$SPX failures at the top $RUT $XLFBeen a while since i posted - life stuff :)
I think it's fair to say that given all the things that are going around in the US and the rest of the world, the stock market, particularly the tech driven Nasdaq has been "over-exuberant", getting to and fairly swiftly breaking above to new all time highs on the SPX. While market participants had all signs to say that this would correct, many, almost all, maintained that this is still a bull market and the markets have more upside to go.
I've maintained that we have been in a bear market but participants are wishing the continuation of the longest bull market in history, ignoring the March correction, or rather asserting that this is a new bull market. In either case... history has shown that even with crisis driven/led markets, it takes a couple of years for markets to reverse trend and enter/exit bull and bear markets. I think we're in a bear market that is shaking off what remains of the bull market and it's glitters.
The SPX broke above new highs and sputtered quite drastically as it ran out of gas. It didn't put up much of a fight near the 3390 level for support, and after spending a day to get back above this level to mount a bull charge, that effort was quickly extinguished and broke down to 3365 ish level, below the previous all time high support.
From there it mounted another charge to get back above 3393, and this week, once again smothered by sellers, and we remain at 3330, where the last bull charge/stance was made. Will there be another charge to test resistance? Yet to be seen.
Interesting perspective to note here is that, while institutional investors move markets, retail investors can cause a panic rampage. With the Covid pandemic and people having no place to go, no work to go to, staying at home and unattended or unemployed, people are pouring money in to their only source of income and investment, which is the stock market - which by all accounts, rallied from March as the pandemic has gotten worse, at least in the United States. We have to understand that, while someone like myself have been through the dot com bubble and the financial crisis, many of these young investors and traders don't know what a stock market crash is, never mind what a bear market looks like. For them, the stock market seems unbreakable; it's a sure win if everyone sticks with it. No understanding of market psychology or behavior, of how markets move.
That means, potentially, when market takes a downturn, we may see a feverish panic to the likes of which has never been witnessed before. This rally from March is a subtle sign of that on the bullish side. Call it a panic rally, if you will - fear of missing out, there is no alternative, etc., the usual sayings.
Where will the markets go from here? Well, while tech has led the way upward, small caps and financials have not been as enthusiastic about the March bounce, and these groups may drag the markets on the way down like an anchor. I would be looking at those for direction in the coming weeks.
