Wall Street - Surpasses another extension
Hello Traders and Analysts,
A Note before reading - this is a forecast analysis - based upon our trading strategy. This is tagged Neutral for the short term. Long term, bullish, due to purchasing further increments upon imbalances.
Please do not take this as face value and conduct the relevant investment strategy to successfully trade the probabilities.
Note:
To see more information - review the linked ideas for more reading upon the suppressed VIX [Volatility Index] and S&P500.
The addition of the overlay of the SPX does not provide a clear 100% correlation as the top 30 companies in the US and the SPX comparison does not 100% move in parity despite both being within the same country. There are differences where sectors perform worse in Health care, energy, consumer goods, automotive as opposed to the 30 individuals who can out perform.
Fibonacci extension - using the inverse method, I'm aware I use the inverse extension tool but this methodology aligns with pivot points and price reacts clearly upon this method.
Idea tracking at the bottom is in progress - not much data is compiled, but will be added as we go, but for full scope, the charts are available to keep up to date for those who do not follow multi-assets.
Master Key for zones
*Blue = Monthly
*Purple = weekly
*Red = 4 Days
*Yellow = 16 Hours
*Orange = Daily
*Dark Green = 8 Hour
*Grey = 4hour
*Pink = 1 hour
Risk Warning
Trading leveraged products such as Forex, commodities and CFDs, carries with it a high level of risk and so may not be suitable for every investor. Prior to trading the foreign exchange, commodity or CFD market, consider your investment objectives, level of experience and risk appetite. You should never risk more than you can afford to lose. If you fail to understand or are uncertain of the risks involved, please seek independent advice and remember to conduct due diligence.
Firstly why has the SPX and US30 become so bullish?
Simply put, as the FED Funds have been slashed - and with yields being key to movements of both institutional and retail - credit deposits provide a little return so if the trend is up and to the right, then a standard metric is sure, keep on investing regardless of the high value. This keeps the Shiller ratio and price earnings ratio are seen as "this seems fine" (to view the website to review these metrics, click the link below) - https://www.multpl.com/s-p-500-pe-ratio. To further understand this, the use of the cross-asset comparison shows a simplistic view but also a reality.
US yields
Cross-asset comparison;
Looking to the DXY, US05-US02Y short term yields, look towards the critical levels here where DXY and Yields shows an opportunity where imbalances have established for longs where the dollar will show some strength.
Why the Stock market didn't crash was due to the FED, with the correction to the 50-61.8% Fibonacci zone, this was due to the movement of money in outflows changing hands to new influx of buyers - the need for liquidity is everything. In a generalistic term - buying bonds from institutions and buy backs are generating cash, where will this be placed? Not into CDs as the yield is cut based on the cash generation. The feedback loop allows the movement of cash is within the Stock market hence the indices movement towards the overextension targets. The representation of said loop cycle is visualised below.
Monthly Imbalance
Looking back on the monthly chart - select areas have been found for longs, additional longs and further longs as the market refused to dead cat bounce during the pandemic resurgence.
The monthly ray has been used to plot the higher lows which have failed to close outside the ray.
Even though price did break the ray - it actually reverted to a pivot point which will be shown in the following chart image [Monthly US 30 FIBO].
The monthly low formation aligned and created an equal low - which matches a three consecutive which occurred Aug, Sept, Oct 2016.
Monthly US30 FIBO chart*
The Fibonacci had shown a deep correction which pivoted to continue the uptrend - but at the same time triggered a large change of hands back in February 2020. Whilst this happened, it did discount the market heavily through to the 0.786% Fibonacci, but the important factor is where it aligned upon the three consecutive bearish candles.
Now refer to the QTR chart
The quarterly chart is clean just removes all noise and provides clear information of the uptrend from creating imbalances along the way to revert from. The net closing out from buyers exhaustion to a selling change of hands offered a close out from a correction to rest on the new imbalance to add a new position upon or longer term investors who use funds or hedge FX, this would indicate profit taking on a selling imbalance.
