Traditional market analysis 12/06/2021 #3
Hello everyone! Once again I'll have to repeat myself by saying that despite the fact stocks are overvalued, there could be much more upside. Given the way central banks and governments are acting, it is hard for me to see stocks reversing any time soon. Yes there will be some pretty strong corrections along the way and at some point a big bear market. But to me it looks like we are more in a situation like we were after breaking above the 2000-2008 highs or in 1987 than we are in 1970s or 2000s.
Other than the US all other stock markets were very depressed for 1 or even 2 decades. European stock markets have been showing a lot of strength and their charts are indicating significant upside from here rather than downside. Below I have added some European indices which all seem very very strong and with significant upside potential. In 2020 and so far in 2021 we had the US initially show most strength, then Asia and now Europe.
Of course this doesn't mean the US market is in a bad spot or anything. Quite the opposite. Actually European markets doing well is a very good sign for the risk on sentiment. Bond yields have been going lower in several places although some Central banks are raising rates. In my opinion in the EU and US we won't see higher rates any time soon and there is no other way out of this massive debt hole we are in. To me negative real rates are boosting stocks, as long as we don't see Oil getting completely out of control. As long as oil stays below 100/barrel for some time and doesn't shock the market we could be OK. The same goes for most important commodities and especially Copper.
Currently the Russell 2000 is looking like it is about to come out of long period of re-accumulation. The Russell 3000 seems to be in a very strong uptrend that has the potential to continue even higher. We have no idea how massive this bubble could get as the biggest bubble is actually in the bond and currency markets. At least that's my opinion at the moment. This doesn't mean I think we will have hyper inflation or sustained inflation for more than 2-3 years, but it isn't impossible. Unfortunately policy makers are taking a ton of bad steps that are compounding little failures in the 'system' and eventually that will break either through social arrest or a market collapse. It's just not time yet and markets aren't that irrational yet... so dips are for buying and currently being long seems better than being short.
Where am I wrong at least for the short term? If the Russell 3000 closes below 2350. That's where my mental stop loss is.
s3.tradingview.com/snapshots/7/7ukQa1jW.png
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s3.tradingview.com/snapshots/b/bZPG5Azf.png
s3.tradingview.com/snapshots/1/1M4K5fbQ.png
s3.tradingview.com/snapshots/w/WgCzucO6.png
s3.tradingview.com/snapshots/r/RK2yfbmn.png
s3.tradingview.com/snapshots/y/YPaGPHZD.png
s3.tradingview.com/snapshots/c/cvohFJjh.png
Other than the US all other stock markets were very depressed for 1 or even 2 decades. European stock markets have been showing a lot of strength and their charts are indicating significant upside from here rather than downside. Below I have added some European indices which all seem very very strong and with significant upside potential. In 2020 and so far in 2021 we had the US initially show most strength, then Asia and now Europe.
Of course this doesn't mean the US market is in a bad spot or anything. Quite the opposite. Actually European markets doing well is a very good sign for the risk on sentiment. Bond yields have been going lower in several places although some Central banks are raising rates. In my opinion in the EU and US we won't see higher rates any time soon and there is no other way out of this massive debt hole we are in. To me negative real rates are boosting stocks, as long as we don't see Oil getting completely out of control. As long as oil stays below 100/barrel for some time and doesn't shock the market we could be OK. The same goes for most important commodities and especially Copper.
Currently the Russell 2000 is looking like it is about to come out of long period of re-accumulation. The Russell 3000 seems to be in a very strong uptrend that has the potential to continue even higher. We have no idea how massive this bubble could get as the biggest bubble is actually in the bond and currency markets. At least that's my opinion at the moment. This doesn't mean I think we will have hyper inflation or sustained inflation for more than 2-3 years, but it isn't impossible. Unfortunately policy makers are taking a ton of bad steps that are compounding little failures in the 'system' and eventually that will break either through social arrest or a market collapse. It's just not time yet and markets aren't that irrational yet... so dips are for buying and currently being long seems better than being short.
Where am I wrong at least for the short term? If the Russell 3000 closes below 2350. That's where my mental stop loss is.
s3.tradingview.com/snapshots/7/7ukQa1jW.png
s3.tradingview.com/snapshots/o/oXcmQxUM.png
s3.tradingview.com/snapshots/b/bZPG5Azf.png
s3.tradingview.com/snapshots/1/1M4K5fbQ.png
s3.tradingview.com/snapshots/w/WgCzucO6.png
s3.tradingview.com/snapshots/r/RK2yfbmn.png
s3.tradingview.com/snapshots/y/YPaGPHZD.png
s3.tradingview.com/snapshots/c/cvohFJjh.png
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