The second trading day of the year I wrote Apple’s pre-announced poor quarter could/would be the bottom for this market rally. So far it has been with the breadth and pace of the last two months advance surprising just about everybody. This rally has reached a level I thought it would take another two months to attain. That speed initially indicating to many new all time highs are coming soon. Maybe not so fast?

I also wrote a Head and Shoulders pattern was in the works for the S&P 500, but believed the right shoulder would form in May. We got there last week skewing the symmetry May would have brought (same distance LS to Head as Head to RS). It is still a well pronounced H&S pattern showing the key resistance level 2800 is for the S&P 500.

The NASDAQ 100 has formed a more symmetrical H&S thanks to a strong rally March of last year. Yesterday’s reversal thwarted a morning break out of both indices  to new highs for 2019, keeping the H&S pattern in place…so far.

We now have dueling H&S patterns in two of the most important indices. That negative development is pitted against a rapid right shoulder rally that points to higher prices. This is sort of the Super Bowl of Technical Indicators with the winner possibly providing market direction for the next couple of years? March Madness now takes on a new meaning besides college basketball?

Naysayers believe the equity rout last fall/winter was the beginning of a Bear Market and the rally initiated back in 2009 is finally topping. The unimpeded run since Xmas looks to be liquidity driven (super strong breadth thrust) and that type of rally often needs no economic/earnings  support. In other words the fire hose Fed has the Bulls back.

A decided break above the right shoulder of both indices would nullify the H&S patterns giving credence to Fed liquidity. The odds of reaching all time highs after a break out would be a fait accompli IMO. This would imply a whole new leg of the 2009 Bull Market taking the S&P 500 well above 3000? The Bears are hoping the Ides of March take equities below the Xmas low, probably cementing a long term top.

Someone in favor of the new high outcome is President Donald and his re-election team. With the Plunge Protection Team in his tool box (along with the Fed Put) I am putting the odds in favor of a break out. For a more constructive pattern and launching pad for the next leg a March full of increased volatility and thrashing about could/should unfold? Which would be nice for the service as volatility is at the core of our signals. Compare the number of trades from January to no volatility February.

So March should be exciting from a college basketball and stock market stand point. I am curious “Who are you rooting for?”

Final Thought –
“When you win say nothing, when you lose say less”  –  Paul Brown

More later,
Max Power

 

 

 

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