The_Unwind

Breakaway Gap ? Bearish Patterns Resolving Bullishly

TVC:SPX   S&P 500 Index
Friday's breakaway gap to the downside in the S+P 500 ,resolving the Ascending Wedge Pattern
(As shown on the chart) is bearish technically,showing that the underpinnings or support
of this benchmark index continues to perceptively weaken, even as price rallies to all time historic highs.

That's inherently a warning sign,that this market is highly priced
top dollar merchandise,and it's getting more expensive as time passes.

However also noteworthy in my observations as a day trader
is that the market refuses to drop significantly thru any type of meaningful support
and importantly is turning bearish patterns into bullish resolutions,
which equates to a doubly bullish reselt.

When then bears cannot take the market down, you know that the big boys and the big money
simply do not want to take this market down right now.

This coming week,will see a slew of quarterly earnings from the biggest companies in America
as well as a Federal Reserve meeting mid week.
The Fed is on record that they will continue to support the market
with large scale dollar buying no matter what, till the ill economic effects of the pandemic subside.

Inflation in now brewing in the US as companies willingly begin to pass on price increases,
with businesses and consumers now being forced to pay higher costs in 2021 even in a supposedly pandemic ravaged economy.

This is the most unusual economy in the US that I have ever see.
There are no written academic play books on how to manage it, or for that matter invest in it.

My advise to you is to continue to follow the money.The very big money.Take your cues from them.
Until something substantial breaks on the horizon, this is a market that right now simply refuses to go down.

As a writer friend of mind observed this week,don't be caught "flat footed" by this market,
You shall, and will pay an exceeding high price,.if you do.

THE _UNWIND
1/23/21
Woods of Connecticut.

Comments

You are spot on. But it’s like a tightly wound spring which will come shooting back at some point. I think the big algo funds know this and are rubbing their hands waiting for the opportunity when it finally comes.
My current expectation is a slight pull back early next week, then another ferocious rally up to 3900-3920, then (in late Jan / early Feb) just when the last bear has folded and everybody has become convinced that the market can only grind higher forever - the realisation that the new strains (U.K., Brazilian, South African) of Covid are more dangerous, more contagious, and responding less well to the vaccines, will cut the spring and the market will rush full pelt for cover.
To me it actually feels remarkably like February last year when the market had exactly the same feel to it until it melted down in just a few weeks.
I don’t rule out one last mega-rally in the spring as the central banks cut rates to (further) negative and print (even) more money but the fall out thereafter will be dramatic.
Covid has still not written its final chapter, I think.
The S&P will still see the lower side of 2500 within 18 months from now.
+5 Reply
kishnara YouCannotBeSerious
@YouCannotBeSerious, You may be right. The market euphoria will come to bad ending soon.
Reply
The_Unwind YouCannotBeSerious
@YouCannotBeSerious,

One, if not the greatest stock market bubble of all time.
+1 Reply
@The_Unwind, Prob the greatest although 1929 in its day must have been quite something. But I think this one takes it. By the look of tonight’s futures, we are well on our way to 3900. Will we fall just shy of 4,000 or will we burst through it in a manic fit of speculative mania?
I have no idea. One simply can’t predict this can gif mass hysteria.
Reply
@The_Unwind please take a look at this https://www.youtube.com/watch?v=RYfmRTyl56w
It is a very recent Blomberg interview to Jeremy Grantham - very informative and very much aligned with your view
Happy trading
Reply
The_Unwind antrap77
@antrap77,

So I spent the required 30 minutes on my Sunday evening watching this.
Quite fascinating/ sobering viewpoint.
He is a billionaire, but honestly, his views do remind me a lot of my own.
Thank you for bringing this interview to my attention.
Reply
antrap77 The_Unwind
@The_Unwind, you are welcome, I am glad you find it interesting
Keep up the good work!
Reply
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