SPX500 Update - The Imbalance is forming, what to do?
Note before reading;
The previous analysis was private, but included in the following analysis;
https://www.tradingview.com/chart/US30/eKGVwF2y-Wall-Street-Surpasses-another-extension/
Here: or refer to the bottom link
https://www.tradingview.com/chart/SPX500USD/UHslxVgS-SPX-to-complete-the-full-extension-enroute/
Hello Traders and Analysts,
Breakdown:
1. Note
2. Contents
3. Research breakdown
4. Education recap
5. Information on Lupa.
A Note before reading - this is a forecast analysis - based upon our trading strategy. This is tagged Neutral for the moment, due to purchasing further increments upon imbalances for additional sells.
Please do not take this as face value and conduct the relevant investment strategy to successfully trade the probabilities. However, note - the overall trend is bullish, but is beginning to profit take and show signs of cracking.
Master Key for zones
Risk Warning
Trading leveraged products such as Forex, commodities and CFDs, carries with it a high level of risk and so may not be suitable for every investor. Prior to trading the foreign exchange, commodity or CFD market, consider your investment objectives, level of experience and risk appetite. You should never risk more than you can afford to lose. If you fail to understand or are uncertain of the risks involved, please seek independent advice and remember to conduct due diligence.
Firstly why has the SPX and US30 become so bullish?
Simply put, as the FED Funds have been slashed - and with yields being key to movements of both institutional and retail - credit deposits provide a little return so if the trend is up and to the right, then a standard metric is sure, keep on investing regardless of the high value. This keeps the Shiller ratio and price earnings ratio are seen as "this seems fine" (to view the website to review these metrics, click the link below) - multpl.com/s-p-500-pe-ratio. To further understand this, the use of the cross-asset comparison shows a simplistic view but also a reality.
The Daily chart shows us a steep wedge formation - just like the three day chart.
Weekly Chart
The Fibonacci from the swing low - to the top of the market, which created our new "0" as the new all time high part of the structure.
The Continuation of the weekly imbalance had created a new area on the weekly, and bi-monthly timeframe - which offered a 0.236 Fibonacci retracement, indicating that the buying imbalances are still present. [This is now the weekly zone to add long positions].
Now the -0.27, -0.618 extension targets are reached.
The Wedge channel had begun and created a very strong channel with an effective structure of the sellers attempting to make an imbalance. The channel has now provided areas where price can pivot to.
The monthly has a future strong imbalance formed.
The three month indicates where price can be used for buying activity* So long as price reacts to the 61.8 & 70.5% levels.
See the Pathway where price can take us, using the probability of a bearish imbalance formation.
Entry zone?
Scenario - consists of a pullback of the market once the low has been made, where price always corrects. Keep in mind the -0.618 can and has the likelihood of returning to 4465*+ to 4702, assess the reactive level again upon an impending sell. Do your due diligence. Where price makes an all time high, price will revert most like back to "0" Fibonacci zero before reloading a bullish run. However, with the -0.786 Yet to be reached, price can offer this level to provide a large pivot point upon an imbalance created, with a liquidity spike capturing stop losses to most [but in reality is completing the sequence].
See the second chart proposing the outlook where the full completion occurs.
Current position short
Short offset to hedge longs is activated
adding shorts once the imbalance has formed and retested successfully
SPX VS VIX
Refer to the weekly negatively correlated SPX and associated Volatility index.
*Note: please refer to US30 analysis or VIX for inverse relationship of correlation, not causation*
Current scenario
Vix Chart - please keep in mind that the VIX has correlation, causation is caused from the associated short term risk of the sentiment change within profit taking, impending policy changes, health warnings, war and other macro-factors.
https://www.tradingview.com/chart/VIX/s4jLu43r-VIX-chart-tracking/
Current outlook; Using the Daily chart
Refer to the DXY chart to follow the imbalance.
The analysis link is attached.
Cross-asset comparison;
Looking to the DXY, US05-US02Y short term yields, look towards the critical levels here where DXY and USDJPY shows an opportunity where imbalances have established.
Quantitative easing (QE) is where the increasing the money supply of the system, where the Central Bank creates new money and uses the money to make asset purchases. These asset purchases inject the new money into the system.
