Technician

SP500: Approaching Bubble Territory?? Part 2

INDEX:SPX   S&P 500 Index
1501 21 13
In my previous post (https://www.tradingview.com/v/bplrXyXD/), I emphasized on how FED's easy policy has created no other place for money to go but equities , as this pump of liquidity triggered a speculative bubble in asset prices, in this case bonds and stocks , as big institutions used this money to capitalize on an easy FED.

I also mentioned that this easy money will probably continue for the short term(months), as economic conditions have weakened recently, while the FED is in a transitional phase. And that would support markets for the short coming period. However, the FED will eventually start to withdraw, for one of two reasons, either economic conditions stabilize, or forced by financial instability concerns(expanding the bubble in bonds further). In both cases, yields will spike, and this speculative cycle will reverse.

Some would argue that historically, markets aren't over-valued, prices are at normal levels. According to goldman sachs research, four valuation methods suggest the S&P500             is overvalued at current levels.

Technically speaking, I plotted a 36-month long term simple moving average envelopes , a simple moving average with two averages above or below by 25 percent.The average tended to confine price most of the time, while in some cases, extreme swings towards the upper and lower bands occurs, which indicates excessive bullishness or bearishness, resulting from unusual market conditions driven by bubbles in certain areas in the economy,

I am not saying that we shouldn't participate and gain from these bullish trends, but common sense suggests that there is no real rational reason behind this rally but the excess of liquidity, so watch out and Keep Safe :).

https://twitter.com/thefxchannel
thefxchannel.com
My live trades here https://telegram.me/joinchat/DgsnQ0FzifLqyI2YAoMqqQ
fxtrader66
3 years ago
The last two bubbles were identified when they entered the gann sq, will be interesting to see if this is the case for the current bull market.
snapshot
Reply
Technician TOP fxtrader66
3 years ago
Yeah, there are plenty of technical tools to estimate how far the trend has gone, however that doesn't guarantee a reversal, it only tells "markets are extremely strong, is there a fundamental reason ?".
Reply
fxtrader66 Technician
3 years ago
No fundamental reasons, just an observation how the past has reacted when entering the gann sq. But am not going to try to top call, this market can head higher as long as liquidity is being pumped into the market.
Reply
Technician TOP fxtrader66
3 years ago
Agree
Reply
BEI
3 years ago
I do not agree, technically, this still looks bullish, 2400 first target and after 5000.
snapshot
Reply
BEI BEI
3 years ago
More seriously, My point is patterns will always favour both sides, so important thing is to look for confirmations, and i still don't have any on short side even if i think a correction or at least a pullback is imminent, longer it takes, harder it will fall.
Reply
Technician TOP BEI
3 years ago
I totally agree with the confirmation part, and I would be crazy to short this strong bull market, I emphasized on that in my post. However, to be honest your targets are way unrealistic under the current fundamental stance of the economy, companies and valuations.Unless your talking from a longer term perspective, i mean more than 5 years.
Reply
BEI Technician
3 years ago
it was a way to make a point, i see a lot of exuberant bull calls lately, i totally agree with you.
Reply
Technician TOP BEI
3 years ago
Cheers. By the way, what would make start shorting this market?
Reply
BEI Technician
3 years ago
I have already opened a short position on the first red arrow, waiting and scalping until FOMC now. But a conservative way to short the market would be a break below 175.50-175 (below green line on chart). I believe November can't close above / at 1800. this is my opinion only and i do no recommend this unless you can adjust your risk day trading the markets, because if prices break above the trending channel it will not feel good.
My targets will depend on where the top should be but i can easily see 165 and after 160, although we might get some bounce before the second target. I think one of the best signs out there is to watch 1-yields and 2-gold prices during this FOMC week, and on daily basis watch the 3-VIX, above 14 it's a sell and above 14.71 strong sell. this will certainly give you an idea on how the daily / week / month should close.
I have chosen to open a short position because of other reasons than just what we can see on daily chart.
Good luck and happy trading.
snapshot
Reply
Technician TOP BEI
3 years ago
Good Luck Mate
Reply
OldGoat
3 years ago
Thanks all for the discussion. I've reached similar conclusions and lean toward the short side as well. I don't see any Armageddon, but do see a significant pullback coming.
Reply
Lautraman
3 years ago
Thanks for your presentatio, but I am not sure that the FED is the autor of equities growth. It is real that USA do not stop of print money and the only refuge that someone has at hands are the equities. Are you in line with this?
Reply
Technician TOP Lautraman
3 years ago
If understood you correctly.Yeah, that's exactly what I wanted to say :).
Reply
josephmeth
3 years ago
Note that the Tech Bubble continued for 3 years at the upper 25% boundary before crashing. There probably will be a correction back to 1500-1600 range but I agree with BEI that we've just exited the Secular Bear Market and there's a lot of upside still left in this bull market.
Reply
Technician TOP josephmeth
3 years ago
First thing, You've just said its was a bubble. Second, a correction from 1800 to 1600 would be 11%( big correction), am looking for more than that thought. Third, secular bull markets could have reactions of major magnitude, 2008 crash corrected more than 50 percent of 1980-2008 secular bull market.
One more thing, the boundaries argument is a part of the overall proposed idea, it would be meaningless if separated from that context.
Reply
Mikke2130.
2 years ago
i HERE A LOT OF INVESTOR AND TRADERS SAY THIS IS A MINOR SELL-OFF AND I WANT TO TELL ALL OF YOU THERE WRONG. THE MAJOR SELL OFF HAS ALREADY BEGUN. THE S&P 500 HAS ALREADY FORMED A PERFECT MONTHLY WOLFE WAVE PATTERN WHICH IS IN STAGE 5 EXTREME, WHILE MOMENTUM HAS ALREADY TURN DOWNWARD. THE MARKET WILL NOT ADVANCE SIGNIFICANTLY ANY FURTHER. THE DECLINE WILL DROP TO THE 700 TO 600 AREA. SO ANY ONE HOLDING STOCKS OR INDEXES FOR THE LONG HAUL ARE GOING TO LOOSE GREATLY. CHECK OUT THE WOLFE WAVE PATTERN.
Reply
Ideas Scripts Chart
United States
United Kingdom
India
España
Italia
Brasil
Россия
Türkiye
日本
한국
Home Stock Screener Economic Calendar How It Works Chart Features House Rules Moderators For the WEB Widgets Stock Charting Library Priority Support Feature Request Blog & News FAQ Help & Wiki Twitter
Private Messages Chat Ideas Published Followers Following Priority Support Public Profile Profile Settings Billing Sign Out