S&P 500 bull rally regression trend analysis 1990-2020
Updated
If you follow my ideas then you know that I really believe in regression trend analysis. The more I use it the more it just makes things make sense. I have said this several times, but I believe in it because linear regression (data fitting and prediction) is the easiest idea to understand for humans and the easiest for to implement in trading algorithms. All rallies generally follow a linear regression channel bouncing off the top for a correction and bounce off the bottom for rallies.
So what? Well, I thought it would be interesting to plot linear regressions for each of the major rallies since the dot com bubble. The end result is pretty interesting. I did not show the deviation bounds as it makes it too hard to read. The line you see is the linear model fit to the data (y=mx+b). This is not conclusive on if this irrational rally will contiune, but given how many lines interest in one location is a good hint that this major rally from the 1990's is getting close to its end, IMO.
Now, look at what happens when I zoom in. I did not manipulate these lines at all. All lines come directly from the built in regression tool. If that is not some cosmic sign for a top I don't know what is! I did add a black regression line in. I added dots to define where I started and ended. For that line my assumption is the extra "drop" in March was a test (see how my dot stops at the regression line and the drop goes past) and the other dot is where the rally should have stopped but FOMO took it higher.
So what? Well, I thought it would be interesting to plot linear regressions for each of the major rallies since the dot com bubble. The end result is pretty interesting. I did not show the deviation bounds as it makes it too hard to read. The line you see is the linear model fit to the data (y=mx+b). This is not conclusive on if this irrational rally will contiune, but given how many lines interest in one location is a good hint that this major rally from the 1990's is getting close to its end, IMO.
Now, look at what happens when I zoom in. I did not manipulate these lines at all. All lines come directly from the built in regression tool. If that is not some cosmic sign for a top I don't know what is! I did add a black regression line in. I added dots to define where I started and ended. For that line my assumption is the extra "drop" in March was a test (see how my dot stops at the regression line and the drop goes past) and the other dot is where the rally should have stopped but FOMO took it higher.
Note
An extra channel from 2009 top this year. Note
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