Just like in May 2001 and May 2008, we appear to be in a bear rally. This is difficult to see by just looking at SPX because SPX is manipulated by the money supply; However, if you look at SPX/M2, this becomes more clear. See the similarities on the RSI and MACD. This seems to suggest that some time before the end of July 2020, we will see a top in the market.
The Fed has stated they are not considering negative interests rates. However, if you notice during the previous two recessions at the top of the bear market rallies marked with the red vertical lines, the Fed had to continue lowering rates. Therefore, if the Fed stays true to their word and does not push rates into negative territory, it's possible that this 2020 Recession/Depression will be significantly worse.
If the Fed does not push rates negative, it's possible that some form of sustained "helicopter money" could be coming.
I applied 1-yr Bollinger bands with 2std dev. as well as 3, 5 and 8-yr moving averages. Vertical lines are color-coded to each MA and represent when each MA is crossed by the 1-yr MA. The black horizontal lines mark the tops of each bear market rally; It's still hard to say for sure if this top was back in June or if we'll push higher in July.
I also marked Sept. 2020 as a timeframe to watch for a potential cross of the 1-yr and 5-yr MA. If we see that happen, I would consider it further evidence that this idea may play out.
wow, this analysis is really something to aspire to, thank you!
mohacg
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Great analysis but the actual situation is not like that. NO SHORT they inject a lot of money and probably we will see a ATH for the S&P500 the end of this month
liamcambra
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@mohacg An ATH on SPX would not invalidate this chart within itself. However, if you’re suggesting an ATH will be reached on this chart (SPX/M2), then that’s going to require SPX to get up and over 4k.
M2 is currently sitting just above 18,250. 18,250*0.22 = $4015.
That 4k mark will rise as M2 increases. For every 1,000 rise in M2, add $220 to the value SPX has to reach in order for SPX/M2 to reach it’s recent ATH from Feb. 2020.
dontdaytrade
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@liamcambra, I'm bad at math. If this were to get to the 61.8 retracement, what would SPX value be?
I would be careful assuming this 38.2 fib won't hold though. Notice how the previous bounces in May 01 & May 08 seemed like they were breaking upward to the next fib, however, that didn't end up playing out.