Slope of Hope Blog Posts
Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
One thing I try to stress in these posts is that the movement of the market can, to a significant extent, be broken down into a series of inflection points and, depending on the outcomes at those inflection points, the market moves to the next inflection point or screen.
Last week there was a very nicely formed inflection point and the decision at that inflection point was made on Friday, with a smaller bull flag channel ultimately breaking up with a target at a retest of the short term high at 3184.15, and a larger bull flag channel also breaking up with a target at a retest of the June high at 3233.13. Both targets have now been reached, with the high today on SPX at a marginal higher high at 3235.32.
Was this good news for bulls? Well not necessarily no, as my bear scenario had a decline ideally into the 2880 area before a likely retest of the June high to set up a possible double top for this move up since the March low. As that retest has been done now instead, that possible double top has been set up earlier and SPX has arrived at this next inflection point.
I was reading a very interesting article yesterday on the progress of COVID-19 and it was interesting not so much because of what was said, as for the decent quality numbers that it was quoting on COVID-19 exposures in the US population, and the fatality rate from the now decently sized statistical sample of exposed population and consequent deaths. In summary about 5% to 8% of the US population has now been exposed and are showing antibodies, and the death rate so far, subject to some likely attribution of deaths to other causes, is coming through at between 0.49% to 0.78% of those exposed. If you’d like to see the source article you can see that here.
If you haven’t seen it before I’ll be referring back to my 20th March post ‘A Short History Of Superflu Pandemics‘ and so I’m linking back to that for reference.
I was asked an interesting question yesterday in our monthly free public Chart Chat at theartofchart.net, and I’d like to talk a bit about that before I start looking at markets today. The question was whether, given that market prices reflect everything that is currently known at the moment about that market, then how can that price be mistaken? My reply was that if that was truly the case then the price of tulips in January 1637 (just before that bubble burst) would have been equally justifiable and that, further, if that was really true there would be no speculative bubbles, which clearly there are on a regular basis.
Something I didn’t add, and should have, is that while statements like this are often thought of as economic rules or even laws, what they are in truth is just working assumptions that contain enough truth that economic models can be built using them that will have some relevance in modelling the behavior of a market that is infinitely more complex than that model.
Just a reminder before I get started that we are running our July 4th sale at theartofchart.net at the moment and that will be running until the end of next week. For the duration of the sale annual memberships are available for the price of only eight months at the monthly rate rather than the usual ten and as ever with all our memberships, the membership rate will remain the same with no price rises for as long as the subscription is maintained. If you are interested then you can find the sale page here.On to the markets. I was writing last week about the Janus (Bull) Flag targets at retests of the June highs on SPX, NDX, RTY and INDU and I was noting that NDX would likely reach that target first (done) and would then likely retest a major resistance trendline just above there afterwards (retested) and that the upswing on equities might fail there (possibly happening). Here is that updated NDX weekly chart. NDX weekly chart:
On Friday afternoon. in the webinar I posted on my twitter, I was talking about the either way setup that had formed on equity indices with the formation and break down from head and shoulders patterns on SPX, NDX, RUT and INDU. I noted that on this setup there were only two strong targets to watch, and that was either a move to the H&S target, on SPX a retracement to the May low at 2766, or a rejection back up into a retest of the June high. In the case of the rejection that would be a pattern that I would call a Janus (Bull) Flag, I see a lot of these and they make the rejection/retest target 80% to 90% of the time. When the target isn’t reached there is often a near miss.
The H&S patterns have since all failed, so the Janus Flag targets are fixed on all of those indices and in the absence of strong evidence to the contrary, I’m expecting those targets to be reached.SPX 60min chart: