Youtrading UK
Register Login
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us
No Result
View All Result
Youtrading UK
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us
No Result
View All Result
Youtrading UK
No Result
View All Result

The fastest bear market primed all-time highs

by Neville Hornsey
23 December 2020
in Economy, Index, Insights, Markets, Stocks
0
The fastest bear market primed all-time highs
324
SHARES
6.4k
VIEWS
Share on FacebookShare on TwitterShare on WhatsApp

The S&P500 has returned 15% in 2020 after printing a 33% drop during the worst of the coronavirus pandemic. Q1 2020 was the fastest bear market in history with volatility reaching hights not seen for 70 years and on par with the Black Monday crash. Optimism running into the end of 2020 on the back of a Q3 record recovery is still high and centred around the prospect of a smooth change over in the US administration of Trump/Pence to Biden/Harris. With that should come more stimulus packages to fight the coronavirus and fiscal support for the wider economy. 

The highly anticipated covid-19 vaccines are being rolled out and it was this development plus the Fed backstop that halted the 2020 crash. In reality, the FED did not pump the S&P500 from the March lows to All-Time highs, as that was purely down to the investors that stepped back in, investors just need the confidence to enter and $trillions of stimulus is a shock and awe way to add confidence. The confidence continues to play a massive part in these bull markets and any uncertainty for now is trumped by the perceived economic growth that should rise from current depressed levels.

Analysts predict further gains in the S&P500 for 2021 with 4300 the upper target and a base case scenario of at least 3900 by year end.  This will be fuelled by economic growth, a rise in employment and a continued loose monetary policy from the Federal Reserve.

Big sector winners within the S&P500 were Health Care (+12%) and Info Tech (+25%).  Companies like T-Mobile US Inc., Activision, Facebook, Adobe, Microsoft have now been joined by the behemoth that is Tesla. At the start of this week (21st December 2020) Tesla started trading within the S&P500 with much anticipation after the TSLA stock had run up 712% year to date.

All of this positivity would have the reader believe that all is well in the USA and rest of the world. However, US GDP growth rate is currently -2.8% year-on-year, even after the massive 33% annualised GDP expansion in Q3 2020. The unemployment rate is still at elevated levels of 6.7% having been as low as 3.6% at the start of the year. Core PCE and CPI indicators are rolling over as inflation fails to materialise and even though all of the PMI’s including manufacturing are above 50 and expansionary, consumer confidence is lower than the start of the year and the trade deficit continues to expand.

Looking at the daily chart of the S&P500 (Usa500) on ActivTrader it is hard to see a buying opportunity for anyone that does not like trading breakouts. At these elevated levels no one wants to be the last trader to buy the end of the bull market run up, so it feels like most traders are waiting for a ‘Buy the dip’ scenario. Which is great if there is a dip but really frustrating for traders if the market grinds higher, leaving lots of money waiting on the side-lines.

Momentum on the Daily chart is rising, the chart goes from the bottom left to the top right in direction, so the 50 and 200 moving averages only confirm the obvious. The 200 daily sma has in the past been a great support level and in the tighter ranges the 50 always provides short term floors to downside moves.

Personally, I would like a move down to test the 3200 double bottom chart patterns, but there is obvious demand around the 3587 (September 2020 high) and 3400 (pre COVID high) levels. With any intraday dips being bought up due to the current market conditions.  A trend following system like the Ichimoku will keep followers in moves that could last for several years.  The signal to buy using a weekly chart and Ichimoku indicators on the 24th May 2020 could have been a trade of the decade scenario.

So where does the signal come that all of this bullish optimism is going to evaporate, and the next crash is imminent. A lot of economists feel that the March low was the culmination of a liquidity event and an insolvency event but looking around the data, it is easy to imagine that there will be a lot of consumer driven failings as individuals and then companies start defaulting on their debt. Higher levels of unemployment for a protracted period will occur if the national lock downs persist into 2021 and a back-to-back recession is likely in that scenario.  If there is an insolvency event, the credit which is already being contracted will cease to flow and the markets will liquidate any risk asset in order to move into safe havens like the US treasuries. Currently the Fed is buying $120bln of assets and removing them from the market, meaning that supply is being contracted. We all know that a tighter supply plus increased demand leads to a rise in price, so the first signal of a crash would be a rise in Bond prices and a fall in the US 10 and 30 yields. 

