Will This Uptrend Last Long?
The Federal Reserve is still very hawkish which has caused a big market sell-off recently. The market is showing small signs of bullishness the past few days. Will there be an uptrend in the equity markets in the near future? Right now generally speaking the macro environment is not accommodative for equities. So is this just a small correction before continuing down? Let's look at some major macroeconomic indicators to see if we can find some confirmation in this short-term bullishness that seems to be happening.
Equity Market Outlook
Here is the S&P 500 futures chart with the daily candles. You can see how it seems like SPY is catching a bounce off of these two convalescing support levels. I have highlighted those levels by the yellow and purple trend lines. It seems like the uptrend that started last June at the 52-week bottom is going to continue because SPY Futures are bouncing off of the trending support that started at that bottom. Things look like they are trying to get bullish at least for the short term.
Corporate Credit Markets Outlook
If you follow corporate credit markets then you know that they are good indicators of possible future price action. LQD tracks the corporate debt of the more liquid companies. Technically this one is still trending down which is bearish for equities but it is reaching support level from its 52 week bottom. it really needs to catch a bounce off of this support to have confirmation of this bullishness in the markets.
HYG and JNK track the corporate debt of less liquid companies. These are the companies that investors typically stay away from when the future I look for the economy is bad. The charts of both of these stickers essentially look the same and they are showing signs of a small bounce. The price is even moved above a very short term downward trending resistance. Who knows if this uptrend will last because many are thinking a recession is in the near future.
If you know about the Vicks then you know that when the vix goes down spy goes up or vice versa. And recently VIX Futures have broken down from the support of an upward trending price channel. This is bullish for the markets on the short-term.
Dollar Index Outlook
$Powershares Exchange Traded Fd Tst Db Us Dollar Index Bullish Fund Etf (UUP.US)$
$Powershares Exchange Traded Fd Tst Db Us Dollar Index Bullish Fund Etf (UUP.US)$
The dollar Index appears to be selling off as it is price has dropped below support from the previous peak in July. The Dollar Index has been rallying since last February with a strong support line that it has bounced off of several times. If this trend continues then you can expect the dollar Index to come down to the support level and bounce off of it. I'm not sure if we will bounce off of that support again or if we will continue down trending. But what I do know is that if the Dollar Index is coming down then that is bullish for equity markets.
Bitcoin looks like it is breaking out to the upside of this descending wedge pattern. that is a short-term bullish notion. this will definitely help crypto related equities in the equity markets. this should add to the bullishness in equity markets also. Especially for the many companies in the stock market that hold Bitcoin as a long term investment.
Bond Market Outlook
$U.S. 2-Year Treasury Notes Yield (US2Y.BD)$ $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ $U.S. 30-Year Treasury Bonds Yield (US30Y.BD)$
Bond yields are still very inverted which is a bad indicator of future economic growth. But as long as bond yields are dropping then that looks good for inflation. That shows that the market thinks future inflation will not be as high. And that is good for the markets currently. Perhaps the comments by Jerome Powell hinting towards aggressively controlling inflation gave the market's confidence that long-term inflation will be under control. And that is a good look for the markets since everyone thinks that there will be a recession soon.
$U.S. 2-Year Treasury Notes Yield (US2Y.BD)$ $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ $U.S. 30-Year Treasury Bonds Yield (US30Y.BD)$
Bond yields are still very inverted which is a bad indicator of future economic growth. But as long as bond yields are dropping then that looks good for inflation. That shows that the market thinks future inflation will not be as high. And that is good for the markets currently. Perhaps the comments by Jerome Powell hinting towards aggressively controlling inflation gave the market's confidence that long-term inflation will be under control. And that is a good look for the markets since everyone thinks that there will be a recession soon.
Conclusion
Basically the market is showing a lot of short-term indications of bullishness. Who knows how long this bullishness will last? I don't know. The general macro environment is not good for equity markets. Recently the market was selling off very fast so this could be a small pullback before the downtrend continues. But if all of these macro indicators I talked about continue the trend that they're in then this bullishness in equities will continue as well.
Basically the market is showing a lot of short-term indications of bullishness. Who knows how long this bullishness will last? I don't know. The general macro environment is not good for equity markets. Recently the market was selling off very fast so this could be a small pullback before the downtrend continues. But if all of these macro indicators I talked about continue the trend that they're in then this bullishness in equities will continue as well.
$SPDR Dow Jones Industrial Average Trust (DIA.US)$ $Invesco QQQ Trust (QQQ.US)$ $iShares Russell 2000 ETF (IWM.US)$ $Powershares Exchange Traded Fd Tst Db Us Dollar Index Bullish Fund Etf (UUP.US)$ $SPDR S&P 500 ETF (SPY.US)$ $iShares 20+ Year Treasury Bond ETF (TLT.US)$ $SPDR Gold ETF (GLD.US)$ $iShares Silver Trust (SLV.US)$ $Crude Oil Futures(JAN5) (CLmain.US)$ $Copper Futures(DEC4) (HGmain.US)$ $Hang Seng Index (800000.HK)$ $CSI 300 Index (000300.SH)$ $SSE Composite Index (000001.SH)$ $S&P/ASX 200 (.XJO.AU)$ $FTSE Singapore Straits Time Index (.STI.SG)$
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No worries be happy : Thanks for such a detail analysis.
SpyderCall OP No worries be happy : no problem at all. It keeps my investment mind sharp when I keep these thoughts in my head. It makes it a little sharper when I write it out as well. It reinforces it in my mind so I can follow the market trends better. Plus we must make the retail army stronger
Revelation 6 : There’s no doubt that your mind is sharp. Thank you so much for sharing.
slank : im thinking to buy vix, do you think its a good time to buy now?
SpyderCall OP Revelation 6 : I got your back Rev6. Always glad to share
SpyderCall OP slank : It has just recently broken down out of the channel I mentioned earlier. You might want to wait and see what happens first. this could be the start of a new trend. but it is still too early to tell. SPY has only been green for a few days. personally I wouldn't go long on VIX just yet. I would wait
slank SpyderCall OP : thank you
Gucci Ambassadors : Wonderful
TinkerB3ll : Are you bullish on crypto? Why do I feel that it’s a fake bull :) I’m still a bit bearish in crypto but love to hear your thoughts
SpyderCall OP TinkerB3ll : When you are looking at the weekly candles almost all of the cryptos look bearish for sure. They have been trending down for a while. Same with equities. I don't blame you for being bearish at all. Most of the indications in this post were for the short term trends I guess. Long term definitely looks more bearish than the short term.
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