(QE) tapering will be seen on interest rates. The impact is almost immediate - affecting the sentiment. (QE) can be used where interest is at zero %, as the central bank(s) want to introduce more stimulus.
Conversely - when easing occurs, adoption of a new introduction is will send the interest rates shooting, the money to those who can offer the highest interest rates and this competition will send the interest rates skyrocketing. This directly affects the Equity market and the FX safe-haven pairs immediately.
Employment
In relation to employment is closely linked to that state of inflation or deflation in the economy. When there is excess money in the economy, the confidence is upbeat and CPI [consumer price index] aligns with goods production resulting in people getting employed in the economy or in this case - returning to the original job before the pandemic. Therefore quantitative easing (QE) is positively correlated to a higher employment level* subject to NFP "True" figure of new jobs created, not in the aspect of 'Return to work'.
See the article snippet below affecting the US Market.
"On Labor Day, COVID-era expanded unemployment benefit programs expired. Those temporary programs included the $300 weekly bonus checks as well as coverage for those who are normally ineligible for unemployment insurance, like gig workers and the long-term unemployed. More than 11 million people were impacted by the cutoff, and roughly 7.5 million people lost their benefits entirely". - Source CNET.com/personal-finance/your/money
Inflation or Deflation?
inflation is likely to turn into deflation through (QE) where tapering pulls money out of the system, where less money (as compared to before) chasing the goods available, making every good less expensive. Great for consumers?! But this is no longer the case as for the wider majority - prices are now starting to take shape and cuts need to be made, and rates need to be hiked.
Daily Fibonacci using the USD CAD
The technical aspect here is price will need to engineer a long movement so when coming to a pivotal point on the Fibonacci extension target, price will react here, allowing discounted buy opportunities. However, price retested the Imbalance upon the weekly back to lows of 1.23 - 1.22, majority of original buyers will find new entries and the sellers would be looking to remove profits or shaken out of late positions added.
- this is a point of interest or (POI), where price has consolidated heaps and has now double bottomed [retested the monthly imbalance] and now heading towards "0" Fibonacci.
Chinese situation:
A quick insight to how the Chinese market works
The chinese property is leased for 70 years from the government who will be brought up by Real estate companies who will design and pre-sale units to investors, who will buy off plan using deposits.
The cycle of funds will allow the developer to fund the next, complete or buy further leases for the next project, leaving a debt cycle
Referring to China A50 USD - the FTSE China 50.
Collapse of Evergrande
Regulators have warned that its $305 billion of liabilities could spark broader risks to China's financial system if its debts are not stabilised. This will have ripple effects upon the US, Australian market relating to commodity imports from Australia with Copper, Iron has hit these commodities with creating imbalance sells upon the metals.
China - will the CCP allow Evergrande to default?
"Evergrande's woes also pressured the broader property sector, with Hong Kong-listed shares of small-sized Chinese developer Sinic Holdings (2103.HK) down 87%, wiping $1.5 billion off its market value before trading was suspended" Reuters.
Whilst the Chinese real estate market has large multiple ratio where the Chinese seek the real estate to be a wealth inidcator.
Despite the prices of price to income ratio as a whole in china the property price is 27.89x the avg income.
Expressed as a mortgage % of income is 223% of monthly income.
Source:
numbeo.com/property-investment/rankings_by_country.jsp?title=2021-mid®ion=142
What do you think about the current state?
Is inflation now transitory - with new FED comments - "Clearly the risk of more persistent inflation has risen," Powell said in testimony before the Senate Banking Committee. ... He pledged that policymakers "will use our tools to make sure that higher inflation does not become entrenched."
source: https://www.channelnewsasia.com/business/fed-chair-admits-us-inflation-could-prove-persistent-2349036
https://www.bloomberg.com/news/articles/2021-11-30/powell-ditches-transitory-inflation-tag-paves-way-for-rate-hike
Do you enjoy the setups?
*Professional analyst with 5+ years experience
*Focus on technical output not fundamentals
*Position and swing trades
*Provide updates where necessary - with new updated ideas tracking the progress.
If you like the idea, please leave a like or comment.
To all the followers, thank you for your continued support.