Another signal would be a tightening of fiscal policy. Should the US administration target a reduction in the debt and look to balance the books, the fiscal flows that have gone into large corporations and the S&P500 will be reduced. US government monetary policy changes will be carefully watched by economists, market analysts and traders alike.

A lot rests on the way we are able to tackle the coronavirus pandemic and with new variants emerging as dominant strains it is here that a lot of the economic problems can occur.

For now, we aim to buy the dip.

Tags: ActivisionAdobeFacebookMicrosoftS&P500T-Mobile US IncTeslaUS stimulus package
Previous Post

AUDUSD Technical Analysis- Waiting For Weakness Below 0.7500 level

Next Post

US fiscal stimulus back in focus as Trump threatens veto

Next Post
US fiscal stimulus back in focus as Trump threatens veto

US fiscal stimulus back in focus as Trump threatens veto

Please login to join discussion

CALL US

Categories
  • Commodities
  • Economy
  • Forex
  • Index
  • Insights
  • Markets
  • Opening of the Week
  • Sem categoria
  • Stocks
  • World

Site Map

  • Home
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us

A comprehensive website for traders, both experienced and new! Checkout our content and learn how to invest and speculate in the markets using margin traded products. Our team of educators has extensive experience and is here to help. Enjoy!

Follow us on social media

Risk Warning

All financial products traded on margin carry a high degree of risk to your capital. They are not suited to all investors, please ensure that you fully understand the risks involved, and seek independent advice if necessary.

All Rights Reserved - YouTrading UK 2020

Privacy Policy and Terms and Conditions
  • Home
  • My Academy
    • Register Now
    • Login
  • Markets
    • Opening of the Week
    • Stocks
    • Commodities
    • Forex
    • Index
  • Charts
  • Economic Calendar
  • Economy
  • World
  • Insights
  • About Us
No Result
View All Result

© 2020 YouTrading UK - Leaders in Trader Training.

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
Do not sell my personal information.
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
__cfduid1 monthThe cookie is used by cdn services like CloudFare to identify individual clients behind a shared IP address and apply security settings on a per-client basis. It does not correspond to any user ID in the web application and does not store any personally identifiable information.
_wpfuuid11 yearsThis cookie is used by the WPForms WordPress plugin. The cookie is used to allows the paid version of the plugin to connect entries by the same user and is used for some additional features like the Form Abandonment addon.
cf_use_obThis cookie is set by the provider Cloudflare content delivery network. This cookie is used for determining whether it should continue serving "Always Online" until the cookie expires.
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-advertisement1 yearThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Advertisement".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
CookieDurationDescription
YSCsessionThis cookies is set by Youtube and is used to track the views of embedded videos.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
CookieDurationDescription
_ga2 yearsThis cookie is installed by Google Analytics. The cookie is used to calculate visitor, session, campaign data and keep track of site usage for the site's analytics report. The cookies store information anonymously and assign a randomly generated number to identify unique visitors.
_gid1 dayThis cookie is installed by Google Analytics. The cookie is used to store information of how visitors use a website and helps in creating an analytics report of how the website is doing. The data collected including the number visitors, the source where they have come from, and the pages visted in an anonymous form.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
CookieDurationDescription
_fbp3 monthsThis cookie is set by Facebook to deliver advertisement when they are on Facebook or a digital platform powered by Facebook advertising after visiting this website.
fr3 monthsThe cookie is set by Facebook to show relevant advertisments to the users and measure and improve the advertisements. The cookie also tracks the behavior of the user across the web on sites that have Facebook pixel or Facebook social plugin.
IDE1 year 24 daysUsed by Google DoubleClick and stores information about how the user uses the website and any other advertisement before visiting the website. This is used to present users with ads that are relevant to them according to the user profile.
test_cookie15 minutesThis cookie is set by doubleclick.net. The purpose of the cookie is to determine if the user's browser supports cookies.
VISITOR_INFO1_LIVE5 months 27 daysThis cookie is set by Youtube. Used to track the information of the embedded YouTube videos on a website.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
CookieDurationDescription
_gat_UA-42160853-21 minuteNo description
cf_ob_infoNo description
CONSENT16 years 8 months 3 days 6 hours 2 minutesNo description
SAVE & ACCEPT
Powered by CookieYes Logo