Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Eye Opening Currency Charts – Why Precious Metals Are Falling - 23rd May 19
Netflix Has 175 Days Left to Pull Off a Miracle… or It’s All Over - 23rd May 19
Capitalism Works, Ravenous Capitalism Doesn’t - 23rd May 19
The Euro Is Bidding Its Time: A Reversal at Hand? - 23rd May 19
Gold Demand Rose 7% in Q1 2019. A Launching Pad Higher for Gold? - 23rd May 19
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

How Low Could the S&P 500 Go?

Stock-Markets / Stock Markets 2018 Dec 14, 2018 - 02:49 PM GMT

By: Gary_Tanashian

Stock-Markets

Our target for the first half of 2019 is and has been the 2100 to 2200 area for the S&P 500. A friend asked…

I’ve been meaning to ask (and possibly) know the answer, 2100-2200 for H1 2019 is your ultimate bear market target or opening act?

Opening act. It could be the ultimate target because there is a lot of support at that area and a good solid bear phase could put the Fed on ice and impose some changes to Donald Trump’s bull in a China shop policy style.


So for now I see no reason to make dire proclamations beyond that key support level, as so much will depend on incoming information in 2019. At this point, even 2100-2200 is not technically in the bag because the US stock market clung to last ditch daily chart support, as per the marginally favored short-term NFTRH view. So all of we bear callers need to remember that as ugly as the charts are, support is not broken until it is… broken.

I was going to cover this in NFTRH 530‘s Opening Notes segment, but why not make it a public post and save NFTRH’s virtual ink for more immediate issues going on with the markets? Before we dial out to a couple of simple SPX charts showing the prospective downside targets, lets review the situation with a less than simple chart.

Below is a chart from the NFTRH Market Internals segment that simply says when the weekly EMAs 20 and 50 trigger down, a bear signal would be in effect. This occurred near the beginning of the bear markets that began in 2000 and 2007. Ah, but there were two big time fake outs in 2011 and 2015 when harsh corrections failed to deliver anything more from the bear side.

So let’s add some panel indicators to the chart and see what might be different now from 2011 and 2015 and what might be similar to 2000 and 2007. What we find is the SPX/Gold ratio at our initial (and potentially though not definitively final) upside target as we’ve been chronically for much of the last year in the Macro Amigos updates

Amigo #1 (SPX/Gold) got to destination. Amigo #3 is the Yield Curve and it is still flattening like a pancake and while you could say it is very near destination, it has not yet started to steepen and so, is not yet virulent toward stock bulls. In 2007 the stock market did not top until well after the curve steepening began but in 2000 the conditions occurred in unison. All in all risk is still very high, as it has been for most of 2018, actually.

The other indicator is the 3 mo. T-Bill yield in the middle lower panel. This yield is highly sensitive to and correlated with the Fed Funds Rate. In 2000 it topped out simultaneously with the SPX while in 2007 there was a lag, as with the Yield Curve.

The bottom line is that SPX is in a volatile phase with key moving averages not yet triggered but moving in that direction while the market’s indicators shown below flash ‘high risk’.

Does all of the above mean we are going bearish? You’ll have to ask a certified guru who’s willing to sign, seal and deliver a handy prediction. But the probabilities by these and many other indicators we follow flash bearish and hence, that is our favored plan. Simple.

So assuming that plan plays out, let’s look at the two primary downside objectives for SPX.

The first is as we’ve been discussing, a measurement of a still hypothetical Head & Shoulders topping pattern that has formed in classic fashion, with the higher high (Head) having come with a significant bearish divergence by MACD and RSI (among several other technical and macro indicators diverging the market).

The beauty here is that the pattern measures right to the target which we have held as logical for other reasons, like the market poetically taking away the gains of the Trump Rally as this bull in a China shop appears to have little more than a rudimentary understanding of how sensitive America’s most progressive businesses are to well functioning global trade.

Target #1: It is as it has been, 2100-2200 with the idea that this would simply be a short bear cycle; enough to scare ’em all out while the smart money buys at 2100. But smart money is only smart if it is buying forward fundamentals and I am more than willing to stop and evaluate the situation at that time with little need to bank on one or the other eventualities.

Now let’s dial the chart out to a monthly view. Well look at that little shelf of support there at 2100. It would only take away about a half of the bull leg from the blue sky breakout in 2013. Again, as a handy reference that was a time when we were ramping up a bullish view on the Semiconductor Equipment industry as an early cyclical indicator. Today, we are almost a year on from clearly stating the opposite view: Semi Canary Still Chirping, But He’s Gonna Croak in 2018. You can add that as yet another indicator that just maybe this time it’s different (from 2011 and 2015).

So if we go bear and if SPX does not hold the 2100 area, then prepare for a take back of the entire new secular bull market; an all-too normal test of the big breakout. Don’t think it can happen? Think again. Who back in 2013 thought that SPX would hit 2900 just 5 years later? Absolutely not me, for one.

So technically its a gambler’s game. Is MACD doing 2000, 2008 or 2015 in its current trigger down condition? And what about RSI? We have previously noted that the long, drawn out overbought situation in 1995-1998 resulted in the ’98 correction prior to a big new upside burst to the bubble top before the market finally rolled over. But a shorter spike to overbought in 2006-2007 was met with a terrifying bear market once RSI turned down.

More recently there was the drawn out overbought situation in 2013-2015, which ended up resolving bullish as happened in 1998. Today we have something similar to – but even scarier looking than – 2007’s relatively short overbought condition and abrupt drop from overbought.

So there you have it. Some TA mumbo jumbo and some indicators. My friend’s question was an excuse to write a relatively breezy article this week and get to my roots, which is charts and indicators. The two combined have us leaning to the bearish side for the first half of 2019. I am currently straddling the market with a view of a short-term grind (potentially with an upward bias) to finish the weekly pattern’s right side. But as noted repeatedly in NFTRH, the dominant view is bearish.

It’s now on the bulls to prove otherwise and undo the bearish signs that have gathered. They did just that in 1998, 2011 and 2015. But on this occasion there are some key differences and so, in the event the bear view proves out, we have a couple of long-term charts showing logical support areas.

Subscribe to NFTRH Premium (monthly at USD $33.50 or a 14% discounted yearly at USD $345.00) for an in-depth weekly market report, interim market updates and NFTRH+ chart and trade setup ideas, all archived/posted at the site and delivered to your inbox.

You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar and get even more by joining our free eLetter. Or follow via Twitter ;@BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2018 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules