By Sven Henrich[1] on [2] • ( 5 Comments[3] )
Oh the irony.
It was exactly a year ago today, December 23, 2018, when I made the case for a technical bullish reconnect of markets that had overshot to the downside.
Back then in Imbalance[4] I said, among other things, this:
“As of now we have massive imbalances to the downside and these disconnects will cause an effort at a reconnect…Bears are now screaming for ever lower targets in December. Ignore the screaming. Focus on the technicals. Everybody chill. Imbalances don’t last.”
And now with this Q4 being the polar opposite to last year and its current party like it’s 1999[5] atmosphere I find myself in the same spot: Making a case for technical reversion first before the next bull/bear debate. And yes, I’ve been making the Sell Case[6] earlier with recognition that the Fed induced liquidity program may well extend into Q1 2020 and this still applies. After all the Fed’s current liquidity interventions are unprecedented:
That said the technicals are screaming imbalance as they did exactly a year ago.
So I’ll share a few charts for your consideration.
First off, let me point out that the Q4 move here is not dissimilar to what we saw leading up to the January blow-off topping move:
As then this move here being driven by liquidity, tax cuts then, the Fed now.
A basic imbalance then, as in December last year and now: $SPX far disconnected from its 200 day moving average:
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