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Here is our updated list of the 10 things I think are most influencing the markets right now.
I find this is a handy reference tool amid rapidly-changing markets. It keeps me grounded and focused on what the real risks are, rather than the day-to-day distractions. Most of these tend to “what to watch out for,” but recognize that the more of these threats pass without being realized, the better investment conditions become as the aftermath.
Don’t trust anyone over 4,500!
My latest technical take on current conditions
That is, don’t trust the S&P 500 over 4,500. Not until it proves that it is doing more than running on fumes when it reaches that perch. As noted in past commentaries, that 4,500 level is a common point for the market to sit. It has done so many times. And, it should not be lost on investors that if the S&P 500 is bumping its head against “technical resistance” in the 4,500-4,600 area, there are two important hurdles before we cross over to a true new equity bull market.
4,800 is the S&P 500’s all time high. And modern markets have a habit of overshooting their targets on the up and downside, then “failing.” So they can’t be trusted as much as in the past. Don’t blame, me, blame the algorithms. That’s why I believe a move to 5,000 that doesn’t immediately fade back is the first strong signal that we’ve turned the corner.
There is a lot of detail in those 2 side by side charts of the S&P 500 (2-hour timeframe on the left, 4-hour on the right), so I’ll summarize below.
Left side (2-hour time frame): purple line is the key one it needs to bust through to check off the next item on the “it’s more than a bounce” checklist. Bottom of chart shows that it is threatening to roll over.
Right side (4-hour time frame): same purple line, but I’ve also drawn in those 2 purples at the bottom which have been a sort of “cradle” that has kept the market from collapsing. If we get a recession next year, that cradle will fall. Bottom of chart shows that while the very short-term 2-hour time frame looks stretched, the next time frame out that I use (4-hour) is just reaching “overvalued” territory.
What is all means: rallies in markets like this have to be challenged more vigorously by investors before piling in. That’s what the charts help us to do.
OK, we know there’s no one on earth over 4,500 years old. Though I will note that if we converted that into days, it would be “don’t trust anyone over 12 years old.” So I’m pondering that one for validity.
And, for what its worth, Wikipedia tells me this: “Great Basin Bristlecone pine tree is 4,853 years old and has been credited as the oldest known living non-clonal organism on Earth. The Great Basin bristlecone pine is found in the western United States.”
So there: don’t trust that tree!
Related: The Market Always Tells Us a Story … We Just Need To Listen!