the newer post ?
+1 Reply
RSI on daily is showing bearish divergence now as well.
+2 Reply
Would 2000 dot-com bubble be a better comparison than the 08 MBS collapse? Currently, the tech stocks are over-valued, a la 2000. The banks aren't overexposed to debt now like they were in 08.
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hungry_hippo spin_cycle
@spin_cycle, I call it the Cloud bubble. The thing is though, 5G will expand the Cloud, so the bubble will get bigger. I think we hit a new high before the bubble collapses.

Greenspan had the balls to pop the bubble by raising interest rates, Powell seems to have lost his and we're only at 2.5% which is still historically low. Powell has too many friends on Wall St. I think we're going to see an epic bubble that will collapse right before the next election (Oct 2020).
spin_cycle hungry_hippo
@hungry_hippo, Cloud, big data, AI, robotics, they are all in a bubble.

Right, the Fed now wants to slow down QT. A 25-basis point increase was "too much for the market to handle". So, they want the stimulus to continue. Reducing balance sheet is no longer a priority of the Fed.
+1 Reply
hungry_hippo spin_cycle
@spin_cycle, yup Powell helping his buddies, so the bubble will grow.

It was the double hike (Sept/Dec) that was the issue. Dec hike was not necessary, he killed inflation with the Sept hike. What causes inflation? OIL! Because you need oil to produce anything. Obvious that it was all speculative money in oil futures, look how quickly it tanked. The reason why we're in an unprecedented era of no inflation is because of fracking.

In any case, don't fight the bubble. It won't pop until there is an impetus for money to flow out of the market. As long as money flows into the market, the bubble will grow. And keep in mind that every Friday/Monday money flows into the market in the form of 401k contributions.

That being said, I expect market weakness next week...
hungry_hippo hungry_hippo
Did you notice the 401k money flowing in this afternoon?
+1 Reply
Where might one find this info?
spin_cycle hungry_hippo
@hungry_hippo, Several good points mate. Hope to have many more macro discussions alongside price TA!
The legend, the king -- he is back :)
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