Also Calling a Top in the S&P 500

May 27, 2020

by Rob Zdravevski

Following on from my posts about markets being at an acute point and yesterday’s note of calling a “top” on the ASX 200 at 5,780,

…..in Tuesday’s May 26, 2020 session (last night for us in Asia-Pacific), the S&P 500 also traded in a manner accordingly of a market “top”.

It’s intra-day high was 3,022 and closed at 2,992.

Keep in mind that a market top is not the confirmation of a new declining trend. That bit needs to come later.

For now, the S&P 500 “kissed” but didn’t close above its Weekly 50 day moving average (dma) and the same for its Daily 200 dma, all the while the Daily 100 dma crossed beneath the 200 dma 2 weeks ago.

This coincided with it trading 2 standard deviations above its Daily rolling mean.

Also, my trend indicators showed that the recent 8 day spurt was not done with strength nor with adequate volume.

Furthermore, the Banking, Transport and Russell 2000 traded in a manner and to certain levels which helped form this “top” call.

The 2 month rally was clearly performed within a medium term bear trend.

At various times there are things you own and things you rent.

The equity rally from the March 23rd, 2020 low was something you “rented”.

By the way, 94% of the rally from the March 23, 2020 low of 2,192 was seen in the first month.

For the next month (between April 29th until today, May 26, 2020) it see-sawed in a 7% range throwing many head fakes at either end. (see the chart in the headline banner)

Psychologically, equity markets tested the impatient, it drove the fundamental one-dimensional investor nuts and seemed to turn some into forced buyers.

For the most part, the rally hasn’t been about fundamentals. It has been about money flow, liquidity and behavioural science.

Ideas are one thing but execution is everything.

I’ll report back to tell you how the trades work out.

On other notes of interest;

  • my call on a lower Gold price is intact and gradually confirming itself,
  • many are “long” complacency…..should you buy insurance, particularly when you don’t think you need it ??
  • Looking for lower AUD/USD once its done peppering 0.6658 (an overshot to 0.6710 plausible),
  • Still bullish on Oil,
  • I’m keeping a close eye on Copper (the bias is short as it still can’t break above $2.46),
  • Bitcoin is acting like a leading correlation to the S&P 500,
  • And I’m ploughing through various stock ideas

Until next time,

Rob

rob@karriasset.com.au

http://www.karriasset.com.au

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