$SPX S&P 500
I expect those green boxes representing unfilled gaps to easily fill.
That bottom gap would represent a 30% decline from the top. It will easily fill, in due time.
What is a Gap?
- A gap up occurs when the market or an individual issue opens higher than the high on the previous day.
- A gap down occurs when the market or an individual issue opens lower than the low on the previous day.
I am a big believer in the theory that most gaps fill.
Support Lines
The blue dashed lines represent technical support lines. I expect bounces at those levels. Indeed, there was a nice bounce off that level but the market is heading back towards support.
Expect another bounce when that top gap closes.
S&P 500 3700 Level
That 3700 level came up in a recent Tweet regarding the Fed.
“Latest BankofAmerica Global Fund Manager Survey shows investors now believe Fed “put” is hovering around 3700 (for S&P 500)“
Do you really think the Fed is in control of anything now?
I don’t. Internal Fed feuds offer a hint of that as well.
And if the Fed is not in control, then it’s not a matter of “let”, it’s a matter of “try”.
— Mike “Mish” Shedlock (@MishGEA) February 16, 2022
Let?!
Bingo
The Fed is not in control of everything, never was really, but belief goes a long way.At most, the Fed can control some rates but that is at the expense of loss of control of everything else.
Here, Inflation makes it difficult to even pretend control.
— Mike “Mish” Shedlock (@MishGEA) February 16, 2022
Key Idea
“The Fed cannot rescue markets while simultaneously trying to convince Washington that it is determined to fight inflation, slowing growth notwithstanding. In any case the pain threshold (if there is one) is much higher (lower asset values) than in Q4 ’18 imho.”
Speaking of let, please let this sink in: “In any case the pain threshold (if there is one) is much higher (lower asset values) than in Q4 ’18 imho.”
Pain Threshold Q4 2018
If IZ is correct, and I think he is, then the S&P 500 2800 level is in play and a return to the 2000 level is not at all out of the equation.
The 2800 level would be a decline of 42%. That’s the minimum decline I expect from the top.
A decline to that level should be expected, not shocking. And it would not even make the market cheap by historical standards, just reasonably priced.
This post originated on MishTalk.Com.
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Mish
I agree with Mish. The market can go much lower than most people realize.
The paradox is that most people realize that we are in an inflationary cycle in
most goods people need to buy whether it be good, fuel or rent yet they also
assume that the Fed will not raise rates much because of a quasi-religious
belief that the level of the stock market is the only thing that counts. At
some point what we thought was a given in Fed behavior might no longer be true.
We haven’t had inflation like this worldwide since the 1970’s and that is
something new to just about everyone on the planet. To expect that the central
banks will continue with the same policies when the economic environment is
rapidly changing and not in the good direction is not a reasonable assumption
and is based on self-deception.
In a real bear market like in the late 1960’s and 1970’s all stocks went
down. Believing you are covered by your excellent stock selections is like
being at the best table in the best restaurant on the Titanic. In the end it won‘t
matter. In a long bull market everyone thinks they are a financial genius.
In long bear markets their hard-unearned wealth disappears. Does anyone remember
a Time magazine cover titled “The Death of Equity”? That was the feeling at the
end of that bear market. Ironically it signalled that the bottom finally had
been reached.
down. Believing you are covered by your excellent stock selections is like
being at the best table in the best restaurant on the Titanic.”
a Time magazine cover titled “The Death of Equity”? That was the feeling at the
end of that bear market. Ironically it signalled that the bottom finally had
been reached.”
The Fed’s already making excuses why they won’t significantly raise rates – link to finance.yahoo.com
stand to ease on their own without aggressive Fed interest rate
increases.
current, sharp increase in inflation,” Evans said at a conference
organized by University of Chicago Booth School of Business. However,
stripping out pandemic and supply chain effects that are likely to
fade, “by my reading underlying inflation appears to still be well
anchored at levels consistent with the Fed’s average 2 percent
objective,” he said.
told me I could not repo their vehicle because they “owned it.”