This in my eyes is beyond technical... Too many risks hide for the markets - 10 reasons why:
1. Way too much debt of the U.S(estimated roughly 21T)/European countries(Italy - 2.2T/France - 2.2T/Germany - 2.1T/U.K - 1.97T) etc.. 2. Low volume in recent uptrend 3. Too much dependent on FAANG 27.5% Total weight of Nasdaq - P/E Way too high(Facebook - 28.32/Google - 63.33/Netflix - 218.91/Amazon - 267.44/Apple(reasonable) - 17.81) 4. Rising Interest rates(both U.S/EU - will start shortly) 5. Tariffs risks from U.S/China/EU/Canada/Mexico etc.. 6. Inflation risks(stated in both Germany/U.K) - Don't expect them to stay only there(3.8% unemployment in the U.S? really?) 7. Volatile president in the most important country(economically at least) in the world. 8. Machines rule the market - and the next effect will be more dramatic. 9. Over optimistic market - less risk assesment 10. Unexpected President in the most important economy in the world.
And there are more...but we will not discuss all of them.
Long term perspective and patience will lead in my eyes to declines in this Index and by the breach of the range stated in the added chart the machines will come into place and effect the markets worse than February - stay tuned.
Trade active
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So far trade moving as should - sections 7/10 remain active...
1. The question isn’t how much debt, it’s the debt service payment relative to GDP which is actually reasonably low. Not even close to the Carter era... yet.
2. Up volume is always low in a correction.
3. Just because P/Es are high doesn’t mean they can’t go higher.
4. Markets have historically gone up another 3-4 years on average after interest rates are raised. A rising interest rate environment is always part of a healthy mature bull market.
5. The tariffs are incredibly small relative to the overall trade deficit. Trade wars are bad but this seems more like political posturing... if both sides throw pebbles at each other is it really a war?
6. Inflation, like rising interest rates are part of any healthy mature bull market. Both eventually takes their toll but not yet.
7. Sounds like political bias to me. Markets care about action, not words and what exactly has this President “done” that is so volatile and any different than previous Presidents. Tweets don’t count.
8. Ah, the old Algo/machine fears... that’s not how they work.
9. Markets rise on optimism but die in euphoria... we have not hit euphoria yet. Too much pessimism out there... your post is evidence of exactly that.
10. See #7 explanation.
Let the charts tell the story so you don’t see what you want to see. When you are biased you don’t see clearly. A bearish bias will make resistance look strong and support look weak while a bullish bias will make resistance look weak and support look strong.
The chart to me has always and continues to be a classic consolidation pattern in an otherwise bullish long term trend. I will continue to expect that to continue till it doesn’t no matter how I feel about the world going on around me.
TradeProperly
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@ProphAC, appreciate the detailed answer.
No doubt price action is always the most important thing...however it is always good to relate to the other effects and not ignore them.
Can I understand you are bullish on the market then? or riding the trend as it goes? - will be happy to hear your opinion
I’m a self taught market technician for the most part and I personally trade with price action setups but I’m also a sales person for a wealth management firm that manages based upon fundamentals. So I see both sides, fundamentals and technicals. I agree that price action isn’t everything so I’m all for making market calls based upon outside influences if they are the right influences.
To me this is an obvious correction both fundamentally and technically. This bull market will undoubtedly come to an end but the reasons you have given existed a year ago and will still exist 2 years from now. Those types of reasons don’t help us trade better. Those types of reasons cause investors to worry and sell prematurely and I could add 2 dozen more reasons to your list but every bull market has a long list of reasons to sell and the market just devours them as it climbs higher as if the reasons to sell are feeding it. Once the fuel of worry and fear starts to run dry then we should look to sell.
From a chart perspective, this correction pattern looks nothing like a market top historically and every thing like a correction and consolidation pattern. Those types of patterns feed on fear to build a foundation of selling to make another move to new all time highs. Today’s technicians are obsessed with calling the bear, so much so that they don’t see what is right in front of them. A larger and smaller “W” pattern with a backfill to kiss the back side of the larger “W” pattern is a quality setup but not ideal b/c your bullish entry point is harder to call. The breaking of the trend line on the smaller “W” pattern allowed the market to push through the trend line break of the larger “W”... this push left the market exhausted so it spent several days consolidating above the 100 and above the larger “W” pattern trend line it just broke. The bulls were in complete control because they held it in this position till enough price pressure had built back up to make its next run which it is doing now.
From here we have multiple paths the market could take but I see the S&P500 hitting 3100 in the next 6-9 months. I find it very hard to believe this is the beginning of a bear based upon my POV but the market humbles everyone of us so we will see. Good luck in your trading!
TradeProperly
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@ProphAC, will be happy to follow you and learn more from your perspective - I personally always like to learn.
As far as the markets - we need to wait and see how it will develop - completely agree.
2. Up volume is always low in a correction.
3. Just because P/Es are high doesn’t mean they can’t go higher.
4. Markets have historically gone up another 3-4 years on average after interest rates are raised. A rising interest rate environment is always part of a healthy mature bull market.
5. The tariffs are incredibly small relative to the overall trade deficit. Trade wars are bad but this seems more like political posturing... if both sides throw pebbles at each other is it really a war?
6. Inflation, like rising interest rates are part of any healthy mature bull market. Both eventually takes their toll but not yet.
7. Sounds like political bias to me. Markets care about action, not words and what exactly has this President “done” that is so volatile and any different than previous Presidents. Tweets don’t count.
8. Ah, the old Algo/machine fears... that’s not how they work.
9. Markets rise on optimism but die in euphoria... we have not hit euphoria yet. Too much pessimism out there... your post is evidence of exactly that.
10. See #7 explanation.
Let the charts tell the story so you don’t see what you want to see. When you are biased you don’t see clearly. A bearish bias will make resistance look strong and support look weak while a bullish bias will make resistance look weak and support look strong.
The chart to me has always and continues to be a classic consolidation pattern in an otherwise bullish long term trend. I will continue to expect that to continue till it doesn’t no matter how I feel about the world going on around me.