pstowe
Short

SPX: The Biggest Double Top of All-Time?

SP:SPX   S&P 500 Index
As the S&P500 approached its all-time high last week, it was met with massive resistance in the form of more EM problems. I strongly believe you do not need to know current news to analyze price action, because they commonly work together. Price has been attempting to get over this ket resistance zone in the past six months, and has not been able to do it. Whether it be trade fears, EM inflation disasters or US foreign policy changes, the market has not responded in a positive way. This has led to my bold prediction that we have seen the top of the markets for the next few years.

A possible double top has emerged on the S&P500 between the 2870 - 2860 region. This could lead to a significant downtrend in the coming weeks. EM problems seem to be emerging themselves which could rattle markets further. The vast majority of financial analysts and experts have been calling for a major summer rally, which they claim could push major indices another 10-15% higher from January's high. However, I think this move would have already begun if it was ever going go. Whenever the crowd is calling for the same thing, it is important to examine the other side, because most of the time the market behaves opposite of what the crowd thinks.

Technical indicators are not bullish either. RSI is significantly lower than January's high, while price is only slightly lower. This is a sign of weakness in the market known as bearish divergence. MACD looks to be headed for the south side as a bearish cross reently occurred. It will be essential to keep a close eye on the 50 (yellow line) and 200 (blue line) day moving averages. If price falls below the 200 day moving average, it will be safe to say the bull market is over.

Similar signs can be seen my looking at the charts in 2000 and 2007. The technical indicators pointed to the end of a market cycle, while many financial experts called for higher highs. There is a good chance the market rallies to higher highs and this prediction is completely wrong. However, for the time being, I have good reason to think it will be mostly downhill from here.
Comment: When I posted this, I wanted to point out the potential double top in the S&P500. However, I mentioned: "There is a good chance the market rallies to higher highs and this prediction is completely wrong". (see last paragraph)

Today, President Trump agreed to a new trade deal with Mexico that boosted the entire market significantly. The S&P500 broke out with great strength and the double top was averted. This prior analysis is invalidated. The market will most likely rally to higher highs in the coming weeks.
Good call. Went a little over the double top line but headed down like you said. Now the question is. Triple Top?
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just by mentionning that because the analysts and experts said ... then do the opposite, you deserve a gold medal ^^
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pstowe lapin_eliott
@lapin_eliott, I am not saying I recommend doing the opposite of what analysts and experts are saying (shorting the market). Personally, am a day trader, so the bigger picture of the market for my own trades is less significant.

However, I think it is important to consider both senarios in the bigger picture and read the price action with an open mind.
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Well done commentary and post. Thank you.

I agree with your thesis that long-term, S+P 500 could be at a very important DOUBLE TOP RISK.

The 8/10/18 Gap Down from the 2860 price area I believe is much more significant longer term, than the crowd perceives at this point.

a Bearish sentiment is on the rise though as seen in the spike move up in the CBOE Put/ Call Ratio
Thus, the bear trade is becoming crowded, with the financial crisis in Turkey,
and the "contagion" risk of debt risk spreading throughout the financial system.

Much is unknown at this point.

Recent S+P Lows in the 2790 -2800 price area are very important intermediate price support just below.
Much will be revealed, if that test comes to pass in the day's ahead.

See my recent posts for further illumination.

THE_UNWIND
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pstowe The_Unwind
@The_Unwind, agreed!
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