Techical and Fundamental analysis of traditional markets 3
Updated
2900-3030on the SPX has so far proven to be a strong area of resistance, but stocks are still on an uptrend. They are at a make or break stage in my opinion. Lots of people are losing their minds as stocks keep rallying, and even though I believe it is very likely that we see new ATHs on the SPX500 & NAS100... I am still of the opinion that eventually the rally will fail and roll over. It is all about understanding the structure of these products, markets and MONEY. For this reason it is better to play everything based on TA and not FA. FA is really blurry and there are many variables. (All my charts are below, including some ideas)
For now the printing press and retail optimism have been major reasons for this rally. Currently people believe Central banks have everything under control, which along with all the fresh money hitting the market and a 'buy the lockdown' (short squeeze). I don't believe they really do have everything under control and the issues are massive, but at the end of the day they want to step in and buy stocks... and they won't buy them 10% below ATHs. If the USD was pegged to gold, I'd expect an 80% correction from ATHs, but because it isn't... we might be lucky to get to 1600. Many stocks will fall 80% from their ATHs, but this doesn't mean indices will as most money is concentrated are certain stocks. Many companies will fail as they won't get a bailout and especially small to medium ones. This will have big effects on the market, but with bond yields going at 0 or below, and infinite money... it probably is better to buy Amazon or something like it that buy bonds ones they get there.
So I'd like to see the SPX500 cleanly break below 2840 and close below before thinking about shorting. On my other idea I have a clean chart of what I'd like to see to short. I was getting from neutral-bullish to neutral-bearish on the USD, but I am still confused. The reason is the DXY or DJI USD index still haven't truly broken down. EURUSD and GBPUSD went up yesterday, but the USD went up against every other pair so it is still confusing... I still believe the dollar has 2-3% room to fall but that it will resume its uptrend. For now I see it more as range bound with medium term bearish bias and long term bullish. I've been very clear on where my long term bias switches completely. One thing that is clear to me is that you can't be bearish the USD and bearish on equities. So far this has been quite clear, because if we get another down turn the dollar might go down initially along with yields (down)... but then it will most likely go much much higher.
As for oil I was wrong short term. I've been bearish for so long that I wasn't able to switch my bias. For now I think we are in a resistance zone, but there could be some upside. From my basic understanding of that market and how the hole thing works... is that oil is going much much lower. I am pretty certain it will hit 0 again, but I have no idea when. There isn't much more capacity, there isn't a way to force many cuts (eventually many will on their own), but the problems are massive and I think demand over the next year will be down at least 30%. No idea how will they be able to cut 30% of global production and where they are going to store the oil if nobody wants to buy it while they can't stop taking it out of the ground.
As for Gold still stuck below the R3 yearly pivot and slowly breaking down. Could it be that the USD is about to resume its uptrend, while Gold and SPX break down? Of course it can be. Both SPX and Gold look fragile here, but their HFT structure is bullish, so I don't want to rush anything. Personally I prefer to play these stuff by going long the USD against EM currencies & oil shorts. At least that's where I put more weight. SPX and Gold have cleaner charts for entries and exits, but for shorts they are definitely sub optimal even if you increase the size. They also both benefit tremendously from money printing while EM currencies and oil don't (at least not as much)
For now the printing press and retail optimism have been major reasons for this rally. Currently people believe Central banks have everything under control, which along with all the fresh money hitting the market and a 'buy the lockdown' (short squeeze). I don't believe they really do have everything under control and the issues are massive, but at the end of the day they want to step in and buy stocks... and they won't buy them 10% below ATHs. If the USD was pegged to gold, I'd expect an 80% correction from ATHs, but because it isn't... we might be lucky to get to 1600. Many stocks will fall 80% from their ATHs, but this doesn't mean indices will as most money is concentrated are certain stocks. Many companies will fail as they won't get a bailout and especially small to medium ones. This will have big effects on the market, but with bond yields going at 0 or below, and infinite money... it probably is better to buy Amazon or something like it that buy bonds ones they get there.
So I'd like to see the SPX500 cleanly break below 2840 and close below before thinking about shorting. On my other idea I have a clean chart of what I'd like to see to short. I was getting from neutral-bullish to neutral-bearish on the USD, but I am still confused. The reason is the DXY or DJI USD index still haven't truly broken down. EURUSD and GBPUSD went up yesterday, but the USD went up against every other pair so it is still confusing... I still believe the dollar has 2-3% room to fall but that it will resume its uptrend. For now I see it more as range bound with medium term bearish bias and long term bullish. I've been very clear on where my long term bias switches completely. One thing that is clear to me is that you can't be bearish the USD and bearish on equities. So far this has been quite clear, because if we get another down turn the dollar might go down initially along with yields (down)... but then it will most likely go much much higher.
As for oil I was wrong short term. I've been bearish for so long that I wasn't able to switch my bias. For now I think we are in a resistance zone, but there could be some upside. From my basic understanding of that market and how the hole thing works... is that oil is going much much lower. I am pretty certain it will hit 0 again, but I have no idea when. There isn't much more capacity, there isn't a way to force many cuts (eventually many will on their own), but the problems are massive and I think demand over the next year will be down at least 30%. No idea how will they be able to cut 30% of global production and where they are going to store the oil if nobody wants to buy it while they can't stop taking it out of the ground.
As for Gold still stuck below the R3 yearly pivot and slowly breaking down. Could it be that the USD is about to resume its uptrend, while Gold and SPX break down? Of course it can be. Both SPX and Gold look fragile here, but their HFT structure is bullish, so I don't want to rush anything. Personally I prefer to play these stuff by going long the USD against EM currencies & oil shorts. At least that's where I put more weight. SPX and Gold have cleaner charts for entries and exits, but for shorts they are definitely sub optimal even if you increase the size. They also both benefit tremendously from money printing while EM currencies and oil don't (at least not as much)
Note
Nasdaq 100 looks like it has topped. Essentially a massive fake out, hit the 76.8% retracement and broke the uptrend.SPX 500 same, but stopped at the last possible level. However both 2880 and 2840 turned into resistance.
2970 had many key levels that's why I thought 2900-3030 was a good zone. Was thinking there would be +/-2% around the yearly pivot, but what was confusing to me is how oil looked bullish, dxy bearish... both happened, yet stocks went down after breaking out which is odd.
At the same time all CBs were coming out in full force, but this was probably a bit more of a sell the news. The problem with that is that overall the USD will get stronger. Also it looks like the reopening talks are intensifying and the dates are coming closer, so...
If it wasn't for the QE infinity with Central banks buying junk bonds etc, I don't think we'd have bottomed that early or went so high. But that's both the narrative and the money. The issue is that the narrative will eventually fail as the underlying problems are massive.
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