New Line In Sand For S&P 500

In my video update on Friday, I outlined three strong support levels for the broad markets. For the S&P 500, the support was 2,430. For the Dow is was 22,275. And for the Nasdaq it was 6,300.

I based these on logarithmic (exponential for tracking bubbles) channels.

The S&P 500 broke that support on Friday. The other two indices accelerated their decline and broke their respective supports on Christmas Eve.

That was NOT a good sign, despite the rally today.

The Nasdaq and Dow channels only broke slightly below those support levels, certainly not enough to disqualify them…

But the S&P 500 broke down a bit more critically… Yet the markets are finally rallying more strongly today!

This brings us to the middle of both potentially EXTREME scenarios I’m monitoring: 

Either the markets are going to blow-off big time into 2019 after this deeper correction… 

Or, they’re going to continue to crash into 2021 or later, with more to come near term. 

Unfortunately, right now it could still go either way…

The experts on Wall Street are expecting neither of these two scenarios. They think the markets will be up modestly in 2019 after this correction.

But I still lean towards the “pause-that-refreshes” scenario. That is, a deep correction that ends up in a strong, final blow-off rally into late 2019. History would favor this scenario when a major bubble is peaking.

Here’s the important support just ahead at around 2,300 on the S&P 500…


This is the linear channel for the S&P 500, with a classic overthrow top above the channel.

A break much below 2,300 on the S&P 500 would confirm this pattern and be the first signal that markets put in the top in late September, even though the previous January top looked more like a major bubble peak. That would mean stocks could accelerate downward again occurring just a bit later than in past initial bubble crashes.

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Moon Kil Woong 9 months ago Contributor's comment

The market has bounced back after a bout of disturbing news more on the calming effect of not firing the Fed chief more than the strong Christmas sales numbers which may be more attributed to inflation than anything else. A strong rebound it is, however, it does not imply a directional reversal longer term. What we need is the political weights to be taken off the market. That is, Chinese tariff wars, global weakening by attacking our allies, stabilization in the Mid East theater, and monetary stability.

The market thrives on stability. Hopefully it will return at least for a few more months.