S&P 500 Has Entered a Bear Market

I believe that it is possible to beat the market through a consistent and unemotional approach. This is primarily achieved through preparing instead of reacting. Click here to learn more about how I use the indicators below and Click here to get my complete trading strategy! Please be advised that I swing trade and will often hold onto a position for > 1 month. What you do with your $ is your business, what I do with my $ is my business.

For a variety of reasons I no longer believe that $2,718 will be the bottom of the 2018 Bitcoin’ bear market. I am now very confident that we will return to $1,000 before finding a bottom. That is due to Tyler Jenks’ hyperwave theory and the Point of Control on the Visible Range Volume Profile with > 2 year look back | Calling for $35 ETH before the end of 2018, however I do not believe that will be the bottom. Strongly expect ETH to return to single digits before the end of 2019 | Calling a top in the S&P 500 at $2,634

Instead of the Bitcoin Daily Update we are going to take a look at the S&P 500 because today was a very important day.

Previous analysis: Called a top on December 7th
Position: Short SPXUSD from $2,639

Patterns: Weekly H&S with abbreviated right shoulder “I love abbreviated right shoulders” -Peter Brandt | Daily Wyckoff distribution breakdown | Trendline breakdown
Horizontal support and resistance: Using high of 2018 and low of 2008 the 0.786 fib = $2,453. Could be a good spot for a redistribution type bounce / consolidation
SPXUSDSHORTS: “There is a problem, almost nobody is short.” Indicative of a top and also could spell trouble for support if the shorts aren’t there to cover.
Short term trend (4 day MA): Bearish
Medium term trend (9 day MA): Bearish
Long term trend ( 50 day MA): Recent death cross with 200 (200 just turned bearish)
Overall trend: As bearish as it gets
Volume: Volume on today’s candle was very real
FIB’s: Using high of 2018 and low of 2008 the 0.786 fib = $2,453
Candlestick analysis: 12m shooting star. Only other one I can find came in 1929 (see below)
Ichimoku Cloud: See daily and weekly cloud’s below
TD’ Sequential: Monthly red 3. Weekly red 3. Daily red 4.
Bollinger Bands: Looks like it is starting to stick to the bottom band. On daily and weekly.
Trendline: Brokedown Oct 22nd and retested on Dec 3rd
Daily Trend (Using 1h 33 MA to identify daily trend): Bearish
Parabolic SAR: $2,703
RSI: Just brokedown 30 on daily. Just brokedown 35 on weekly.
Stochastic: Monthly sell nailed it, weekly is already oversold.


Summary:

“The Federal Reserve on Wednesday raised interest rates for the fourth time this year. The Fed increased the target range for its benchmark interest rate by 25 basis points to a new band of 2.25%-2.5%, putting the Fed funds rate at its highest level since the spring of 2008. All ten voting members of the FOMC voted in favor of Wednesday’s decision.” (2)

While chairman Powell appeared nonchalant about the news, the markets were far from it. After starting the day up more than 1% there was a quick reaction to the other side. Many were waiting to sell that news. I was one of them, adding to my short exposure at the daily close.

The US could barely afford it’s liablities at record low interest rates. The 10 trillion dollar question is: how are the going to be able to afford them now?

Furthermore the interest rate on the 3 month treasury yield is increasing while the 30 year continues to decrease. If this continues we will get an inverted yield curve.

The feds pulling a rabbit out of the hat during the fourth quarter meeting was the last hope to reverse from the death cross and Wyckoff Distribution breakdown as far as I was concerned. That didn’t happen and now I am very positive we have seen a top and are in for another prolonged recession which could perhaps even lead to another depression.

Let’s start with the yearly candle which will be coming to a close in the next two weeks. I don’t think that long is needed to confidently state that it will be a nasty shooting star. The likes of which we haven’t seen in 90 years.

12 month shooting star S&P



Only other 12 month shooting star I can find



The weekly chart confirmed the h&s on Friday and this week created a new yearly low. This one gets bonus points for the abbreviated right shoulder:

“I love abbreviated right shoulders” -Peter Brandt



The Ichimoku Cloud is also very useful in calling reversals. As we see below it coincided nicely with Consensio, as well as the H&S breakdown.

Weekly Cloud



Daily Cloud



If you are not prepared for this and you understand / believe in the power of technical analysis then it is time to make some decisions. The indicators of a reversal outlined above are simply too much to ignore. However that does not mean you should make emotional decisions. The process that I went through is as follows:

(1) Exit all long exposure. Don't even long gold or silver. Why? Well look what happened to them in 07 - 08 before taking off.
(2) Do not enter short exposure unless you have an entry and fully understand your time horizon / price targets
(3) Tell friends and family to gtfo of the markets.

Sources:

(1) zerohedge.com/news/2018-12-17/heres-problem-almost-nobody-short
(2) finance.yahoo.com/news/preview-feds-last-monetary-policy-announcement-2018-155802273.html