Sven Henrich: It’s Make Or Break Time For The Markets
Stocks are poised to break big, one way or the other.
It’s make or break time in the markets cautions Sven Henrick, technical analyst and lead market strategist for Northman Trader.
His weekly flurry of trendline charts warn that the major indexes have been compressing in rising wedges that increasingly point to a binary outcome: either a massive new leg up that will result in the market making new all time highs, or a bad breakdown that could waterfall into a 2008-style correction.
One high-level chart he tracks closely indicates that if the S&P 500 does not soon rise above the blue trendline that began in 2009, a sharp roll-over is highly likely:
His reams of data increasingly suggest that today’s global elevated asset prices are in no way justified by the fundamentals of the underlying world economies. And that someday — perhaps quite soon — a reckoning long overdue will occur:
Passive investing obviously is becoming a larger portion of the investing mix to the point where we have more ETFs investing than we actually have stock traders. And so there’s this element of automatic allocations. A lot of these are driven by market cap weightings, for example.
So to the extent that you have a lot of influence coming in from passive funds or ETFs, they will buy a certain set of stocks more actively than others, because it’s just the way it’s allocated. We saw that last summer — and this is one of the things want to pay attention to, when you see divergences and deviations.
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