cbistriceanu

How much room does the tech market have to the upside? SPX

Short
SP:SPX   S&P 500 Index
Is it possible that the tech market is now in a second bubble? Although the valuation of the top 5-6 companies is accurate, what would the rest of the 455 stocks of the SPX are signalling on what is going to happen next?

In my view, I believe that a few signs on the chart of the SPX does seem to indicate that a correction is due. There is a current bearish divergence looking both the the monthly and weekly volumes in relation to the price. The MACD is highly elevated too and it seems we are not seeing a record level that we have not ever seen before. Of course, the correction back in March is a contributing factor on seeing such elevated levels but they cannot simply go on like that for too long now. Despite a vaccine being available and as of tomorrow starting to be used in the UK targeting around 2 million people, the economic prospects and worries seem to be more elevated both in Europe and the US. The US market has been flooded by vast amounts of money printed by the FED which were mostly use to purchase bonds and stocks, increasing it's balance sheet . The argument of a high inflation is real and of course is something to take serious but personally I believe that deflation will be the first real threat. Every major crisis in the past had started with a deflationary period and the pandemic has set the stage perfectly for that.

It is very possible to see some high volatility in the month of December but I believe that end of February mid March would be the the more sensitive times one should watch the market. The levels to watch would be the 21EMA on the Weekly chart as , breaking that level, would be a first sign of a potential reversal.

I will update this idea with more charts as we go along but for now I just wish to publish the current state and see if we will get any signals before the end of 2021.

Trade active: I have opened a short two days ago as time for a correction may be very close. The recent developments in the US on many fronts to not seem to look good for the beginning of the year. The recent Unemployments numbers have shown an increase and the FED policy on injecting massive amounts of money doesn't seem to have much more impact. With an impending new help program from the Biden administration of $1.9 trillion USD we may start seeing the opposite effect expected.

From a technical perfective the long term chart seems to indicate that the SPX does not have much more room to the upside looking at the MACD but also at the Fibo extension which seem to indicate the touch to the upper zone. The next few weeks will be interesting for sure and for the ones shorting the market now, I wish you all good luck.

Trade closed: stop reached: The SPX insanity is going on ;-)....SL was hit so on to the next opportunity.

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