This Looks Like A Seller's Rally Built On Quicksand We have a truly massive bearish divergence on both the weekly RSI and Ultimate Oscillator for the S & P 500. Marked on this chart are moments where SPY broke its all-time-high and confirmed further upside without a divergence (yellow). In pink, I also marked where SPY printed a failed breakout and entered bearish territory shortly thereafter. While I think we COULD have a bit more upside, I think this is a great opportunity for people to exit the stock market before things get potentially pretty awful. It could drop next week. It could happen in two weeks, three weeks, several months even. All I can see is that there is a LOT of downside risk here, and the bearish divergence usually didn't take too long to play out in the past.
Potential support/liquidity zones for the coming decade are marked in magenta. I also have been posting about how price action in the Dow Jones is perfectly mirroring what led up to the 1929 stock market crash. So yes, I think SPY can get back to the 400-700 range. However, a bear market of this magnitude would only become more likely if we breach the low from December, 2018 and then fail to hold the important 1500 range as well (resistance from the 2000's).
The monthly chart looks just as bad, with the divergences even MORE pronounced. It shows that we easily have downside at least towards the 1600 area, and the 200 month moving average. What's really interesting about the monthly chart, is that we haven't seen a positive correlation between the oscillators and price since 2012! You can see the anomaly here, where the oscillators started looking bearish even in 2014. This could tell us that the entire rally from the last 5 years didn't have much strength behind it.
No one is benefitting from this stock market rise. The everyday person isn't even happy about it. I see it on their faces every day. Why? Because they're still making the same amount of money that they did decades ago and paying more taxes, while the wealthy continue to be the sole beneficiaries of this endless bull market. Meanwhile, the barriers to entry for landing a decent-paying job keep getting more oppressive: the cost of a college degree, the racial wealth gap, workers getting replaced by technology...I'm pretty sure most people see that there's something wrong with this. You can feel it in the air. There's a lot of turbulence. Civil unrest is on the rise globally, and I don't think it's unlikely that it will spread to the United States. I think the real reason why people have been waiting for a market correction is because deep down they want it to happen. They know that something needs to be shaken up, because positive change cannot occur as long as the greedy people who are in power are comfortable. Change will occur when even those at the top start to tremble in their boots from fear and loneliness.
What's sad is that the stock market was initially meant to represent universal prosperity; if stocks are doing well, then the whole nation is doing well! Everyone can own a piece of the pie and benefit from our shared growth! Instead, what we're seeing now is an evaporating middle class, where the majority of the nation is NOT doing well. It's like a lovely mansion built on a termite infestation that everyone somehow chooses to ignore.
I think some sort of financial restructuring is inevitable---some serious ground-up rebuilding. This will need to happen in order to face environmental problems as well. As we are now, we cannot efficiently tackle major issues. Will cryptocurrency valuations benefit from massive change? We have no idea. First we need to tackle the stock market delusion, so crypto may be left by the wayside at first.
I think that once major media outlets stop believing in the endless stock market rally, then we would get real panic, and all the people who have been feeling uneasy will start to feel validated, but in a sick way. Then, perhaps we can unite and tackle these challenges. In an age of constant self-medicating and denial through smartphones and social media, people will need a lot to get them to take action, especially the people least affected by these problems.
Alright, rant over.
This is not financial advice. This is purely my opinion.
-Victor Cobra
