So, i was studying the daily/weekly chart of the $SPX and thought to myself: this chart pattern looks familiar to me. I feel like I have seen this before in the not-to-distant past.
The pattern:
1. cruising along at market highs
2. bears take over and we see a ~10% correction
3. bulls resume control and take prices back towards prior highs
4. we fail to break those previous highs, and bears resume control, sending us lower than the previous swing low (from #2)
5. daily/weekly charts turn ugly as we now are looking at a lower low
6. touch and test 200 week EMA, turn back upwards, eventually going back to prior highs
late 2015-early 2016
that look cannot be a very reassuring look for bulls at this point. But of course, as we know, this bull market continued marching on:
********************
If we look a little closer at the daily chart from 2016, we can see that after completing the 2nd 'green cycle' in early July, we rallied and made new highs. We only rallied about 3% before the momentum stalled out and more or less drifted sideways for several months. The shaded part of the chart shows that the next little 'cycle' lasted roughly 120 days, further broken into 2 roughly equal 60 day halves. Each highlighted by several smaller little ranges and cycles within that.
The first 60 days we traded in several tight ranges nearer the highs before bears gained a little momentum and sent prices below its 50-day moving averages.
I see the second 60 days as the markets displaying a little more uncertainty in future prices as highlighted by the several sets of small near-symmetrical wedges. Each one began as establishing a high and low price, followed by 1-2 weeks of tightening price action with lower highs and higher lows, before breaking the wedge, and starting the next one. Bears picked up some momentum towards the end of the 120 days and pushed prices down to test the 200 day moving average which also happened to be slightly below the prior resistance before bulls resumed control and we really began rallying
A rally that lasted for about 14 months and almost 40% before we topped out in Jan 2018. At which point, begins the repeating cycle at the center of this post.
A pattern which may have just completed after 15-16 months, as we made a new ATH this prior week.
A lot of the action over the last half a year have been led, in my opinion, largely by China trade talks. Which, AS I am sitting here writing this up (sunday afternoon), i see headlines crossing that a new wrinkle may have just presented itself in the form of Trump wanting to impose new tariffs on ALL Chinese imports, in an effort to hasten a deal. Any major change in how the markets perceive these trade talks to be progressing will almost assuredly be a market moving event. I personally feel that the announcement of completion of deal will be a sell-the-news event in the short term. However, any breakdown in those talks will also lead to selling. It will be interesting to see how futures react tonight when the indices resume trading.
The markets have shown great resiliency these last 6 months, and in the bigger picture, may end up being a very healthy pause within the larger bull market. I am certainly no perma-bull (if anything, closer to the opposite, as i tend to be more alert for bearish scenario's; with that old saying 'stocks take the stairs up and the elevator down'), and i am very well aware that this bull market cycle has lasted for over 10 years now. But i am also not really seeing a lot of big flashing warnings signs for the economy's health. GDP, unemployment, personal income/spending, and those sorts of gauges remain strong, and so far in this earnings season, corporate earnings have not shown to be slowing down quite as much as previously expected.
This is already one of the longest bull runs in history, and its all cyclical...just the nature of life; but man...hard to look at these charts and be overly bearish....
As always, just my personal opinion.....
any comments and thoughts are always welcomed :)
The pattern:
1. cruising along at market highs
2. bears take over and we see a ~10% correction
3. bulls resume control and take prices back towards prior highs
4. we fail to break those previous highs, and bears resume control, sending us lower than the previous swing low (from #2)
5. daily/weekly charts turn ugly as we now are looking at a lower low
6. touch and test 200 week EMA, turn back upwards, eventually going back to prior highs
late 2015-early 2016
that look cannot be a very reassuring look for bulls at this point. But of course, as we know, this bull market continued marching on:
********************
If we look a little closer at the daily chart from 2016, we can see that after completing the 2nd 'green cycle' in early July, we rallied and made new highs. We only rallied about 3% before the momentum stalled out and more or less drifted sideways for several months. The shaded part of the chart shows that the next little 'cycle' lasted roughly 120 days, further broken into 2 roughly equal 60 day halves. Each highlighted by several smaller little ranges and cycles within that.
The first 60 days we traded in several tight ranges nearer the highs before bears gained a little momentum and sent prices below its 50-day moving averages.
I see the second 60 days as the markets displaying a little more uncertainty in future prices as highlighted by the several sets of small near-symmetrical wedges. Each one began as establishing a high and low price, followed by 1-2 weeks of tightening price action with lower highs and higher lows, before breaking the wedge, and starting the next one. Bears picked up some momentum towards the end of the 120 days and pushed prices down to test the 200 day moving average which also happened to be slightly below the prior resistance before bulls resumed control and we really began rallying
A rally that lasted for about 14 months and almost 40% before we topped out in Jan 2018. At which point, begins the repeating cycle at the center of this post.
A pattern which may have just completed after 15-16 months, as we made a new ATH this prior week.
A lot of the action over the last half a year have been led, in my opinion, largely by China trade talks. Which, AS I am sitting here writing this up (sunday afternoon), i see headlines crossing that a new wrinkle may have just presented itself in the form of Trump wanting to impose new tariffs on ALL Chinese imports, in an effort to hasten a deal. Any major change in how the markets perceive these trade talks to be progressing will almost assuredly be a market moving event. I personally feel that the announcement of completion of deal will be a sell-the-news event in the short term. However, any breakdown in those talks will also lead to selling. It will be interesting to see how futures react tonight when the indices resume trading.
The markets have shown great resiliency these last 6 months, and in the bigger picture, may end up being a very healthy pause within the larger bull market. I am certainly no perma-bull (if anything, closer to the opposite, as i tend to be more alert for bearish scenario's; with that old saying 'stocks take the stairs up and the elevator down'), and i am very well aware that this bull market cycle has lasted for over 10 years now. But i am also not really seeing a lot of big flashing warnings signs for the economy's health. GDP, unemployment, personal income/spending, and those sorts of gauges remain strong, and so far in this earnings season, corporate earnings have not shown to be slowing down quite as much as previously expected.
This is already one of the longest bull runs in history, and its all cyclical...just the nature of life; but man...hard to look at these charts and be overly bearish....
As always, just my personal opinion.....
any comments and thoughts are always welcomed :)