Please note - the current Sequence may not reach the full extension or may, but a sell imbalance has yet to be clearly identified, but what is beginning to show on the monthly and weekly timeframe has provided a clear opportunity to create at least a correction impending as the weekly channel has become steep and is showing a tail off as a wedge would normally suggest.
Weekly Imbalances
The overall trend is your friend, clearly shows a multiple buying opportunities to keep pivot points on the Fibonacci extension pattern to completed the overextended pattern.
The newly formed which has rested upon the -0.27% Fibonacci has indicated the pivot level has withstood (refer to white box) where three valid wicks have provided a key upper zone to remove early sellers.
The two key purple zones fit perfectly at both the "0" Fibonacci full retracement to the previous market structure high and also before this, the 0.236% [Use your Fibonacci retracement to see where the weekly imbalance has formed].
SPX Chart
Refer to link below.
Here is the weekly chart for the SPX500 - which shows the extension target -0.618 or 4,465 points, price has reacted in favour of an extended bullish move where price corrected on a five week consolidation phase before securing a "resistance turned support" but in reality the overextended market phase had not yet completed, so the probability was in favour of longs.
The Daily chart
Note: this is only valid on a bearish scenario where the -0.618 or 1.1618 Extension is no longer clear of buying pressure and looks to correct. Invalid if data is bullish towards continued growth of the Index.
The daily has provided a great build up on creating higher highs to test the rising channel with three consistent tops within the white boxes, but only twice tested the channel bottom, which has provided two major lower high formations.
With a possible third forecasted on the chart - this will indicate a sell off whereby price can pivot from as it has now created an all time high.
The probability of pivot levels may not occur with a change of hands in the short term, but a correctional in accordance with other major pivot levels have all provided a consolidation zone to allow an imbalance to form, so using the historic data, price >50% probability will look to 36055* est as a reference pivot.
What can the chart also indicate that buyers were still in control?
Within the inner channel construct lays a rising wedge, but this only took price to form a short term correction for buyers on the four day as well as the two chart to pick up a discounted long addition [see four day below at Reference four day**] and [two day at reference two day].
Note - the red lines which identify the four day channel align with the one day channel, but remove noise of lower timeframe candles.
[Reference four day]**
The four day chart shows a clearer image of showing where the wicks show the same highs as does the two day which follow the same pattern but again remove consolidation phases and simple show a larger candle in a bearish or bullish candlestick - where the wick forms a shorter wick or none - as per candlestick analysis, this indicates that the movement can provide a change of hands.
Reference Two day
VIX (Volatility Index)
please keep in mind that the VIX has correlation, causation is caused from the associated short term risk of the sentiment change within profit taking, impending policy changes, health warnings, war and other macro-factors.
There are multiple talking points here which are noticeable.
The corrective channel is ever present upon the weekly and two day whereby the channel has created opportunities for longs in a bearish scenario but has been rejected upon numerous occasions.
The VIX has been leaving multiple wicks above the 10.00 zone and is drifting currently between 14 lows to 28 highs which relate back to the 15th September.
See the full chart to track here;
https://www.tradingview.com/chart/VIX/s4jLu43r-VIX-chart-tracking/
VIX VS SPX
Inverse correlation at its finest - but not causation? or is it? Read the US Yields - this can indicate why the corrective state of play is not present as yet.
Cross-asset comparison;
Looking to the DXY, US05-US02Y short term yields, look towards the critical levels here where DXY and USDJPY shows an opportunity where imbalances have established.
To see a tracking of the full chart on the weekly timeframe - this is possible to view as part of a full analysis scope. https://www.tradingview.com/chart/US05Y/GnmvxkNK-US05-02Y-DXY-and-US30-tracking-weekly/
Quantitative easing (QE) is where the increasing the money supply of the system, where the Central Bank creates new money and uses the money to make asset purchases. These asset purchases inject the new money into the system.
(QE) tapering will be seen on interest rates. The impact is almost immediate - affecting the sentiment. (QE) can be used where interest is at zero %, as the central bank(s) want to introduce more stimulus.
