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The 2020 OUTLOOK: Broad Market Analysis and Guidance (Part 4/4)

TVC:SPX   S&P 500 Index
The 2020 Outlook: Series on Equities, part (4/4); Dec 28th, 2019

Very simple and straight forward chart. Obviously, very unlikely that it'll completely follow the drawn structure, but here are the few things that I am expecting in 2020.

1. It will be a slow year. Mostly because of all of the election noise, smart money will be waiting on the outcome of the elections. The importance of the elections, is that it's one of the most polarized election in recent history. It will basically be a coin-toss whether, we will have a sell-off post elections or not. Either-way, speculators will kick in 2020, and volatility should rise. Momentum is still bullish .

2. Global macro trends have bounced and are somewhat recovery. I am waiting to see whether the recovery will continue in Q1 and Q2 before I completely dismiss any bearish ideas. Corporate profits have recovered(https://fred.stlouisfed.org/series/QFR32...), but they still do not support the current valuation(P/E well above historical average).

3. As of now, "Not QE" balance sheet expansion program by the FED, is planned to be cancelled in January, but options are open for further action. Post QT, liquidity is still low, and the yield curve is flat. Expecting further accomadative monetary policy , perhaps even an actual QE-4 announcement by May.
4. The trade/cold war is HERE TO STAY. It's not going away! It will be prolonged, until most US companies move their supply chains out of China. This will dramatically decrease global growth in the short run. In fact, I think upon announcement of Phase I, it'll be a good sell news.

This is it for 2019, happy New year! It's been a year full of events, developments and progress. Hoping for an even better 2020. Wishing everyone better health, better relationships and of course, larger trading P/L's!

This is it on my series on the 2020 Outlook. Make sure to check the previous parts, charts and discussions are welcome! Thank you for the continuous support and feedback!
Investing Strategies: Momentum vs Value Investing
Liquidity Significance:
For those of you interested in investing in GOLD:
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Comment: Apologies for all the typos, it was a long day! They're besides the point of the chart.
Comment: Tiny correction. There'll be no May FOMC this year, perhaps expectations of QE-4 will become more widespread. But the FOMC meeting will be in June.

-Step_ahead_ofthemarket-
Comment: Having a closer look at the current pattern. We might be in a head and shoulders situation. The neck line should be somewhere around 3200!

-Expect a potential sell-off if it closes below 3200 on the weekly!

_Step_ahead_ofthemarket_
Comment: Just to clarify. For a better understanding and simply the proper way to look at this chart, you have to switch it to log. The trend lines are based on log returns. If there's any questions on the chart setup just send me a private message. I'll answer as soon as I can,

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Comment: Chart working out beautifully so far!

3300-3350 target range for the deal announcement. It can potentially break out of that range if we get a surprise in terms of the deal quality.

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Comment: Latest update-commentary: Market expectations

I think that the current equation, is based on the factors, that the economy is neither too hot (for these levels of unemployment), neither too cold. This is the slightly bullish scenario, preferable scenario. One thing tipping the scale in bearish favor are bad earnings or trade deal disappointments. And there's the FED and liquidity, the most important factor. Let's see how the deal turns out tomorrow.

_step_ahead_ofthemarket
Comment:
Deal seems to have added even more fuel to the market. Let's see if it translates into next week.
The optimal profit taking range for 2020, would be in the range of 3300-3450.

_Step_ahead_ofthemarket_
Comment:
Busy week ahead. Futures are reacting cautiously. Vix futures are up, expecting excess volatility.

_step_ahead_ofthemarket_
Comment: NFLX Sub growth has slowed YoY. 8.84 vs 8.75. Some interesting numbers:
$NFLX ER is out. Overall growth in most key segments.
$ spent on marketing per customer acquired Q4 100$(2019), Q4- 81$ (2018).

What's driving the EPS is their increase in YoY GP(8.4%vs 5.2%) and NP margins(10.7% vs 3.2%).

They're of course maturing but, Free Cash flow still very negative, simply bleeding cash(also rate of bleeding somewhat slowed down from previous years).
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Comment: Chart going extremely well so far. Key resistance at 3250. Let's see how earnings and FOMC go this week.
Comment:
IF the uptrend breaks, the next range for the spx would be 2660-2720(close to -20%).
Tough day as the sell-off waterfall goes on.

Comments

Where are we now? headed for -20%??
+1 Reply
@lu1977hk, Depends on the virus news. We will see the real impact on earnings come earnings season (mid-April).

It will give us the market direction for the rest of the year. -20% or even further down, it's not really an exaggeration.
Reply
if we correct as in your graph. I call you boss
+1 Reply
@isatikx241, Haha thanks! So far this chart is predicting returns 2 weeks in a row. The downsides are much harder to call then the upsides. There's a possibility that we might breakout to 3450 first, the FED is not giving up on repo "Not QE" operations.

Let's see how next week turns out.

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Reply
3300 on weekly RSI, no way!
+1 Reply
step_ahead_ofthemarket UnknownUnicorn2019403
@UnknownUnicorn2019403, You are right, I know, it's overvalued as it currently is. I think there will be a small drop to 3200, then 3300 in anticipation of the deal sometime in mid-January. And after that a sell-off.
Reply
step_ahead_ofthemarket UnknownUnicorn2019403
@UnknownUnicorn2019403, Either-way, the point isn't whether it'll go up another 1.5-2% or not, the point being, is that the top is near. 3250 or 3300, doesn't matter to most swing traders/investors. But on your point about the RSI, I couldn't agree more.
Reply
Just to clarify. For a better understanding and simply the proper way to look at this chart, you have to switch it to log in case you have your settings on default/regular(right click on the scale, press logarithmic. The trend lines are based on log returns. If there's any questions on the chart setup just send me a private message. I'll answer as soon as I can,

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Reply
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