Dr_Roboto

S&P 500 - Rising Wedge and Fan Patterns

AMEX:IVV   ISHARES TRUST CORE S&P 500 ETF
Just trying to take a look at the bigger picture today. I see a nice rising wedge pattern off the March 2020 low. I also see a fan pattern that does a great job of defining both the important low and high peaks since 2017.

4h lcose up

motive wave fib levels

Just in case this week is the end of motive wave 3, we could see a max pull back to around 0.382.



Comments

I'm scratching my head that the market still has the power to climb with the geopolitical risk and the rising US treasury yields--threatening the narratives of "low interest rates justify sky high valuations, there is no alternative to stocks because interest rates are so low, and reflation is happening"--the last narrative will, in the short run, increase interest rates and squeeze debt-laden companies. This rise in equities is built on the willingness of lenders to lend money and not get a return. So, if the equity people are right about reflation and a booming economy, what's in it for the lenders? It seems the lenders would be baking in opposite assumptions--that deflation is going to be the result. So, who is going to be correct--the equity investors or the debt investors? And when do we get to find out?
+1 Reply
@unicow, this keeps going up because the market is no longer rational (was it ever) and it is simply about greed and making as most money as possible for now. I think the big investors know there is a limit to this rally, but are more than happy to keep pushing it up until it breaks. Looking back across history this seems to be the general pattern. The major investors (hedge funds, etc.) always push the market as high as possible and right up to the very edge, constantly trying to push the edge a little farther. As long as the general market stays "invested" they will keep pushing the limit until the dam finally breaks. Every time they push to what the edge is, there is a sell off. The depth of the sell off and the strength of the counter rally helps determine how far the can push the edge higher. Clearly, after only about 3 days of drop the other week, the market has rallied really hard for 2 weeks. As you can see today, the was a lot of action Sunday night to pump the market up more, but very little participation from the retail crowd. My guess is we will see a pull back this week to get more buy in for more ATHs in the next week or two.
+2 Reply
unicow Dr_Roboto
@Dr_Roboto, I really hope we see the pullback. I just wonder--what's it going to take--what else has to go wrong in the world--for people not to have enough money to buy the extremely expensive "dips" to 3500, 3200, etc. I was complaining in 2019 that the market was too inflated and was not interesting from a value perspective. Now, look at it!
+1 Reply
@unicow, IMO, bears are people who try to rationalize the market based on fundamentals derived from companies' profits, revenues, future expectation, new products, etc. Bears almost always think the markets are overvalued because the reality is that they are. The reason I got into the markets was to start "investing" into companies that have a future. I can support a company via buying its stock and I get a ROI when they are successful with a higher stock price. What the past few years have taught me is that it is all BS. The stock market is just a big scam run by hedge funds, big banks, and as of the last decade the Fed. The two things that clearly demonstrate this are 1) something like 75% of all market moves happen after hours, and 2) this idea that investors "rotate" into different stocks. The only investors working after hours are hedge funds and foreign interests. They take advantage of the low volume to get 10x movement in the price they want. Rotation of investments is even more telling IMO. The whole concept is to move out of stocks that are already peaked and move your money into the ones that have not. This is not "investing" in a company. It is just making money by pushing up prices and then taking profit when they run out of momentum, and then rinse and repeat for the next batch.

To be honest, I would not really care about all of this so much if my 401k did not depend so much on the stock market. That may be the biggest scam of them all. Think about how many people just blindly pour money into their 401k's, which then (for the most part) just goes right into the stock market. That is what I did for the past 15 years. What is the average middle class and up worker put in their 401k per year? 10k? How many people do that per year? 5-10M? That is something like $5-10B/year without a thought of how well the market is doing! IMO, that is why markets go up so much in the past decade or so. Pensions are out and 401k rules (most companies moved to by the early 2000's), which just pumps up the market more. Add in FOMO and the greater fool theory, and then stonks only go up!
+2 Reply
unicow Dr_Roboto
@Dr_Roboto, I hear you!
Reply
@unicow, here is a chart that you may finding interesting: SPX*(DXY/100). It is the SPX scaled by the US dollar. This is what the true value of the market is. This just goes back to my stock market is BS. The Fed effectively pumped up the stock market by devaluing the dollar. Now they will try to slowly increase the value with the hopes of not causing the market to correct. The general hope I assume is that now the worst has passed the weight of the dollar will be offset by real economic growth.

I feel that if that market rebound more like this then maybe most of us bears would not be so frustrated.

+2 Reply
unicow Dr_Roboto
@Dr_Roboto, this is a very helpful chart! Thanks for putting this together and sharing
+1 Reply