StealPipsSal

SPX 500 nosedive in the new year

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OANDA:SPX500USD   S&P 500 Index
The stock market has been gunning for all-time highs despite the horrible economic news going around. Based on stimulus hopes and mass euphoria of the market reaching highs, with help from the fed, investors have just been buying at the highs and pushing it higher. However, I think all of that is quickly coming to an end. The market has been pushing higher with no real fundamentals to back it up and there is a lot of negative news looming over these markets. The new Covid-19 strain is quickly spreading throughout the U.S. now so there may be fear of new lockdowns, and Trump signed an executive order for the NYSE to delist some of the biggest Chinese telecom companies in the market. All of this news may trigger some major fears among investors to start taking massive profits and the market will definitely see a huge selloff because of that. Price action also tells the story of the nosedive. As you can see, the S&P has been moving in an ascending channel with a false breakout below on December 21st, which already indicates selling pressure. The market also closed the new year at the zone of resistance formed around 3758 and 3763. The market is showing significant rejection at that level, especially on the 1 hour time frame. You can also see a double top formation and this is further indication of a reversal. Many have been pointing to a glaring bearish RSI divergence forming and they are spot on with that analysis. The market should be seeing a huge correction and if it breaks past the strong support zone around 3641 and 3645 we could see the market bleed all the way to the 3500 levels. I'm currently in a sell position and I'll be targeting 3608. There are a lot of gaps to fill in this market and I believe they will be filled in the coming week.

Comments

I agree 100% SPS - the propping up can only last so long. The end of year shamanisms was nuts. Debt has fuelled the whole bull run from 2009. It has to end some time - law of economic "physics".

Ans when it does start to fall and all the Robin Hooders start buying dips , this time it may very well only ADD to the carnage.
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@Chicama I’ve really never seen the markets move the way they did to finish off the year but we got some bloody days ahead of us for sure
+1 Reply
unicow Chicama
@StealPipsSal @chicama my thoughts exactly. The only twist is USD. Will the dollar continue to fall? That supports people buying stonks. I see no reason, though, for the dollar to fall in 2021 given Eurobonds are yielding -0.47% and the European Union has no military teeth while the wolf, Russia, waits for opportunities to meddle. 54 trillion in US denominated debt, means the dollar isn’t going away anytime soon.
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@unicow, I think the US dollar is showing signs of strength and reversal at these lows so it may just be dump time for the stock market
+1 Reply
unicow StealPipsSal
@StealPipsSal, I see it too! It closed above it 5 day moving average Dec 22 and 28th after a non-stop descent from the elections. Come on people! You can’t get away from the US dollar so easily!
+1 Reply
I live high RRR. Good one
+2 Reply
StealPipsSal TheSignalyst
@TheSignalyst, thank you !
+1 Reply
Thanks for your analysis, which I agree with - nevertheless I personally have been calling the sell off for months now but I have been proven wrong so many times that I am not sure anymore that SPX will correct anytime soon. There is huge monetary mass flowing around because 1. money has never been so cheap for so long 2. people do not spend money on travel, leisure, restaurants and all savings are put into the stock market...this will become unsustainable at a certain point but it might still be too early. Every crisis is different from the other and probably in this case we will have to wait to see a correction
Your inputs are valuable but I believe this buying bonanza could still last for a while.
Price action as seen for BITCOIN, Tesla, Tech stocks and others are the result of cash last resorts. And with all the money out there probably there are still months to go before we will see a significant correction. Let's see how the new years will kick off but I am afraid it will be another gap-up again
Happy trading
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Chicama antrap77
@antrap77, I believe BTC going mental is actually bad for stocks as Bitcoin is perceived as a flight to safety. Happy for others to discuss? ON IG Markets Weekend DOW indicators are slightly down.
+1 Reply
antrap77 Chicama
@Chicama, i typically trade stocks and indexes and recently I've been trying a few trades with Bitcoin. Felt like passing from wine to tequila actually. It's spread and volatility are just crazy.
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