DanV
Short

SP500 Bearish Outlook - Close to forming Generational Top

SP:SPX   The S&P 500 Index
Like most of the major equities Indices are in very bullish mode since 2009 low and it seems nothing could go wrong. All the "Fundamentals" point to many profitable years ahead.

In fact I have hear a presentation from notable commentator suggesting 2009 will is a generational low ie will not be revisited ever in his life time. I think he is in his fifties.
He has shown many charts in his presentation boasting over 30 years of real life experience in the technical analysis of financial markets. Therefore many stock that are languishing at 50% of the retracement of the 2000 high to 2009 low are heading to retest their all times high.

If he is correct about these retesting their all time high, then I think they are running short of time.

From my chart you can see that we are only couple of months away fro forming truly forming a generational "TOP" that really is unlikely to be retested for more than generation. In fact we might spend another 15 years or so cascading down before forming a lasting low at a level likely below 2009 low.

So the wind will change may be by Early Sept to late October with SP500             hitting 2000 zone and could spike into 2030 area.

Could the end of Tapering and prospect of rising interest rate be the catalyst? I wonder.

Likewise could Gold             bottom by then? Check out my published chart

Well for the trader this could be an opportunity of a life time.

As always, this is my interpretation of the price action. Be sure to do your own analysis before planning a trade.
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UPDATE: Please note that I have published and update this chart
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If the SPX tops, gold bottoms, what do you think of the US dollar? Do you think Gold and the US dollar can rise at the same time as everyone exits out the market and goes to cash, or is it possible for both the dollar to drop in value at the same time as the market. Trying to understand the correlation. Thanks for your insight!
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DanV MOD dmagtrader
Hi thank you for your question.

My analysis for Gold and DXY have been published and I will link the charts for you below.

It is my belief that the major top in Equities in process of being formed. Though since I have publish this chart it has gone on little higher than suggested but not to the extent that it has changed the overall picture.

You are correct that normally money would go into Bonds. But in this case if all or majority of the USD coming out of Equities goes in to US Bonds then from USD point of view it is neutral. Just like when money coming out of Bonds go into US Equities.

However, if some of the money coming out goes into Gold then I am not sure how much this might affect USD, may be not as it is denominated in USD. It might affect it some what, but can't quantify from my limited resources of analytical data and methods. However, unlike 2007/08 when every thing fell against USD, I think Gold is likely to benefit. It might be viewed as safe haven this time during the turmoil in the market (though it must be kept in mind that on larger perspective we are heading in to deflationary environment when it is not supportive of Gold going higher)

I suspect that during the last 2-3 years when both the and USD & US Equities have gone up probably as a result of net inflow of foreign money, some of these would be repatriated or reinvested in other currencies and geographical region.

I can't demonstrate this idea as plausible, but when I look at DXY and several USD currency pairs, they all require at least retracement as minimum then they could all continue to weaken against USD in which case we might have USD gaining for few more year.

OR as I suspect DXY is in major bear market which is about to resume then it might follow that USD sell off in equities would result in net outflow of money away from US soil. So that needs to be proven and how DXY behave over next 6 months or so would give us much better view of longer term price path of all USD denominated assets. It will confirm if the current USD weakness is just temporary or resumption of bearish cycle.

Therefore right now other than Equities forming a major top, I have flexible outlook on USD & DXY which will remain under review for few months before making conclusion. Similarly we could, as has often happened previously when both USD and Gold have go up together.

There are so many major factors at play in global finance that it is not easy to have them all fit in perfectly to conform to a particular model and during turmoil some of the standard behaviour could remain out of sync and confused.

Sorry can't be as clear as you might have expected. But it will give some points to ponder on.
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Another crash can happen, and nobody will see it coming. These days though it seems like everybody sees it coming. I like the comment about 15 years...what if it did something more like 1966-1982. That could serve to relieve the overbought condition, and still not bring about the end of days.
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I am in a process of updating and republish this chart as I think it is so important that we do not lose sight of the bigger picture amidst seemingly never ending sharp drops only to go on to achieve new marginal higher high. This could easily make many think we are in to new paradigm ie its different this time. However, I think we are very close and upside it very limited. it could real wild and post 2200 as an out side chance but not alter the bigger picture. Here is the interim chart
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we may have a short-term hiccup but S&P is going for 3000 and likely higher. Dow will hit 20,000-40,000 level within years as well. DanV, there's absolutely no way we can have a correction of this size. Bond markets are virtually non-existent by now and possibly entering a bubble, commodities are volatile and/or way too small of a market, real estate is a illiquid (relative to other markets)... where is trillions of $ of global investment money to run? The equity markets will blow people's heads off, the harder the bears insist, the higher they'll go.
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DanV MOD Pink Grasshopper
You could be absolutely right. However, if you say Bond is in bubble and if it were to pop, normally it has been observed that the money go into stock. That could happen again. Yet what if there is s different dynamics at play. What if the US market has risen to current level due to money flow from like s of Japan and other major financial centres begin to reverse course from unwinding positions from leveraged funds. What if wealth repatriation finds that Bond sell off do not go back in to US stocks but a large portion leave US soil? I have no way of demonstrating this but should it pan out then I can see this getting real nasty as many accepted relations ships could fail. Therefore, whilst I sincerely hope you are right, I am concerned and would watch the market for the kind of weakness I am suggesting by my chart. Thanks for your comment. I Appreciate it.
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