Hair-Trigger Markets

Stocks are at an inflection point.

After a bruising end to 2018, the major indices caught fire at the turn of the New Year as the world's central banking cartel leapt into action. Here's how the US Federal Reserve reacted:

The central banks have more than demonstrated that they are now subservient to the markets. Losses will not be tolerated

Which is why the chart below by Sven Henrich goes far in explaining why they've been in full panic mode this year: a major long-term technical breakdown threatened. As prices fell in later 2018, the S&P 500 broke through a trendline that had remained unviolated since the markets began recovering from the Great Financial Crisis in 2009:

As Sven has been doing an excellent job of monitoring, this violated trendline may now have flipped from "support" to "ceiling" for the S&P. 

Which may be why we were treated to not just one, but three Federal Reserve chairs during last weekend's episode of 60 Minutes. Their triple-strength "all is well" show of force was good enough to juice the S&P back up to the long-term trendline this week -- but not convincingly through it.

The market looks very much paused at the brink of a breakout here.

The bulls are expecting a sharp rebound in GDP from Q1, which they claim was artificially low due the government shutdown. They point to 2018's solid 3% economic growth, claiming the US is humming along fine and about to get a shot of adrenaline once America and China announce an end to their trade war. In their eyes, the S&P is poised to rocket higher once it punches vigorously above 2820.

The bears see a topping out of a classic bear market rally, one that has been propelled by no convincing fundamentals -- only central bank jawboning/easing and continued massive buyback programs (plus this week's rare Quad Witching options expiration). They see an extremely overbought market, with stocks ready to break down to new lows for the year.

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