Black Monday

[FTG]

Coincidentally, I recently opined here that 4600 on the S & P 500 is a significant level, and ~ 4750 was the next level to watch on the bull trend. Well, this week it hit an ATH of 4745, but then reversed to 4595 (with the biggest 1 day fall this year) to sit back right on the significant level. Also leaving a Bearish engulfing pattern on the weekly chart. It seems that the market is treating those levels with some respect.

15 Dec 2021....and as at today this reasonably tight trading range (4600 - 4750) is STILL in play. The 4600 level especially is still being respected by the market, with the market bouncing off it today, yet again - making an intraday low.

FED talk tomorrow could be direction setting??

...Originally posted in Mid-Dec & prior. My word, how things have progressed!

As each candle on the daily & weekly chart prints, to me it more & more looks like a good old bear market is now (finally!) forming. It's been so many years now, can you remember those?! If so, I would suggest it's WELL overdue. Let's face it, the March 2020 "crash" wasn't a real bear market. However, it was a very sharp & swift correction. As we know, it was the fastest decent drop from an ATH in history (over 35% fall in less than 30 trading days from the ATH), but which then went on to be totally retraced & go on to further new ATH's (all within just 6 months!).

With just 4 trading days left in the month the S & P is now clearly showing a bearish engulfing candle on the Monthly chart. Yet another signal that if confirmed we should take heed of. Additionally, when looking at the weekly & daily charts one can clearly see the charts are showing more of a 'rounded top'. This is the shape one would normally expect for indices (as opposed to individual stocks, commodities etc which can produce more sharply shaped formations ) to print when evolving into a decent Bear Market. '29, '73, '87, '09 ALL showed rounded tops. During these rounded tops the "smart money" starts to exit, whilst the "not so smart" keep buying the dip.

The psychological condition of the market certainly appears to be changing in 2022.

So, where to from here?

- As the market psychology changes from a long-term bullish mindset to a bearish mindset it is likely volatility will remain more elevated for a period. We are certainly seeing some of that whipsawing action intraday already.
- The 200 DMA has been pierced to the downside (first time in 2 years),
- and the 4600 Fibonacci and S/R line mentioned above has been blown away like a line in the sand on a windy West Coast beach.

If I'm on the money and this is the beginning of a BEAR Market, then the eventual targets to the downside will be dependent on which time-cycles are in play. IMHO we are more likely to see a decent Bear market play out over months/years, rather than just days/weeks.

FWIW, Bear markets aren't all bad. They are actually needed to clean things up a bit and set up conditions for sustainable Bull market to prevail later. They are part of a healthy & well functioning market. Remember though , in this case the S & P hasn't been in a Bear Market for a record 13 years. Just think, there will be a few young retail investors who have never truly experienced a Bear Market!



Number wise, even when just looking at the leg up from 23/3/20 and using Fib and historical S/R, at the absolute minimum initially the 3200-3500 zone looks like a big magnet to me. NB. It just happens the Feb 2020 swing high is smack in the middle of that range too.

First though, we now need to see a 2DC below 4200 to strengthen the Bear's case. Later this week, or early next month?

[value_investor]

I've woken up from my slumber and starting to buy, I'm reading a lot of things online capturing my interest and the backdrop I get to this is that a lot of new investors have come in the last 2-3 years. They've experienced some outsized gains, and this uptrend we have seen without a correction is not sustainable. However, its come now and its healthy for the market in the long run to shake out some of the investors and bring itself back to fair valuations. Remember the saying "everyone is a genius during a bull market".

The funny thing I'm seeing is if you zoom out on the US markets about 6 months you are still up on stocks. Microsoft is down 11% YTD however its still up 2.5% if you go back on 6 months. Apple is down 11% YTD as well, if you go back on 6 months its up 8.5%. You could do a similar exercise if you zoom out on the large caps on the NZX.

I expect we will continue shaking out some of these investors, a lot of stocks that have low conviction have been propped up by cheap money and/or incredibly lofty guidance or outlooks. We have seen this trend of companies keeping short term debt at 2-5 year lengths financed at very low rates and then refinanced again. Those days might be coming to an end, and while interest rate rises are coming in now, we are still very low historically so the run up could continue (unless we see political factors come to play).

If your time horizon is less than 2 years then I would be concerned, but if its 10 years + then this is a great opportunity. Remember if you had strong conviction on a stock at $5 then your conviction should be even stronger at $4.50 not weaker, and if it is weaker at $4.50 then you probably didn't believe in the stock from the beginning.

[bull....]

no follow thru after a historic intra day rally is not normally a good sign

anyway heres a good story

Boomerang Rally Hints at Deeper Market Troubles

History suggests that such dramatic reversals happen only when something is amiss

https://www.bloomberg.com/opinion/ar...d=premium-asia

[JohnnyTheHorse]

Just setting some hourly and 4hr (futures) higher lows before getting any rally follow through in my opinion.

[Rawz]

US rebound.

Quick buy buy buy. Cash is trash, it’s losing money as we speak.

Max debt
Max investment

[alokdhir]

Normally markets make the low before the start of the up rate cycle of FED ...many call it " FED. Tantrum " ...so as per that saying ....low should be in place or close by ...after this will be slow grind up while the rates rise .

NZX most likely low for the year is in place 12100 should hold and we end year close to 14000 ....

[bull....]

fed announcement just out only reinforces my view they are way behind the curve. setting up for dangerous times ahead. short term bounces are just that

[winner69]

Hmmm



Bull says - Fed are way behind the curve. setting up for dangerous times ahead. short term bounces are just that

And

alokdhir says - FED. Tantrum " low should be in place or close by ...after this will be slow grind up while the rates rise - NZX most likely low for the year is in place 12100 should hold and we end year close to 14000 ....

[JohnnyTheHorse]

Normally markets make the low before the start of the up rate cycle of FED ...many call it " FED. Tantrum " ...so as per that saying ....low should be in place or close by ...after this will be slow grind up while the rates rise .

NZX most likely low for the year is in place 12100 should hold and we end year close to 14000 ....

I almost can't find a bull case for equities or risk assets at all. Let me put two scenarios to you...

1. Economy continues to perform very strongly, so inflation is strong. Rates go up, hence strong downward pressure on asset prices

2. Economy falters, recession, inflation takes a further 12 months to abate so rates can't be dropped too quickly. Rates put pressure on asset prices, BUT there's something more important... PE ratios are at historical extremes and this is at a time of an economic goldilocks period (for many). If there is economic contraction, even if the current historically extreme high average PE ratio is maintained, share prices will drop significantly due to decreased earnings. PE contraction would probably happen too.

So what's the bull case? Keen to hear other views.

[bull....]

better buy everything you need now from the shops cause prices be heaps higher soon