Do we see a top in the S&P 500 next week?

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The S&P 500 closed Friday at 2670.71 up 2.87% for the week and up 13.58% from its December 24th low. While this rally has been very impressive, our timing models are showing that Tuesday will be a key date (US markets are closed Monday for MLK Day), and suggests we could see a top and directional change early next week, likely starting Tuesday.

As we can see on the following chart the S&P has now recovered all of its losses from mid December to the 24th.  While it is possible we could see another spike higher on Tuesday, based on timing, we expect to see the market turn lower. 

On Tuesday watch for another downturn with the key support levels being 2600, 2540, 2450 and then ultimately the December 24/18 low of 2351.10. On the bullish side, only a break above the 2725-2776 resistance level, and then holding above 2830 would suggest new highs are in the cards.

What could trigger a negative turn in the markets next week?  The list is long, here are a few potential contributors:

  • The British parliament voted down the Brexit proposal this week and now on Monday the UK PM May must present her new Brexit plans
  • Ongoing China/US trade tensions
  • Escalating tensions between China & Canada related to Huawei CFO detention
  • The reality that China’s economy is slowing down which could seriously impact global economies
  • The declining economy in Europe, and the looming banking crisis there
  • Growing calls from Democrats for Trump’s impeachment
  • Continuation of the US government shutdown
  • To solicit votes from millennials the election platform from the progressive left will be: guaranteed income, free university, free healthcare, free everything, resulting in increased debt & taxes

Understand that we are getting closer to that point where the ‘trust’ & therefore ‘confidence’ in government seriously deteriorates. This will ultimately cause investors to really question whether they want to invest in government bonds or move their capital into private companies via stocks.  Investors who understand how the global flow of capital drives all markets are the ones who will thrive over the next few years. Those who don’t, won’t.

Subscribers will get the full picture in Sunday’s issue of the Trend Letter.  If you are not a subscriber but wish to be, click here to subscribe.

Stay tuned!