SPY looks to extend gains but correct much more in the coming years.
Comment
⋅
I have almost completely changed my mind regarding this prediction. I think we may be on the drink of a major market correction over the next 1-2 years. Decreasing market sentiment, unpredictable trade talks, China's massive market decline, much higher risk than reward in the market, etc are all major contributors. I think SPY might not see an all time high for the next few years. I think we will either start the next major correction now, or trade in a channel for a year-ish (similar to 2015 - late 2016), until we crack 40-60% off of January's all-time high.
Market sentiment is one of the most important indicators to use when trading. For example, there is no reason to be long on all positions right now due to decreasing market sentiment, and poor 1W technical indicators. Swing trading market sentiment can be very predictable and profitable, especially when combined with technical indicators. I am short the market, and think we might be in for a red summer. Either way, it will be very interesting to watch in the coming weeks.
Is there any fundamental basis for a correction to happen?
By the way, I'm dearly hoping for a correction/downtrend but it seems that regardless of all the 'risks' you mentioned along with the rising rates, the markets keep shrugging it off and going higher. I can't really see the catalysis for a downturn; the economy is good, the companies are profitable, people are employed and spending, people aren't afraid of aggressive tweets by the President,...
pstowe
⋅
@justinmischief, I completely agree that right now the economy is doing good and with an extremely low unemployment rate, it is hard to determine when the next crash will happen. America's economy is doing well, but not as well as people think. My biggest concern for our economy is how extremely weighted the major indices are with tech stocks, which have accounted for nearly all gains in 2017 - 2018. Also, China is in major trouble and no one seems to care. It is extremely similar to the start of the real estate bubble in early 2007. The signs were there, but no one seemed to care. Check out this article: seekingalpha.com/article/4186890-42-trillion-bubble
Also, most emerging markets are down 20-25+% this year, and with lots of American investment tied up there, if they default on their loans that will cause major problems (it is very likely that some of them do, Argentina for example). EM's also tend to lead major markets into and out of economic cycles, another factor to consider.
pstowe
⋅
@justinmischief, Also, in early 2007, the charts told traders a recession was coming. Many indicators were overextended and had begun to decline (on the monthly chart). Of course, the charts did not predict hundreds of thousands of Americans would default on their mortgages, but the 2008 recession was definitley predictable, just by looking at the chart. Most top bankers and analysts never saw it coming until it was too late. I see the same thing happening now. So many analysts are long the market, while the chart is telling a much different story. If SPY cannot break January's ATH by mid-September, I expect a downturn to begin accelerating.
By the way, I'm dearly hoping for a correction/downtrend but it seems that regardless of all the 'risks' you mentioned along with the rising rates, the markets keep shrugging it off and going higher. I can't really see the catalysis for a downturn; the economy is good, the companies are profitable, people are employed and spending, people aren't afraid of aggressive tweets by the President,...