My crystal ball

Of course, I don’t have a crystal ball. No one has! But people are always trying to imagine to get something out of a crystal ball and that’s really why the market becomes so exciting everyday with so many traders are betting based on their “manufactured” (a fancy word nowadays!) crystal ball. I must admit I’m one of those constantly betting based on my MCB! So what my ball is telling me right now? It is whispering to me that we are going to see a repeat of what we experienced back in Feb/Mar last year. But before getting into what I mean, first let me share a wisdom from a very successful trader, which I got from a friend today:

“But really, technical analysis is much more of an art than a science… That is, if you try to force it to conform to strict rules and formulas, it’s likely to be wrong almost every time. Try thinking of it the way I do… A chart of a stock (or index) is simply an emotional picture of the stock at a specific moment in time. Stock charts tell me how traders/investors are responding emotionally at any given point in time. Human emotions are remarkably consistent. We tend to respond the same way, over and over again, to the same circumstances. So, if I look at a chart, find a time where the conditions were similar to where they are today, and note how the chart behaved afterwards… it can provide strong clues for what to expect in the future. But technical analysis is emotional. It evolves over time. So, conditions that used to provide a catalyst for a big move may need to get more extreme to cause a similar movement the next time.”

So what I’m going to share with you is exactly what I’m thinking based on the past similar setup and what happened afterwards. Remember, while history does not always repeat, it often rhymes. So don’t take my words for a scientific precision. Rather a general roadmap that I think we are going to witness. With this precaution out, see the one year S&P chart. Do you see how the market behaved in trying to challenge its 50 DMA back in Feb/Mar (green box)? Pretty clear, right? It tried first with a fake breakthrough and fell back, followed by another attempt that formed a bearish double top (DT). That bearish DT triggered a much powerful next leg down to test its previous lows. I think we are going to see something very similar, if not exact. S&P has just made an attempt to challenge its 50 DMA but didn’t hold up. It dropped down to 2610ish and today wanted to try to make another challenge again to breakthrough its recent high of 2670 but failed. If successful in the next few sessions, it has an important overhead downtrend line to break at 2700. But I highly doubt it can make it. If I’m right, it is basically following the same pathway to form a bearish double top while alluring majority traders into the trap. And then an end-of-world type of attack may follow to kill as many dumb traders as possible as a punishment for their FOMO in chasing highs.

But again, you don’t need to take my words seriously and you can just take it as a weekend fun reading. After all, I don’t have a real crystal ball!! For myself, I'm following my fake ball and will only go really long if it can decisively break out above its downtrend line, especially above 2800! I think it is at least many weeks, if not months, away!!