As described in my previous note on the S&P 500 there have been two major market corrections since the end of the Great Recession. They were periods of high volatility and a lot of repricing of stocks for 140 days or more.
In both cases they started with:
1. A complete reset of the RSI ( Relative Strength Index below 20)
2. The S&P 500 holds below the 200 day MA
3. The 50bar EMA passes below the 100bar EMA
They end when:
1. The S&P 500 0.54% holds above the 200 day MA
2. The RSI holds above 50
3. The 50bar EMA passes above the 100bar EMA
We are clearly not in a recession in the US however there will likely be many months of turmoil in the markets if the Dems take the House. From the TA angle we have a strong reset of the RSI currently retesting the trend-line just below 50. The S&P 500 is just below the 200 day MA and the 50 day EMA just death crossed the 100 day EMA.
When I first posted this I said "I think we will have our answers in the next 10 days. If this is for real, we will see all 3 conditions met and people will be talking doomsday talk all the way through March."
I now have a more bearish outlook, I will be looking for cheap stock prices to buy in when the S&P 500 reaches 2500 to 2400. We should also see higher trading volume of course.
Gold miners should do well in the short term since all of this is based on inflation fears. Common sense dictates however that gold will not rise for any reason other than short-term fear and that higher bond yields will keep gold down once fear subsides.
The TTW (Trump Trade War) is good for the dollar, bad for the developing world, bad for retail stocks if it continues into the holiday season. It is also bad for exporters since the dollar is going up. Tech stocks will bottom faster and recover faster than anything, the TTW does little to hurt their profits.
In both cases they started with:
1. A complete reset of the RSI ( Relative Strength Index below 20)
2. The S&P 500 holds below the 200 day MA
3. The 50bar EMA passes below the 100bar EMA
They end when:
1. The S&P 500 0.54% holds above the 200 day MA
2. The RSI holds above 50
3. The 50bar EMA passes above the 100bar EMA
We are clearly not in a recession in the US however there will likely be many months of turmoil in the markets if the Dems take the House. From the TA angle we have a strong reset of the RSI currently retesting the trend-line just below 50. The S&P 500 is just below the 200 day MA and the 50 day EMA just death crossed the 100 day EMA.
When I first posted this I said "I think we will have our answers in the next 10 days. If this is for real, we will see all 3 conditions met and people will be talking doomsday talk all the way through March."
I now have a more bearish outlook, I will be looking for cheap stock prices to buy in when the S&P 500 reaches 2500 to 2400. We should also see higher trading volume of course.
Gold miners should do well in the short term since all of this is based on inflation fears. Common sense dictates however that gold will not rise for any reason other than short-term fear and that higher bond yields will keep gold down once fear subsides.
The TTW (Trump Trade War) is good for the dollar, bad for the developing world, bad for retail stocks if it continues into the holiday season. It is also bad for exporters since the dollar is going up. Tech stocks will bottom faster and recover faster than anything, the TTW does little to hurt their profits.
