SPX big picture monthly view

Here is how we have been viewing the situation in the S&P 500. For months now (since October and/or November when SPX hopped the Bull Turnstile) and as SPX climbed to and through all of the NFTRH targets but the last one (3200, 3300 & 3500 at an extreme) we managed those targets while noting the disgustingly over-bullish risk profile.

In December (NFTRH 582) a monthly chart, much like the one below was introduced to appear in each weekly report asking the question “unfinished [downside] business?”

It took the COVID-19 hysteria to knock this pig away from the trough, as before that I felt the odds were leaning to an upside blow off and exhaustion (ref. the 3500 target) as momentum and FOMO were building amid horrifically over bullish sentiment. Ah, but fate…

Anyway, I have no clue as to when SPX might (or might not) put on a sustained bounce along the way but this chart has until this day asked its question and will continue to do so unless the index takes back some important resistance levels per daily and weekly charts.

As you can see, this is far from a broken stock market. In the context of the big bull out of 2009 a drop to either of the preferred levels, the 38% Fib retrace or better yet, the 50% retrace could be considered healthy on the big picture. That is not what people want to hear right now because many were momos and FOMOs now puking out that ill-advised orientation. But can you imagine the clean out this market could have if it were to pull a 50% retrace?

As a side note, the RSI below implies that a bounce needs to come soon if this is to remain a relatively normal correction. It is at the levels that contained the pullbacks in 2011, 2015 and 2018. Much further and it could open the gates to a crash to the 50% Fib. What a buy that could be.


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