Conversely - when easing occurs, adoption of a new introduction is will send the interest rates shooting, the money to those who can offer the highest interest rates and this competition will send the interest rates skyrocketing. This directly affects the Equity market and the FX safe-haven pairs immediately.
Employment
In relation to employment is closely linked to that state of inflation or deflation in the economy. When there is excess money in the economy, the confidence is upbeat and CPI [consumer price index] aligns with goods production resulting in people getting employed in the economy or in this case - returning to the original job before the pandemic. Therefore quantitative easing (QE) is positively correlated to a higher employment level* subject to NFP "True" figure of new jobs created, not in the aspect of 'Return to work'.
See the article snippet below affecting the US Market.
"On Labor Day, COVID-era expanded unemployment benefit programs expired. Those temporary programs included the $300 weekly bonus checks as well as coverage for those who are normally ineligible for unemployment insurance, like gig workers and the long-term unemployed. More than 11 million people were impacted by the cutoff, and roughly 7.5 million people lost their benefits entirely". - Source CNET.com/personal-finance/your/money
Inflation or Deflation?
inflation is likely to turn into deflation through (QE) where tapering pulls money out of the system, where less money (as compared to before) chasing the goods available, making every good less expensive. Great for consumers?!
Keep aware of a bullish weekly formation that the channel never stops to corrects, based on the vicious cycle of printing the Trillion dollar coin and also ever moving the debt ceiling., plus the cycle of money being put back in the market on repeat. We all win
Bearish
the cycle completes and the fun stops in order to reset at a pivot point to continue growth. Not an advocate, but it seems the right thing to do. Everything must come down right at some point?
Do you enjoy the setups?
*Professional analyst with 5+ years experience
*Focus on technical output not fundamentals
*Position and swing trades
*Provide updates where necessary - with new updated ideas tracking the progress.
If you like the idea, please leave a like or comment.
To all the followers, thank you for your continued support.
Thanks,
LVPA MMXXI
A Note before reading - this is a forecast analysis - based upon our trading strategy. This is tagged Neutral for the short term. Long term, bullish, due to purchasing further increments upon imbalances.
Please do not take this as face value and conduct the relevant investment strategy to successfully trade the probabilities.
Note:
To see more information - review the linked ideas for more reading upon the suppressed VIX [Volatility Index] and S&P500.
The addition of the overlay of the SPX does not provide a clear 100% correlation as the top 30 companies in the US and the SPX comparison does not 100% move in parity despite both being within the same country. There are differences where sectors perform worse in Health care, energy, consumer goods, automotive as opposed to the 30 individuals who can out perform.
Fibonacci extension - using the inverse method, I'm aware I use the inverse extension tool but this methodology aligns with pivot points and price reacts clearly upon this method.
Idea tracking at the bottom is in progress - not much data is compiled, but will be added as we go, but for full scope, the charts are available to keep up to date for those who do not follow multi-assets.
Master Key for zones
*Blue = Monthly
*Purple = weekly
*Red = 4 Days
*Yellow = 16 Hours
*Orange = Daily
*Dark Green = 8 Hour
*Grey = 4hour
*Pink = 1 hour
Risk Warning
Trading leveraged products such as Forex, commodities and CFDs, carries with it a high level of risk and so may not be suitable for every investor. Prior to trading the foreign exchange, commodity or CFD market, consider your investment objectives, level of experience and risk appetite. You should never risk more than you can afford to lose. If you fail to understand or are uncertain of the risks involved, please seek independent advice and remember to conduct due diligence.
Firstly why has the SPX and US30 become so bullish?
Simply put, as the FED Funds have been slashed - and with yields being key to movements of both institutional and retail - credit deposits provide a little return so if the trend is up and to the right, then a standard metric is sure, keep on investing regardless of the high value. This keeps the Shiller ratio and price earnings ratio are seen as "this seems fine" (to view the website to review these metrics, click the link below) - https://www.multpl.com/s-p-500-pe-ratio. To further understand this, the use of the cross-asset comparison shows a simplistic view but also a reality.
