Friday, August 28, 2020

SPX Update: Inflate or Die

Last updated discussed how SPX had reached a potential signal line, and not to assume that its reaction would be bearish:

Note the blue trend line, which SPX has just reached... and don't just see one side of that trade (i.e.- don't view it only as "resistance"); note what happens if it sustains a breakout:

The Fed has since announced that it doesn't care about inflation anymore (if it ever really did)... and SPX has since cleared that line.

I don't think bears should underestimate the Fed's signal, because by keeping interest rates artificially low while at the same time (basically) committing to ignore inflation... what other options will savers have but to be forced into high-risk investments?  They gonna put their money into a CD at the current Special Introductory Rate (*for new customers ONLY) of .0000000000000000132% while inflation runs away from their money?

And keep in mind that my second target was 4000+/- (and yes, 3980+ would be within that +/- margin, so knock it off!)... and my out-loud musing about the potential bullish options from 8/24:

Maybe it doesn't seem so crazy anymore.

In conclusion, SPX has broken out over its first long-term resistance zone... bears will have a small window here to whipsaw that (and any whipsaw could start from a little higher), but if they can't, then SPX may (ultimately) be on the way toward the next higher resistance zone (as discussed in the first chart) and my second target.  (Again, we're talking intermediate-term here, so that wouldn't preclude a near-term correction after the current rally completes -- the next near-term upside target that I discussed yesterday morning in the forum was 3520-25, so that could be one zone to watch.)  Trade safe.

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