Monthly chart - S&P facing significant resistance
Looking at the monthly chart of S&P 500, there are 4 signs indicating significant resistance / trouble for S&P 500
1. March closes right at the peak of the 10-year long trend line.
2. S&P 500 is also touching the peak of the up channel top. Experience tells me that this often is a significant barrier for further up movement. Some extremely good news will be needed to push through this point, but what? more QE than unlimited? lower interest rate than now?
3. RSI is also showing less momentum / divergence as you can see that a higher high in S&P did not lead to a higher high in RSI. This is what happened in 2008, therefore a big sign of caution here.
4. Average true range (ATR), a simple measure of volatility based on the past 14 month range also indicates that current ATR is right at the 30 year trend line, which looks like is due to bounce back up. Although volatility could mean up or down in price, for upside volatility to eventuate S&P not only have to continue to move higher but accelerate. My logic tells me that downward volatility is much easier to contemplate.
What will happen next month? I suspect early in April traders will push the S&P 500 higher to take out stops around 1600 mark, then immediately pull back. Average needle (spike) at the last two peaks were 31 points. Add this to the current price of 1569, you get exactly 1600. So get ready for the big short. If the stop hunt doesn't happen, then the euphoria is much less than we thought
There are a few fundamental reasons which I believe are going to support my technical view
1. Interest rate is at historical low. It doesn't mean it couldn't go even lower, but eventually the only way is up. When this happens, cheap money will evaporate and a lot of bubbles will burst/deflate. Let's start with real estate bubbles in China, Hong Kong, Singapore, Australia except this time it won't be the U.S.. A bubble popping is a disaster, but a bubble deflating hurts just as bad
2. Competitive devaluations among countries currencies are clear as day light. U.S., Europe, Japan are all doing it open-endedly and they smartly brand it as QE. These three currencies are the biggest reserve currencies, which means if you own their money then your wealth is getting eroded with an open tap. This is economic robbery as simple as that. If history is of any guide, competitive currency devaluation often preludes trade war which then preludes physical war. Now there are already signs of arms race in East Asia, potential flash point in North Korea, and recent island dispute between China & Japan (an US ally). I see economic reasons behind all these conflicts. This then leads me to my conviction that the global financial market will soon take another severe blow, only this time it begins with a inevitable conflict between powers
1. March closes right at the peak of the 10-year long trend line.
2. S&P 500 is also touching the peak of the up channel top. Experience tells me that this often is a significant barrier for further up movement. Some extremely good news will be needed to push through this point, but what? more QE than unlimited? lower interest rate than now?
3. RSI is also showing less momentum / divergence as you can see that a higher high in S&P did not lead to a higher high in RSI. This is what happened in 2008, therefore a big sign of caution here.
4. Average true range (ATR), a simple measure of volatility based on the past 14 month range also indicates that current ATR is right at the 30 year trend line, which looks like is due to bounce back up. Although volatility could mean up or down in price, for upside volatility to eventuate S&P not only have to continue to move higher but accelerate. My logic tells me that downward volatility is much easier to contemplate.
What will happen next month? I suspect early in April traders will push the S&P 500 higher to take out stops around 1600 mark, then immediately pull back. Average needle (spike) at the last two peaks were 31 points. Add this to the current price of 1569, you get exactly 1600. So get ready for the big short. If the stop hunt doesn't happen, then the euphoria is much less than we thought
There are a few fundamental reasons which I believe are going to support my technical view
1. Interest rate is at historical low. It doesn't mean it couldn't go even lower, but eventually the only way is up. When this happens, cheap money will evaporate and a lot of bubbles will burst/deflate. Let's start with real estate bubbles in China, Hong Kong, Singapore, Australia except this time it won't be the U.S.. A bubble popping is a disaster, but a bubble deflating hurts just as bad
2. Competitive devaluations among countries currencies are clear as day light. U.S., Europe, Japan are all doing it open-endedly and they smartly brand it as QE. These three currencies are the biggest reserve currencies, which means if you own their money then your wealth is getting eroded with an open tap. This is economic robbery as simple as that. If history is of any guide, competitive currency devaluation often preludes trade war which then preludes physical war. Now there are already signs of arms race in East Asia, potential flash point in North Korea, and recent island dispute between China & Japan (an US ally). I see economic reasons behind all these conflicts. This then leads me to my conviction that the global financial market will soon take another severe blow, only this time it begins with a inevitable conflict between powers
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