S&P 500: What if history does NOT repeat again in 2017?
Updated
Scenario: No "Black Monday" crash next week - 30 years after the "1987" stock market crash. What if there is no large stock market crash in the next week and instead we get to see lots of new all-time highs as bulls keep pressing the marketing higher and higher?
Based on my own research the odds for a crash next week have strongly increased going into next Monday, October 23, 2017 as the uptrend has started to get weaker on October 19, 2017. But given the fact that so many are warning about a repeat of the "1987" crash, here is a scenario what might happen, if the "S&P 500" does not start to crash in the next 1-7 trading days and instead begins a very strong short squeeze leading to new all-time highs.
In this bullish scenario there could be a very strong rally, which might take the "S&P 500" from around 2550 points quickly up to around 2700 points. The actual crash might then for example occur in early December or later at the start of Q2 2018.
Don't get me wrong, I have started to get very bearish today on October 19, 2017 as the price declined on this historically day right along what some of my indicators show me. And if the "S&P 500" falls below recent lows I'm going to change my opinion immediately to very strongly bearish. But so far it appears that maximum greed might yet not be fully priced in.
Trade setup: Bullish breakout happens
Long entry: 2560 (after new breakout all-time high 2570 occurred)
Target: 2695
Stop loss: 2525
Risk: 35 points
Reward: 125 points
Based on my own research the odds for a crash next week have strongly increased going into next Monday, October 23, 2017 as the uptrend has started to get weaker on October 19, 2017. But given the fact that so many are warning about a repeat of the "1987" crash, here is a scenario what might happen, if the "S&P 500" does not start to crash in the next 1-7 trading days and instead begins a very strong short squeeze leading to new all-time highs.
In this bullish scenario there could be a very strong rally, which might take the "S&P 500" from around 2550 points quickly up to around 2700 points. The actual crash might then for example occur in early December or later at the start of Q2 2018.
Don't get me wrong, I have started to get very bearish today on October 19, 2017 as the price declined on this historically day right along what some of my indicators show me. And if the "S&P 500" falls below recent lows I'm going to change my opinion immediately to very strongly bearish. But so far it appears that maximum greed might yet not be fully priced in.
Trade setup: Bullish breakout happens
Long entry: 2560 (after new breakout all-time high 2570 occurred)
Target: 2695
Stop loss: 2525
Risk: 35 points
Reward: 125 points
Note
After my bullish forecast on October 19 (which I had made before the close at 2559 intra-day), the S&P 500 made a breakout higher one day later on October 20 and reached a high of 2575.44 that Friday. On Monday, October 23 the S&P 500 opened at a new all-time high of 2578.29 but then closed the day down in the 2560 range.
The uptrend was so strong on Friday, that I fear that a bearish blow-off top has occurred on Monday, October 23.
That's why I'm going to make a new bearish forecast even though the long entry at 2560 has not been reached, yet.
If the S&P 500 is going to decline below 2560 on Tuesday I will stick with my bullish idea only as a paper trade here and make a "trade active" update, but only to track the outcome of this bullish idea. My recommendation is to follow my upcoming new bearish trade idea.
Trade active
Long entry due to a higher low on Tuesday, October 24 with less than 1,5 hours left until the close. Monday low was 2564.33 almost at my 2560 - entry after bullish breakout - recommendation.This uptrend might reverse bearish again in less than 3 trading days, but my long criteria was met with the breakout far beyond 2570, there the long is active now from 2569 points. Stop loss: 2545, Target: 2695.
Note
Right after I market the trade as active, news appeared that Trump could favor John Taylor to lead the Fed. A hawkish Fed would mean there could be much more rate hikes in the future, which could weigh on most stocks and make buying them less attractive than under the current dovish Fed lead under Yellen.The news had a negative impact on the market and the S&P 500 futures made a new low for the week.
Note
The downtrend which started right after I marked the trade as active before the Tuesday close continues on Wednesday.Please hedge with a short. Here my new bearish idea:
Trade closed: stop reached
Stop loss 2545 reached. I'm glad I warned you before it happened today at around 2555-2560.
Note
The market is acting as bullish as I had originally envisioned on October 19. A new all-time high above 2588 was reached on November 1.Note
The market continues to act super bullish. Another new all-time high above 2593 was reached on November 6.Note
Another new all-time high above 2597 was reached on November 7, but then the market gave up the gains before the trading week ended.I came across a very bullish long-term S&P 500 view on CNBC:
This portfolio manager sees a decade left in this bull market
cnbc.com/video/2017/11/10/why-one-portfolio-manager-sees-a-decade-left-in-this-bull-market.html
Note
The S&P 500 has - after rallying strongly - meanwhile reached the red colored time/price area of potential downside risk, after making yet another all-time high on December 18.There could be one or a few more all-time highs coming soon though as bulls try to reach the 2700 target in the remaining trading days before the year 2017 ends.
Trade closed: target reached
A final update for everyone followed this bullish idea and used a different stop loss (which unlike my recommended stop loss wasn't triggered on October 25).The original long target of 2695 points since the long entry below 2600 points has been easily reached as the S&P 500 made a new all-time high above 2725 points on January 4, 2018 after almost hitting 2695 points on December 18, 2017 already.
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