Valuations are high, and long-term charts are looking parabolic; these suggest things are too hot. Stimulus bill should already be baked into the prices, so I'm not sure what else is left to drive stocks higher. I'm not very good at timing the market, so take my words with a grain of salt, but I'm getting a bad feeling here.
Wednesday's action saw the S&P close right at the 50-DMA, a support line. It's already tested that line a couple of times in recent weeks. If it falls through that line tomorrow, then look out below.
Even if it bounces up, though, the last several sessions are still in a converging triangle, which means a breakout in one direction or the other is coming, likely within the next two weeks. My bet is on a breakout lower. Next support after that is the 200-DMA (currently at 3462).
In unrelated news (or is it a portent?) I watched a rocket blow up today.
The launch was still a success, though, and I love-love-love these SpaceX events. Daddy Musk is gonna take us all to Mars. :D
UPDATE: Market sell-off today. I didn't know some Fed guy was going to have an announcement, but that's what happened, and that sparked the sell-off. Assuming there's not a miraculous rally in the next twenty minutes, support at the 50-DMA is broken. I don't know where the Fibonacci support lines are, but due to the parabolic nature of the chart, I'm guessing they're way down below the 200-DMA, so that's the next support line.
I'm not convinced this is a new bear market, though. It could just be a two-week correction. We could easily bounce right off the 200-DMA and head higher as the economy opens back up from the lockdowns. But whatever happens, the 200-DMA is now the level to watch. It'll continue to creep up a little, so it'll probably be at around 3500 by the time it meets the candlesticks.
UPDATE 2: Stocks rebounded on Friday. A small rebound wouldn't have surprised me, but I would have expected the 50-DMA to act as resistance, and it didn't. Friday's close was higher than Wednesday's close.
So I'm not sure what to think. I'm still wary of this market, but that doesn't mean it can't go higher in the near term. We'll just have to see, I guess.
I don't get it at all--the stock market. But the rocket--wow!
ReplyDeleteThe rocket launch was a test flight, and the test part succeeded. They made the rocket hover in mid-air, tilt on its side and fall horizontally, and finally land upright. It was pretty cool to watch.
ReplyDeleteThe explosion happened about 5-10 minutes after it landed. The rocket had landed hard, and it was leaning slightly, so something got crunched. The remote control fire hose came on and hosed it down for a good long while, so fire and explosion seemed unlikely. Then... boom! lol
From what I hear, the thing was going to get scrapped anyway after the test, and they've got other prototypes ready to go, so it's not really that big of a deal. But it was a fun test to watch, and the explosion was exciting.
Here's a link to yesterday's live stream if you want to see it. Start the video at the 10:24:00 mark.
https://www.youtube.com/watch?v=XOQkk3ojNfM