3 Paths going forward for US Equities, yes we are going lower
Well its official after nearly a full year (depending where you measure from) we have officially left the BIG WEDGE. This wedge is obvious to any half decent trader let along beginners and we all know that falling out a rising wedge is....not good. Look the market recovered quickly from the pandemic, faster than there was good news about the vaccine, age old adage buy the rumor sell the news. We have pushed towards new highs like it is nothing, Bitcoin has exploded in price, sending any damn stock that mentions blockchain in their press release soaring. Well I was there for it all, riding $CAN from 3$ to 20$ was the best PnL i've ever made on a stock, given I tend to cash out early. Gamestop got pumped by a hoard of one million reddit users that couldnt even tell you what a MACD was, and AMC despite being nearly bankrupt went to the moon. I am just bringing up some of the insane Euphoria that has happened only recently.
Now I am not calling for a massive bubble pop, there are 1000x reasons to be Bullish here, fundamentals haven't changed much, Apple still going to sell more iPhones, Tesla will keep ramping up car production and All the airlines are only going to get much more business. There is a new president, one who can actually tell the difference between the word division and dividend, and he has a great offering at the Fed. But what I am saying is that we are getting a bit too ahead of ourselves with valuation. The technical looks really tired and this wedge is getting way too skinny. What I am laying out here is a few possible scenarios for us going forward in the next month to next months.
I have placed on the chart 3 different numbers corresponding to different bounce points.
(1): At 3676 Three great confirmations of this Fib from above and below. This would be pretty damn bullish and likely bounce us back to the old wedge support line before making a decision to go lower or burst through it.
(2): This is a line I drew through two descending peaks back in Sep and Oct. If the stars align perhaps SPY might bounce both on that line and on the 0.786 Fib at 3379.
(3): This would be particularly bad, I don't think we will get here short of maybe deploying troops into a proxy war in Myanmar or something, the market is being pushed by tech so much and tech companies continue to have really great fundamentals. I am almost certain it would bounce here, but if it immediately comes back for a retest and fails it, might as well sell everything and wait a while.
Overall I am Bullish long term, but short-medium term we need some bearish action to shake out overleveraged players, stick it to WSB'rs and help reset some really overvalued US equity. Personally I am still long most of my portfolio with 10% as of yesterday in various UVXY Calls and SPXL shorts as a hedge.
Now I am not calling for a massive bubble pop, there are 1000x reasons to be Bullish here, fundamentals haven't changed much, Apple still going to sell more iPhones, Tesla will keep ramping up car production and All the airlines are only going to get much more business. There is a new president, one who can actually tell the difference between the word division and dividend, and he has a great offering at the Fed. But what I am saying is that we are getting a bit too ahead of ourselves with valuation. The technical looks really tired and this wedge is getting way too skinny. What I am laying out here is a few possible scenarios for us going forward in the next month to next months.
I have placed on the chart 3 different numbers corresponding to different bounce points.
(1): At 3676 Three great confirmations of this Fib from above and below. This would be pretty damn bullish and likely bounce us back to the old wedge support line before making a decision to go lower or burst through it.
(2): This is a line I drew through two descending peaks back in Sep and Oct. If the stars align perhaps SPY might bounce both on that line and on the 0.786 Fib at 3379.
(3): This would be particularly bad, I don't think we will get here short of maybe deploying troops into a proxy war in Myanmar or something, the market is being pushed by tech so much and tech companies continue to have really great fundamentals. I am almost certain it would bounce here, but if it immediately comes back for a retest and fails it, might as well sell everything and wait a while.
Overall I am Bullish long term, but short-medium term we need some bearish action to shake out overleveraged players, stick it to WSB'rs and help reset some really overvalued US equity. Personally I am still long most of my portfolio with 10% as of yesterday in various UVXY Calls and SPXL shorts as a hedge.