I use a system that is kind of old school, you manually draw on the chart the overlap in price between any candle that makes a new closed high or low and the last candle to establish resistance and support. Strikingly, this method on a quarterly S&P, and the DOW for that matter, has had a 100% accuracy record in predicting market trend reversals going back 30 years. Possibly until now. The correction in the 4th quarter of 2018, didn't just break through support, it crushed it and ran through it like a freight train. The last time this happened was...wait for it..was January 2008 and we know what happened next, the time before, was January 2001. The reversals to the upside were also perfectly predicted by the same method. Based on this I have been very bearish since December. I'm certainly not alone in that sentiment, however, it's taking balls of steal of hold on to my shorts when the S&P just keeps going up. Yes, a back to back trend reversal is possible, but extremely rare on long term charts. So I'm still betting this quarter will close much lower than the current high, however, I can't help but wonder, is this the first time in 30 years and 5 trend reversals that we will see a false signal? Time will tell, on this system the S&P quarterly candle will have to close more than another 100 points higher at the end of June to signal this on this system...and man, what a nail biter! Any thoughts would be appreciated.
Comment:
Here we are at the end of the 3rd quarter and the S&P has yet to still make new highs. Frankly speaking, I thought it would have dropped by now, and I'm not the only one. Deustch Bank came out and said that the historically speaking the S&P is over valued and should be at 2,600 based on it's correlation with manufacturing indexes. So time will tell, I'm still bearish. that said, if we get a close end of Sept significantly above 2950, that would indicate the Bulls are in control.