US yields
Cross-asset comparison;
Looking to the DXY, US05-US02Y short term yields, look towards the critical levels here where DXY and Yields shows an opportunity where imbalances have established for longs where the dollar will show some strength.
Why the Stock market didn't crash was due to the FED, with the correction to the 50-61.8% Fibonacci zone, this was due to the movement of money in outflows changing hands to new influx of buyers - the need for liquidity is everything. In a generalistic term - buying bonds from institutions and buy backs are generating cash, where will this be placed? Not into CDs as the yield is cut based on the cash generation. The feedback loop allows the movement of cash is within the Stock market hence the indices movement towards the overextension targets. The representation of said loop cycle is visualised below.
Monthly Imbalance
Looking back on the monthly chart - select areas have been found for longs, additional longs and further longs as the market refused to dead cat bounce during the pandemic resurgence.
The monthly ray has been used to plot the higher lows which have failed to close outside the ray.
Even though price did break the ray - it actually reverted to a pivot point which will be shown in the following chart image [Monthly US 30 FIBO].
The monthly low formation aligned and created an equal low - which matches a three consecutive which occurred Aug, Sept, Oct 2016.
Monthly US30 FIBO chart*
The Fibonacci had shown a deep correction which pivoted to continue the uptrend - but at the same time triggered a large change of hands back in February 2020. Whilst this happened, it did discount the market heavily through to the 0.786% Fibonacci, but the important factor is where it aligned upon the three consecutive bearish candles.
Now refer to the QTR chart
The quarterly chart is clean just removes all noise and provides clear information of the uptrend from creating imbalances along the way to revert from. The net closing out from buyers exhaustion to a selling change of hands offered a close out from a correction to rest on the new imbalance to add a new position upon or longer term investors who use funds or hedge FX, this would indicate profit taking on a selling imbalance.
Please note - the current Sequence may not reach the full extension or may, but a sell imbalance has yet to be clearly identified, but what is beginning to show on the monthly and weekly timeframe has provided a clear opportunity to create at least a correction impending as the weekly channel has become steep and is showing a tail off as a wedge would normally suggest.
Weekly Imbalances
The overall trend is your friend, clearly shows a multiple buying opportunities to keep pivot points on the Fibonacci extension pattern to completed the overextended pattern.
The newly formed which has rested upon the -0.27% Fibonacci has indicated the pivot level has withstood (refer to white box) where three valid wicks have provided a key upper zone to remove early sellers.
The two key purple zones fit perfectly at both the "0" Fibonacci full retracement to the previous market structure high and also before this, the 0.236% [Use your Fibonacci retracement to see where the weekly imbalance has formed].
SPX Chart
Refer to link below.
Here is the weekly chart for the SPX500 - which shows the extension target -0.618 or 4,465 points, price has reacted in favour of an extended bullish move where price corrected on a five week consolidation phase before securing a "resistance turned support" but in reality the overextended market phase had not yet completed, so the probability was in favour of longs.
The Daily chart
Note: this is only valid on a bearish scenario where the -0.618 or 1.1618 Extension is no longer clear of buying pressure and looks to correct. Invalid if data is bullish towards continued growth of the Index.
The daily has provided a great build up on creating higher highs to test the rising channel with three consistent tops within the white boxes, but only twice tested the channel bottom, which has provided two major lower high formations.
With a possible third forecasted on the chart - this will indicate a sell off whereby price can pivot from as it has now created an all time high.
The probability of pivot levels may not occur with a change of hands in the short term, but a correctional in accordance with other major pivot levels have all provided a consolidation zone to allow an imbalance to form, so using the historic data, price >50% probability will look to 36055* est as a reference pivot.
What can the chart also indicate that buyers were still in control?
Within the inner channel construct lays a rising wedge, but this only took price to form a short term correction for buyers on the four day as well as the two chart to pick up a discounted long addition [see four day below at Reference four day**] and [two day at reference two day].
