The Top May Be Very Close – Week Of April 12

Another interesting week is upon us, and it isn’t often that we find the S&P 500 overbought, using the RSI and Bollinger bands on a Daily, Weekly, and Monthly basis all at the same time (SPX, SPY). But that is exactly the case.

Top, Spinning Top, Children, Play, Toy

Daily

Weekly

Monthly

The chart below shows the S&P 500 now at the 1.618% extension from peak to trough of the March 2020 decline.

There is also this chart that shows the 4,125 area as a 38.2% extension from the March low to the September peak.

This log chart shows the trading channel that has been in place since the 1920s and has only been violated 2 times, the late 1920s and the late 1990s. We are the very upper end of the channel right now.

I stumbled upon this too, when I was looking at previous periods. I noticed the double bottom shape in April and May of 1987, which made me wonder what would happen if I overlaid 1986 and 1987 with 2020 and 2021. I got this…

I will tell you this the period of June 2020 until March 2021 is incredibly similar to November 1986 to October 1987. History may not repeat in the chart below, but it sure does rhyme.

Finally, the market’s momentum is undeniable. Still, it appears to be occurring with fewer people participating, which means the market is not nearly as strong as it would seem, especially on the Nasdaq (QQQ). It either suggests that sellers have taken a vacation and decided to let the buyers pay up, or there is a serious buyer exhaustion case.

Anyway, that’s it for this week! I just thought I would change it up. Certainly something to think about.

-Mike

Disclosure: Mott Capital Management, LLC is a registered investment adviser. Information ...

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Kurt Benson 4 weeks ago Member's comment

The Fed will keep printing. Going up.