S&P 500: 2011 ‘Comp’ Back In Play

Sometimes simpler is better.  For months now, and right through the Brexit drama we have been noting simple technical and fundamental items like a NYSE breadth ramp up (see bottom panel of chart in this post), key lateral support levels that have held, the ramp up in Semiconductor manufacturing equipment, the elevated ‘prices paid’ by US manufacturers in recent ISM reports and this little technical specimen right here; the negation of the moving average cross on the weekly S&P 500 chart.

We had all the (backward looking) reasons why the stock market was over valued, the economy was sputtering and this long topping pattern was going to make the previous two look tame by comparison.  When the EMA 20 crossed below the EMA 50 we had a signal that had triggered in 2001, 2008 and… 2011.  The 2011 case was a whipsaw, which provided the ‘thrust’ (much more on this theme in NFTRH 404, but for reference:  Breadth Thrust: Prelude to a Crash?) to the most intense leg of the inflation-fueled, Goldilocks-sustained bull market in US stocks.

Months ago this negative signal was undone and now technically at least, the breadth thrust that is breaking stocks up and out is confirming the message; in this age of hyper-policy, the 2011 ‘comp’ has won.  In 2001 the inflationary policy to come was just a twinkle in Greenspan’s eye.  In 2008 he had gotten out of Dodge and handed the reins over to Ben Bernanke, who presided over the liquidation of Greenspan’s mess.  Then the age of ever more experimental, and globally coordinated monetary policy began.

You caught me; that is all noise.  Back to the simplicity of this one chart; the signal is morphing into a larger version of the 2011 signal.  It may eventually be undone because in TA there are no promises, only facts that have already come about… and projections.  The signal noted above projects higher prices, though stocks are vulnerable in the near-term when considering a variety of short-term factors.