S&P Pushing On Wedge Resistance
Here is a closer look at the S&P Rising Wedge as I see it. I really have no idea what to expect in term of break-out / break-down. The market is very clearly broken as a “discounting mechanism” in my opinion, so I think projections based on past behavior – which is the essence of charting – is riskier than usual. It seems that the world’s Central Banks exist in a reality that ends in a couple of years. There is no long term plan, just a plan to bolster confidence in the short term at any cost. Here is the rising wedge in the S&P as I see it:
Something above 1600 would be technical “break-out” territory. If we started selling off now, trendline support would probably be around 1470-1480 by the time we got there. This chart pattern is very bearish in my view, but our Fed is awfully determined to keep pushing equity prices higher. As I see it, the Fed’s “wealth effect” approach pays billions to bolster bank reserves and boost asset prices (enriching the top 10% wealthiest, who own the large majority of equity holdings) in the hope that a smidgen of the wealth trickles down via increased spending to the 99%. Asset prices – namely equities and real estate – are at the heart of the Fed’s program. The Fed can’t control RE prices as much as they’d like, but they have plenty of firepower to push around equity prices through the Primary Dealers, who can buy stocks, etc with their fresh reserve funds (the liquidity of securities is apparently preferred by banks to the longer term risk of actual loans). I expect they will continue to try to do so. For the market to break down, I think there will need to be some kind of failure of confidence. I’d be surprised if the market started selling off aggressively without a catalyst. With all that said as a caveat, it is still an awfully ugly, bearish-looking chart to my eyes.