$ES DOOM or VROOM?Stock market bears have been preaching that the stock market has been due for the DOOM correction ever since the covid recovery began. Their arguments have tantalized the analytical mind and a slew of data and indicators have supposably backed up their thesis. However, with the fed's clownish monetary policy wind in its sails, the S&P 500 has steamed full speed ahead to make new highs again and again. The astounding part about it all is not that it's made new highs (the S&P has always been a good long term investment) its that it did it in the face of insurmountable odds. The face melting +75% rally it put in off of the covid lows happened during some of the most tumultuous times this country has ever seen... with lockdowns, record unemployment, civil unrest, and a prevailing fear of this unknown virus that swept over the nation. Yes, amongst all this chaos, the S&P just went up. Then we had the most widely contested and chaotic election we have seen in a long time in this country, but still... the S&P only went up. Then we had a widespread labor shortage as people delayed going back to work after the lockdowns lifted... And inflation payed us a surprise visit and brought a new type of fear... but still the S&P went up. The virus returned with 5 new variants and vaccines turned out to be doing a whole lot of weird stuff we weren't expecting and new dreadful data was flashing across our screens, new mandates, new concerns, new narratives... but still the S&P only went up. Then the Afghanistan situation broke out, and the market dropped sharply, the world was in chaos!... but then the S&P rebounded and went back to the highs.
Now I can hear you thinking... "are you saying we will never have another correction again?... never another depression?" No, in fact I believe the correction and the depression will be one of the worst we've seen when it happens, I just don't think we are there yet. The stock market has morphed into a creature of its own. Cutting the umbilical cord from what it used to be traditionally tied to. This can be clearly seen as it rallied to new highs in 2020 while the economy was in shambles. MMT and the age of stimmy checks, multi trillion dollar spending bulls and daddy Powell backing us up, have given us a Clown monetary system that has produced a clown market. And that market has been honking it's nose at the bears for a year and a half now, and I think that there are still plenty of honks to come.
Many will say yes... but now the fed is going to taper and everything is going to fall apart. That's only a true assumption if you believe that the fed actually wants to change it's policy. I for one hold a different view, but we shall leave that for another time.
For now, I leave you with this chart... What if the correction we saw was really just a retest of previous highs on the way to a bigger breakout move? Certainly makes the pullback look a bit different when you put on that perspective right? We have a the previous highs as support, as well as a high volume anchored vwap that marked the lows so far. I think the S&P still has some big moves ahead and maybe even a Santa rally in the cards to take us to 4700+ by end of year.
May the pumps be ever in your favor
-ST
