And if the music goes on, just keep on dancing around the musical chairs. Reaching the all time highs let's see how what the technicals say about it.
SPX has reached the 100% Fib level, which is an important support/resistance level, and in my opinion, it's more a resistance rather than a future support. This bull has already run longer than the previous bulls with the feds putting the gas of the economy at its maximum. The index reached this level with decaying stochastics, oversold relative strength index and crossing MACD at the top of it. If we compare this levels with the previous two peaks before the housing bubble and the .net bubble, the comparison is frightening, same technical patterns appeared just before the previous bubbles. This time is the free money bubble.
Can we expect this to raise unboundedly? No. We have a super Dollar, very low commodity prices and Oil has bottomed. The prices ranges have started to become narrower and we have seen a strange consolidation since january. There is no commitment in the market right now, and it started to go to sleep, as if this was the calm before the storm.
What's the worst case scenario? A retracement back to the 1720 level or the 1475 levels is possible. The cyan bold line in the chart shows the main support line of the channel that started before the .com bubble and which was confirmed during the housing bubble. This is the line of true value, and all the lines above it, specially the last one is what I call the line of greed. Market will drive prices as high as possible regardless of the real company valuation. Janet Yellen said it right, and mark her words, Yellen said that equity-market valuations "generally quite high" and that "there are potential dangers there.".
Even if this goes higher, and keeps on doing HH's, I see it leaving the 'greed line' through a consolidating wedge pattern. If the market reacts softly by 2017 we'll be back retesting 1720, if not then we can expect this to happen during October this year, but an overreaction can take the index back to the 61% retracement at 1475. Be cautious, keep your stops tight, and plan ahead for a possible aggressive reversal.
SPX has reached the 100% Fib level, which is an important support/resistance level, and in my opinion, it's more a resistance rather than a future support. This bull has already run longer than the previous bulls with the feds putting the gas of the economy at its maximum. The index reached this level with decaying stochastics, oversold relative strength index and crossing MACD at the top of it. If we compare this levels with the previous two peaks before the housing bubble and the .net bubble, the comparison is frightening, same technical patterns appeared just before the previous bubbles. This time is the free money bubble.
Can we expect this to raise unboundedly? No. We have a super Dollar, very low commodity prices and Oil has bottomed. The prices ranges have started to become narrower and we have seen a strange consolidation since january. There is no commitment in the market right now, and it started to go to sleep, as if this was the calm before the storm.
What's the worst case scenario? A retracement back to the 1720 level or the 1475 levels is possible. The cyan bold line in the chart shows the main support line of the channel that started before the .com bubble and which was confirmed during the housing bubble. This is the line of true value, and all the lines above it, specially the last one is what I call the line of greed. Market will drive prices as high as possible regardless of the real company valuation. Janet Yellen said it right, and mark her words, Yellen said that equity-market valuations "generally quite high" and that "there are potential dangers there.".
Even if this goes higher, and keeps on doing HH's, I see it leaving the 'greed line' through a consolidating wedge pattern. If the market reacts softly by 2017 we'll be back retesting 1720, if not then we can expect this to happen during October this year, but an overreaction can take the index back to the 61% retracement at 1475. Be cautious, keep your stops tight, and plan ahead for a possible aggressive reversal.