Note - the red lines which identify the four day channel align with the one day channel, but remove noise of lower timeframe candles.
[Reference four day]**
The four day chart shows a clearer image of showing where the wicks show the same highs as does the two day which follow the same pattern but again remove consolidation phases and simple show a larger candle in a bearish or bullish candlestick - where the wick forms a shorter wick or none - as per candlestick analysis, this indicates that the movement can provide a change of hands.
Reference Two day
VIX (Volatility Index)
please keep in mind that the VIX has correlation, causation is caused from the associated short term risk of the sentiment change within profit taking, impending policy changes, health warnings, war and other macro-factors.
There are multiple talking points here which are noticeable.
The corrective channel is ever present upon the weekly and two day whereby the channel has created opportunities for longs in a bearish scenario but has been rejected upon numerous occasions.
The VIX has been leaving multiple wicks above the 10.00 zone and is drifting currently between 14 lows to 28 highs which relate back to the 15th September.
See the full chart to track here;
https://www.tradingview.com/chart/VIX/s4jLu43r-VIX-chart-tracking/
VIX VS SPX
Inverse correlation at its finest - but not causation? or is it? Read the US Yields - this can indicate why the corrective state of play is not present as yet.
Cross-asset comparison;
Looking to the DXY, US05-US02Y short term yields, look towards the critical levels here where DXY and USDJPY shows an opportunity where imbalances have established.
To see a tracking of the full chart on the weekly timeframe - this is possible to view as part of a full analysis scope. https://www.tradingview.com/chart/US05Y/GnmvxkNK-US05-02Y-DXY-and-US30-tracking-weekly/
Quantitative easing (QE) is where the increasing the money supply of the system, where the Central Bank creates new money and uses the money to make asset purchases. These asset purchases inject the new money into the system.
(QE) tapering will be seen on interest rates. The impact is almost immediate - affecting the sentiment. (QE) can be used where interest is at zero %, as the central bank(s) want to introduce more stimulus.
Conversely - when easing occurs, adoption of a new introduction is will send the interest rates shooting, the money to those who can offer the highest interest rates and this competition will send the interest rates skyrocketing. This directly affects the Equity market and the FX safe-haven pairs immediately.
Employment
In relation to employment is closely linked to that state of inflation or deflation in the economy. When there is excess money in the economy, the confidence is upbeat and CPI [consumer price index] aligns with goods production resulting in people getting employed in the economy or in this case - returning to the original job before the pandemic. Therefore quantitative easing (QE) is positively correlated to a higher employment level* subject to NFP "True" figure of new jobs created, not in the aspect of 'Return to work'.
See the article snippet below affecting the US Market.
"On Labor Day, COVID-era expanded unemployment benefit programs expired. Those temporary programs included the $300 weekly bonus checks as well as coverage for those who are normally ineligible for unemployment insurance, like gig workers and the long-term unemployed. More than 11 million people were impacted by the cutoff, and roughly 7.5 million people lost their benefits entirely". - Source CNET.com/personal-finance/your/money
Inflation or Deflation?
inflation is likely to turn into deflation through (QE) where tapering pulls money out of the system, where less money (as compared to before) chasing the goods available, making every good less expensive. Great for consumers?!
Keep aware of a bullish weekly formation that the channel never stops to corrects, based on the vicious cycle of printing the Trillion dollar coin and also ever moving the debt ceiling., plus the cycle of money being put back in the market on repeat. We all win
Bearish
the cycle completes and the fun stops in order to reset at a pivot point to continue growth. Not an advocate, but it seems the right thing to do. Everything must come down right at some point?
Do you enjoy the setups?
*Professional analyst with 5+ years experience
*Focus on technical output not fundamentals
*Position and swing trades
*Provide updates where necessary - with new updated ideas tracking the progress.
If you like the idea, please leave a like or comment.
To all the followers, thank you for your continued support.
Thanks,
LVPA MMXXI
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