Thanks,
LVPA MMXXI
The previous analysis was private, but included in the following analysis;
https://www.tradingview.com/chart/US30/eKGVwF2y-Wall-Street-Surpasses-another-extension/
Here: or refer to the bottom link
https://www.tradingview.com/chart/SPX500USD/UHslxVgS-SPX-to-complete-the-full-extension-enroute/
Hello Traders and Analysts,
Breakdown:
1. Note
2. Contents
3. Research breakdown
4. Education recap
5. Information on Lupa.
A Note before reading - this is a forecast analysis - based upon our trading strategy. This is tagged Neutral for the moment, due to purchasing further increments upon imbalances for additional sells.
Please do not take this as face value and conduct the relevant investment strategy to successfully trade the probabilities. However, note - the overall trend is bullish, but is beginning to profit take and show signs of cracking.
Master Key for zones
- Red = Three Month
- Blue = Monthly
- Purple = weekly
- Scarlet [Red] - Four day
- Orange = Daily
- Green = 8 Hour, 16hour
- Grey = 4hour
- Pink = 1 hour
Risk Warning
Trading leveraged products such as Forex, commodities and CFDs, carries with it a high level of risk and so may not be suitable for every investor. Prior to trading the foreign exchange, commodity or CFD market, consider your investment objectives, level of experience and risk appetite. You should never risk more than you can afford to lose. If you fail to understand or are uncertain of the risks involved, please seek independent advice and remember to conduct due diligence.
Firstly why has the SPX and US30 become so bullish?
Simply put, as the FED Funds have been slashed - and with yields being key to movements of both institutional and retail - credit deposits provide a little return so if the trend is up and to the right, then a standard metric is sure, keep on investing regardless of the high value. This keeps the Shiller ratio and price earnings ratio are seen as "this seems fine" (to view the website to review these metrics, click the link below) - multpl.com/s-p-500-pe-ratio. To further understand this, the use of the cross-asset comparison shows a simplistic view but also a reality.
The Daily chart shows us a steep wedge formation - just like the three day chart.
Weekly Chart
The Fibonacci from the swing low - to the top of the market, which created our new "0" as the new all time high part of the structure.
The Continuation of the weekly imbalance had created a new area on the weekly, and bi-monthly timeframe - which offered a 0.236 Fibonacci retracement, indicating that the buying imbalances are still present. [This is now the weekly zone to add long positions].
Now the -0.27, -0.618 extension targets are reached.
The Wedge channel had begun and created a very strong channel with an effective structure of the sellers attempting to make an imbalance. The channel has now provided areas where price can pivot to.
The monthly has a future strong imbalance formed.
The three month indicates where price can be used for buying activity* So long as price reacts to the 61.8 & 70.5% levels.
See the Pathway where price can take us, using the probability of a bearish imbalance formation.
Entry zone?
Scenario - consists of a pullback of the market once the low has been made, where price always corrects. Keep in mind the -0.618 can and has the likelihood of returning to 4465*+ to 4702, assess the reactive level again upon an impending sell. Do your due diligence. Where price makes an all time high, price will revert most like back to "0" Fibonacci zero before reloading a bullish run. However, with the -0.786 Yet to be reached, price can offer this level to provide a large pivot point upon an imbalance created, with a liquidity spike capturing stop losses to most [but in reality is completing the sequence].
See the second chart proposing the outlook where the full completion occurs.
Current position short
Short offset to hedge longs is activated
adding shorts once the imbalance has formed and retested successfully
SPX VS VIX
Refer to the weekly negatively correlated SPX and associated Volatility index.
*Note: please refer to US30 analysis or VIX for inverse relationship of correlation, not causation*
Current scenario
Vix Chart - please keep in mind that the VIX has correlation, causation is caused from the associated short term risk of the sentiment change within profit taking, impending policy changes, health warnings, war and other macro-factors.
https://www.tradingview.com/chart/VIX/s4jLu43r-VIX-chart-tracking/
Current outlook; Using the Daily chart
Refer to the DXY chart to follow the imbalance.
The analysis link is attached.
Cross-asset comparison;
Looking to the DXY, US05-US02Y short term yields, look towards the critical levels here where DXY and USDJPY shows an opportunity where imbalances have established.
Quantitative easing (QE) is where the increasing the money supply of the system, where the Central Bank creates new money and uses the money to make asset purchases. These asset purchases inject the new money into the system.
