Where is the gravity?

First, just some fun about the upcoming election. While it is certainly a political issue, its impact on investment is enormous. Watch your portfolio if Biden wins. A 50% tank is not unexpected!! 💀💀 Mark my words😏🤓 Actually I'm not the solo singer on this. Here is what other same-minds have also seen: "There's a problem. It's all after-tax. That's unfortunate but at the end of the day, the money you put in your pocket is after-tax. You need to put more money in your pocket. It [the Biden plan] means that stocks — all things being equal — would be lower by 25% than they are today. It may not work that way. That is at least the theory," explained SMH Group CEO George Ball . This is just an estimate based on Biden's harmful tax plan but he will have a lot more comprehensive plans that will for sure significantly damage the US economy!

I feel like I'm a crying wolf again now, repeating what I was doing back in Jan and Feb time. I was keeping telling the risk for the market at that time but the market was keeping going up. It almost like there was no gravity anymore. Anything can fly in the sky and no need to worry about getting back down to the earth. But we all know this is just an illusion as sooner or later, everything will have to be pulled down by the gravity. When it does, it is usually very fast and sudden and higher the thing has gone up, the greater the fall will be. That's just a basic physics concept. You don't need to be PhD to understand. But the vast majority of the market participants actually don't believe so and they think there is no limit in the sky to go up and there is no gravity for them! 

So I'm crying again for the sake of honesty in terms of what I'm seeing and thinking. Sure, you can simply ignore me. No ill feeling on my side whatsoever!!😎. 

Below is the QQQ chart for the year as well as the corresponding momentum indicator, Summation Index. If a trend is strong, it is usually supported by its underlying momentum. But when the divergence shows up, be careful. Do you see what happened in Feb when a big divergence occurred? No need to tell you what followed the divergence, right?! Now we are seeing the exact same setup for the divergence. What will follow? I don't know for sure of course but I'd guess a sizable correction is in the cards. 

Now, here's the NASDAQ Summation Index...

Let me share with you another warning sign from the junk bonds. It is breaking down as well. Junk bonds are usually a leading indicator for the market. If its downtrend continues, watch below.

Of course, no technical indicators can tell you exactly when a trend will turn and with what magnitude. But the general rule of thumb is that when multiple indicators all come together pointing to one direction, the turning point is usually not far away. And the longer the underlying trend is going, the greater the magnitude will be for the change (up or down). I personally won't be surprised to see a 10-15% correction for the S&P within the next few weeks. 

And finally the sentiment index for the tech stocks.

Tomorrow, I will share with you what the big money is doing right now. Stay tuned😎