Technician

SP500: Approaching Bubble Territory??

SP:SPX   The S&P 500 Index
782 0 9
The weekly chart clearly illustrates the strong bull market, driven by liquidity injections by the federal reserve , ignoring major events-risk within the past few years . Markets are only worried if and only if the fed stops or hints to to stop providing its drug, however, recent data suggest a slow down in economic activities, meanwhile government shutdown will also have a dampening effect and distort incoming data, making it more difficult for the committee to judge economic conditions. Add to that, the fed is in a transient phase, as the new chairwoman will take office in January. That being said, fed tapering may not come until March :0).

Would that lead to more gains in equities, probably in the short term(months), seasonality also suggests that equities tend to perform well in the latter part of the year(October to January). Getting more technical, price has scored a weekly pin bar two weeks ago, meanwhile, Momentum signaled a hidden bullish divergence , giving the scenario of retesting the top of the main rising channels further chances.

A break of this channel resistance may lead to an acceleration of the rise, for a final upside leg, as irrationality takes control, which may be the final episode of the fed epic, as the withdrawal of the unprecedented scale of asset purchases, which ballooned the fed's balance sheet closer to $4 trillion wont be that much fun, in my opinion the process will probably be chaotic, uncontrollable, and will lead to major spike in yields =bonds crash.

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