I have been leaning more bearish on SPX lately, but I don't think that 2400 is the final top. There will be more upside attempts as we get through some risk events, and more clarity on Trump's tax plan. But we should have trouble going much higher ahead of the French elections, where you will definitely have scared European money sell ahead of time, fearing another Brexit like scenario. Even though Brexit selloff only lasted 2 days, it was a scary 2 days.
There are some ingredients for a final top that are missing, mainly the presence of uncertainty. Tops usually occur when there is very little uncertainty in the markets. Oddly enough, the sooner that Trump can get his tax plan announced and passed, the sooner we will get the ultimate top in the SPX. I believe he will get a tax plan passed, just because Republicans never met a tax cut they didn't like, and they control both houses of Congress. They will use dynamic scoring to jam through a supposedly revenue-neutral bill, putting up absurdly optimistic assumptions for growth to meet those ends.
Only when that happens, will you have the right backdrop for a durable top. Right now, everyone isn't buying into the rally because we haven't gotten the tax cuts. They will be coming. And the market will eat it up.
I am still waiting for the right entry point, the SPX just hasn't given a good short since my bad trade on March 1 when I should have just let the thing work for a few days instead of chickening out. That is what 8 years of a bull market will do to a natural bear that actually survived. The bears that survived are mostly chicken littles.
No opinion for the week, we may get a bit of a relief rally after the Fed rate hike, but it shouldn't last long. After that, all eyes will be focused on the French elections, and that means selling equities.
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4 comments:
TrendRambo on Twitter: How about buying here? I am long ES with small hedge. SPX is oversold held support levels.. consolidating. Rate hike is priced in.
I see limited upside before the French elections, so poor risk/reward ratio for a long here. I am waiting for a rally this week to short for a swing trade. I am not sure there will be much of a rally, this S&P looks tired.
TrendRambo on Twitter : I could be wrong but it feels like market is coiling. Taking on shorts. Will find out tomorrow. That 2400 needs to be retested. I expect a pre 1987 scenario . Market will rise 60 - 80% within 2 -3 years and then falls hard. This market will not allow those underinvested New Yorker/Trump hater fund managers to get in lower.
I don't expect any crashes, but we will get a bear market soon. There is very little fuel left for this pig. Economy is still weak, but compared to last year, it looks strong. Extrapolating strong soft data into future strong hard data is just conjecture, not proven throughout history.
There aren't many that are underinvested, looks like most of the lemmings are already in the boat.
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