Despite the market still remaining in a bull run until roughly the 4000 level on the SPX it appears the market is now looking for a reason to attempt a "real" sell-off based on many indicators. While last weeks sell-off was quickly erased by over 600B of liquidity from China, I believe that action artificially increased sentiment for algos bots to buy off of, but in reality, there is likely more downside to come in February and March overall.
While the SPX could certainly break-out into the 3400s, it appears at this time, the probability of this occurring is rather low. Confidence remains elevated that the SPX will fall below its supported trend-line and into a secondary channel and trade down. With all the liquidity in the market, it is near impossible to predict what type of declines we could be talking about but at some point over the next 2 months the SPX should come to test a level below 3100 but likely no lower than 3026-3030.
There's no question the coronavirus will have a huge impact on supply chains in China and the global economy, and it appears until the virus is contained any market high will be used as a selling opportunity at-least, partially. In fact the "Arms index" supports this notion despite the market continuing higher this week.
For most of the gains this week it is also important to note that it has been based on gap-ups at the open with the gains fading as the trading-day progresses. This is indicative of a near-term market top.
Other support can also be seen in Gold and Silver which appear to be close to completing a 40-45 day fractal consolidation channel before a break-out (as early as this coming week).
Investors must remain very cautious and not fall into a FOMO trap but rather, wait for a correction and/or the coronavirus to subside before buying large lots.
- zSplit
While the SPX could certainly break-out into the 3400s, it appears at this time, the probability of this occurring is rather low. Confidence remains elevated that the SPX will fall below its supported trend-line and into a secondary channel and trade down. With all the liquidity in the market, it is near impossible to predict what type of declines we could be talking about but at some point over the next 2 months the SPX should come to test a level below 3100 but likely no lower than 3026-3030.
There's no question the coronavirus will have a huge impact on supply chains in China and the global economy, and it appears until the virus is contained any market high will be used as a selling opportunity at-least, partially. In fact the "Arms index" supports this notion despite the market continuing higher this week.
For most of the gains this week it is also important to note that it has been based on gap-ups at the open with the gains fading as the trading-day progresses. This is indicative of a near-term market top.
Other support can also be seen in Gold and Silver which appear to be close to completing a 40-45 day fractal consolidation channel before a break-out (as early as this coming week).
Investors must remain very cautious and not fall into a FOMO trap but rather, wait for a correction and/or the coronavirus to subside before buying large lots.
- zSplit
