Short

S&P EMAs at Historical Critical Point

Updated

So I opened the chart at the weekend and flicked through the time frames and upon punching the Weekly I noticed the 21EMA and the 89EMAs were pretty tight. I decided the rest of the morning looking through the historical relationship of these two EMAs. It turns out that each time the 21EMA has come down to the 89EMA, there has been a violent reaction. In general, when there are moderate to minimal macros effecting the markets, this reaction represents a strong opportunity to long. In fact, the 21EMA has never dipped below the 89EMA and recovered until months to years later. On the flip side, on the two occasions the 21EMA did dip below the 89EMA, was in 2001 and 2008...two very significant moments in market history.

I also noted that once the break happens the S&P tends to bottom at around 40%-50% of that breaking point. If we were to use today's valuation, a 45% drop from today [should it be breaking point] is around 2200. That is also the bottom of the COVID crash i.e. where the real market was going to be trading before infinite stimulus was provided by the Fed.

I found this interesting as it seems in these troubling times and with a 'nuclear winter' around the corner in Europe, there is a real macro concern for markets. I'm leaning bearish and I think this rally will fail like every rally this year and lead the 21EMA below the 89EMA. Obviously, I react to the chart and should there be a strong reaction off the touch upwards, I will be flipping bullish.

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The bears are out in force and the 21EMA has already started to drop below the 89EMA. This price action going into Q4 is extremely bearish. Winter in Europe is forecasted to be a tough one, to put it mildly, and the markets are preparing for a recession. The CPI figures leave the FED with no option but to keep hiking rates and frankly, the populace has accepted we are in for a tough time. Now is the time for the FED to be aggressive in tackling inflation. The quicker we get into a recession, the quicker we can adjust to get back out of it. The longer we delay, the more likely a depression / stagflation event occurs.

The next two weeks will determine price action for the foreseeable future. Successive weeks of the 21EMA below the 89EMA, going into end of week, month [Sept] and quarter [Q3] is a very bearish indication.

Stay safe.

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This is a sellers market. 21 EMA has dropped below the 89EMA convincingly. Furthermore, the price has dropped below the 200EMA. This, again, is extremely bearish PA. A reclaim by end of the week is needed by the bulls to save the day. If not, historically, a 40% drop is probable.

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Q3 closed with yearly lows. This weekly/monthly/quarterly couldnt be more bearish 🐻. Not only has the 21EMA crossed the 89EMA on the weekly but the price rejected off the 200EMA. The last time this happened was in March 2008 prior to a 48% drop.
There will probably be rallies in the coming weeks to try and reclaim the 200EMA so there is upside potential but the trend is your friend in these conditions. Outlook remains bearish and this is a sellers market.

Hikes will continue into 2023 as Powell mentioned, the US posted a 3rd consecutive quarter with negative GDP growth, Russia annexing 4 Ukrainian regions + they're Nato application on top of a very very cold and expensive winter for our European cousins. If you're bullish I salute you.

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Keeping shorts open but also opened some longs. I think we rally something like this.

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Bulls couldn't reclaim the 200ema last week and the macro is so negative that there is zero attempt to even try again this week.
This market hasn't truly priced in a recession. The next 2 quarters will see a re-pricing across all asset classes. Capitulation in major stocks probably happens in 2023 and a long accumulation phase will start off the back of those lows.

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It's over boys.
I hope whoever saw this took the trade.
See you at the bottom.

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[Updated with chart]
Haven't updated in a while but it seems I was too early to close those longs. Market is rallying and putting in some lower highs. IMO something along these lines. Either we go lower here at resistance or we rally to 4,100 and put a solid LH in. Not opening new shorts until clear confirmation.

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CPI tomorrow so everything can change but SPY is basically a living, breathing Wall Street Cheat Sheet.

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Market at strong resistance and reacting to it. Good place to short if you haven't with SL above 4200.

Market rallies are to be sold at resistances.

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Did you long CPI & FOMC? What made you do it? FOMO? Belief of a soft landing? The more this plays out, the more similarities I see with 2000. The amount of retail participation in this market is a huge warning sign.

Below is an excerpt from a piece I wrote in November 2021:
**In the middle of 2020, I became more and more concerned by the amount of people I knew that were depositing money to brokerage platforms such as Etoro, Plus500, Fidelity, Robinhood etc…These platforms allow retail investors to deposit cash and invest in stocks. In some cases, complex derivatives such as futures and options are available to non-qualified traders. On the face of it, this allowed savvy traders to finally enter the markets that are traditionally a closed group. It allowed retail plebs to build a portfolio and generate extra wealth. The reality however is that most users were simply lucky. Lucky to be in the market at a time when the markets were pumping. New traders saw their PnL increase to staggering figures. Dream numbers. This was the sign. Market euphoria never lies. If everyone is making money in the market, then who is losing? And the law of the markets is the same as the casino, the house always wins**

If you're new to the markets [2019 onwards] you are most likely exit liquidity. You were always intended to be. In 2020 we saw a massive wealth transfer of public tax payer funds going to Wall Street to prop up the markets. The big boys made their money. They are moving on. Retail are suffering and its not over yet.

As I have stated in previous comments, pumps are for selling until the trend reverses.

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4th Attempt at breaking a year long resistance. Moment of truth.

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Ugly rejection so far. We'll see how weekly closes but possibly another leg down before this channel breaks.

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Market update in the following Substack:
jackatjoat.substack.com/p/spx-is-it-time-to-flip-bullish

Subscribe and join the community for more updates. It's free!

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For those that have been paying attention, it's starting.

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Update in following link. The market is in a interesting spot right now.

open.substack.com/pub/jackatjoat/p/6-the-sound-of-markets?r=1x9x1i&utm_campaign=post&utm_medium=web

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EMAs pinched, S&P pushing to 4,200 resistance. Make or break moment.

Zeahl_Capital

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