(QE) tapering will be seen on interest rates. The impact is almost immediate - affecting the sentiment. (QE) can be used where interest is at zero %, as the central bank(s) want to introduce more stimulus.
Conversely - when easing occurs, adoption of a new introduction is will send the interest rates shooting, the money to those who can offer the highest interest rates and this competition will send the interest rates skyrocketing. This directly affects the Equity market and the FX safe-haven pairs immediately.
Employment
In relation to employment is closely linked to that state of inflation or deflation in the economy. When there is excess money in the economy, the confidence is upbeat and CPI [consumer price index] aligns with goods production resulting in people getting employed in the economy or in this case - returning to the original job before the pandemic. Therefore quantitative easing (QE) is positively correlated to a higher employment level* subject to NFP "True" figure of new jobs created, not in the aspect of 'Return to work'.
See the article snippet below affecting the US Market.
"On Labor Day, COVID-era expanded unemployment benefit programs expired. Those temporary programs included the $300 weekly bonus checks as well as coverage for those who are normally ineligible for unemployment insurance, like gig workers and the long-term unemployed. More than 11 million people were impacted by the cutoff, and roughly 7.5 million people lost their benefits entirely". - Source CNET.com/personal-finance/your/money
Inflation or Deflation?
inflation is likely to turn into deflation through (QE) where tapering pulls money out of the system, where less money (as compared to before) chasing the goods available, making every good less expensive. Great for consumers?! But this is no longer the case as for the wider majority - prices are now starting to take shape and cuts need to be made, and rates need to be hiked.
Daily Fibonacci using the USD CAD
The technical aspect here is price will need to engineer a long movement so when coming to a pivotal point on the Fibonacci extension target, price will react here, allowing discounted buy opportunities. However, price retested the Imbalance upon the weekly back to lows of 1.23 - 1.22, majority of original buyers will find new entries and the sellers would be looking to remove profits or shaken out of late positions added.
- this is a point of interest or (POI), where price has consolidated heaps and has now double bottomed [retested the monthly imbalance] and now heading towards "0" Fibonacci.
Chinese situation:
A quick insight to how the Chinese market works
The chinese property is leased for 70 years from the government who will be brought up by Real estate companies who will design and pre-sale units to investors, who will buy off plan using deposits.
The cycle of funds will allow the developer to fund the next, complete or buy further leases for the next project, leaving a debt cycle
Referring to China A50 USD - the FTSE China 50.
Collapse of Evergrande
Regulators have warned that its $305 billion of liabilities could spark broader risks to China's financial system if its debts are not stabilised. This will have ripple effects upon the US, Australian market relating to commodity imports from Australia with Copper, Iron has hit these commodities with creating imbalance sells upon the metals.
China - will the CCP allow Evergrande to default?
"Evergrande's woes also pressured the broader property sector, with Hong Kong-listed shares of small-sized Chinese developer Sinic Holdings (2103.HK) down 87%, wiping $1.5 billion off its market value before trading was suspended" Reuters.
Whilst the Chinese real estate market has large multiple ratio where the Chinese seek the real estate to be a wealth inidcator.
Despite the prices of price to income ratio as a whole in china the property price is 27.89x the avg income.
Expressed as a mortgage % of income is 223% of monthly income.
Source:
numbeo.com/property-investment/rankings_by_country.jsp?title=2021-mid®ion=142
What do you think about the current state?
Is inflation now transitory - with new FED comments - "Clearly the risk of more persistent inflation has risen," Powell said in testimony before the Senate Banking Committee. ... He pledged that policymakers "will use our tools to make sure that higher inflation does not become entrenched."
source: https://www.channelnewsasia.com/business/fed-chair-admits-us-inflation-could-prove-persistent-2349036
https://www.bloomberg.com/news/articles/2021-11-30/powell-ditches-transitory-inflation-tag-paves-way-for-rate-hike
Do you enjoy the setups?
*Professional analyst with 5+ years experience
*Focus on technical output not fundamentals
*Position and swing trades
*Provide updates where necessary - with new updated ideas tracking the progress.
If you like the idea, please leave a like or comment.
To all the followers, thank you for your continued support.
Thanks,
LVPA MMXXI
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.