On today's CPI report, inflation rose 0.5% in January, which was higher than expected (according to CNBC), yet the market rallied.
With this rally, the market is hitting a supply zone, which was the swing high for two of the most recent swings. In the shorter term, it has also been seen that the recent rally has been rejected twice at the bottom of this supply zone, which corresponds with the 0.236 Fibonacci level, showing strong resistance. Furthermore, SPX is hitting its 300-day SMA, adding further resistance. Back in 2008 when SPX approached its 300-day SMA after the first part of the fall, a 50% drop in the S&P 500 followed over the next year.
To trade this, I have entered a short position.
Disclaimer: This is not financial advice, I have never worked professionally in finance in any capacity.
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This trade continues to be desirable. With the collapse of SVB and the other banking stocks, the systemic risk of high interests could crash the whole economy (particularly unprofitable tech). I have since increased my short position
"a 50% drop in the S&P 500 followed" - it was because of Lehman Brothers bankruptcy. Now there is no news about the bankruptcy of any of the big financial institutions.
spiritualhealer117
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@vitsha Well yes, but we do not know for sure if any big financial institutions are going to go bankrupt, since nobody knows the future. There are however a lot of tailwind, like the ongoing Russo-ukrainian war, Inflation coming higher than expected, the terrible state of China's housing market, Credit Suisse making enormous losses.