The SPX (SNP500 Index) monthly chart has been giving clear signals in the past with regard to overall changes in trend. With all of those trends taken into consideration, we can see an extremely similar situation with the current price action. As we also take into account for current political, geopolitical, COVID-19, and tech stock inflation factors, we can assume that no rally is sustainable without a correction. Keep in mind, this is only an observation by using the simple bearish and bullish divergences. A bearish divergence occurs when the price action by candles, shows a higher high, while the oscillator for the RSI shows a lower high - indicating that price momentum has died off. I also show in the chart that it's possible to identify key points when the market is showing demand for the stock market even if it's in a downtrend, where the general public might assume the major crash is coming - this is a bullish divergence
- The 2008 recession was signaled by a clear bearish divergence on the weekly, and even the monthly. This took months to play out, but with each rise, you could have bought in and still profited with a high average. Following the financial crisis, the 2009 bottom and reversal into a 9 year bull market was signaled by a strong bullish divergence on the weekly. - When many thought the market was crashing in early 2016, a strong bullish divergence showed that selling momentum was done and that a bullish continuation would resume. This was due to the confirmation of a bullish divergence on the price action. It meant that there was CLEAR demand for cheaper prices.
Current Sentiment shows that a large bearish divergence on the monthly chart is forming and we may be in a bear market until proven otherwise.
A way bigger crash than 2020 is very likely. But at the moment I cannot find a discernible way of telling whether it will be next week, in a couple of months or in the next decade. At the moment, it seems to me, we don't have a discernible direction. The ratio between SP500 and gold suggests money is flowing into gold. This reflects uncertainty. The relationship between SP500 and bonds might give some clue whether money will be flowing out of bonds into the stock market. Assuming that the FED will maintain their near zero interest policy, or even come up with more stimuli measures, this could give an additional boost to the stock market for months or years to come, even though with some turbulence in between. I think at the moment we have to wait and see, and have a plan for these uncertain times until a direction is clearer. My 2c.
XForceGlobal
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@idz, EXCELLENT analysis, my friend. I am a huge believer of this specific pattern as it is incredibly accurate in hindsight. With no stimulus in the near future, I just can't predict that far into the future and make positions based on current geopolitical obstacles. We have already outweighed the COVID-19 (recovered immensely), Trump testing positive, and even tech stocks still making their way up to new highs - nothing seems to keep price suppressed. I'm also a firm believer of the stock to flow model; however, based on the accuracy of this lagging indicator and pattern, we can PREPARE for the crash that may be coming up and concretely make assumptions that this rally is not sustainable for how many more months of bullish price action is given to us. All we can do is be a part of it and prepare for the worst, hope for the best. Your idea on the flow of gold, zero interest policy, and stimuli measures also is a valid argument that we may in times of volatility and confusion. Good luck, and let's survive this together!
UnknownUnicorn100937
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@XForceGlobal As the next crash will likely be way more volatile perhaps there are two alternatives: 1) stay out of stocks until they stabilize; or 2) adopt a long only, simple strategy to go in and out of stocks, in the daily or lower time frames. About Bitcoin, given that it's quite unpredictable and can get very volatile fast, we might keep an eye on longer time frames for possible direction, and adjust strategy accordingly. Also keeping an eye on it's correlation or decoupling of stocks and the dollar.
Donnyboy123
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@idz, Money is clearly pouring into Bitcoin, etc, but where is it rotating FROM ?? Does anything / anyone stop this bull?
UnknownUnicorn100937
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@Donnyboy123, Long term I think it's unstoppable, because there is, after all, a theoretical unlimited supply of money. Fundamental factors, nonetheless, could cause some "shake-outs" or mini crashes in the short term, such as happened in March. With regard to the crypto space, there might be issues as well with regulators which might cause some short term shock or even a mini collapse. The "Tether treasury" for instance, has been issuing billions of coins exponentially this year. If and very likely not totally related to actual demand in the crypto market, the unravel of the scheme could cause a big price shock in the crypto space. The problem is nobody knows if and when it would be unravelled, after all. So the bottom line is: systemic risks are always present.
UnknownUnicorn8215487
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agreed very probable!
XForceGlobal
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@C622, Yes, probable is the key word here!! We have to ALWAYS be prepared and make sure that probabilities line up! :)
PolarHusk
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Nice analysis on the 1M chart. Thanks for sharing your idea 🐻❄️😃
clear divergence seen!
But crash in 2020 is absolutely impossible, so would definitely buy all in, enjoy the pre election and post election fever, cash out and wait