S&P 500 to print final move to 6500It goes without saying, this bull market has been the most hated I’ve ever known. Retail traders attempts to go “short” on every leg up resulted in quick squeezes. Every 1% to 4% correction brought renewed calls for the end of all things. Including time I believe. There is a reason why 90% of market participants fail in trading. Emotions.
The last four long ideas published by Without Worries are linked below. Read the comments in each to get an impression of the distain retail traders have for this bull market. The Cup and Handle idea for example, published on November 9th 2023. Many reading the idea were understandably skeptic. I tell you that to tell you this... The idea was much more than a chart pattern. The idea included studies from Dollar index and more importantly market sentiment.
So lets focus on those two in a little more detail.
** Market sentiment **
The market sentiment in November last was incredibly bearish. The Put/Call ratio was sky rocketing, in other words retail traders were all “short” on the market. That was a mistake. Guess what? They're doing it again.
Weekly Put/Call ratio
If you follow my practices you’ll know one of our golden rules, we never never long into active resistance. Just don’t. Don’t even think about it.
On the above weekly Put/Call chart we can see retail traders are betting heavily with both feet for a market correction as the Put/Call ratio shows a strong demand for “Short” contracts. We can see RSI is actively rallying into resistance. Oh dear…
** The dollar index **
The dollar has entered a bull market. Or so it appears. On the 2-day chart below price action has printed a Life Cross with the index trading above the 2-day/200 sma.
However on closer inspection just as in late 2022 and indeed late 2023, both price action and RSI support have failed. This will be a short lived bull market, for now.
Support and resistance is the ultimate cheat code. It has been integral to the previous ideas shared. It amazes how many continue to dismiss the importance of practicing this simple concept. Look left.
2-day DXY
** The conclusion **
On the above monthly chart several technical developments have occurred. Together with market sentiment and dollar index structure, the combination provides a powerful message.
The red arrows highlight each significant market top over the last 10 years when sentiment was incredibly bullish. The blue arrows record sentiment at extreme bearish levels.
Here’s the interesting part, when sentiment was this bearish price action was already at the lower half of the rising channel. There is not an instance when a rise from lower to higher half of the channel with confirmation of support (we’ve confirmed) did not result in a resistance test at the top of the channel.
The resistance is now between 6500 and 6700.
Is it possible the market collapses like many retail traders are now calling for? Sure.
Is it probable? No.
Ww
** previous S&P 500 ideas **
S&P 500 - Cup and Handle
S&P 500 - Why everyone is wrong
S&P 500 - Why everyone is wrong - Part II
S&P 500 to 6000
