SPX | The Everything Bubble

١٤ يناير ٢٠٢٣

SPX vs Inflation is a chart I explained in the following idea.

While this chart showed incredible golden-ratio behavior, there are some periods which stand out. The smooth dance of the ratio throughout the last 100 years, has some quirks (the red ellipses). These periods are not random, they all feature a bubble behavior. It is clear as day that in 1996 the .com bubble formed, which caused SPX to return to trend in 2003.



The 2004-2008 stock market growth and the Great Financial Crisis are not apparent, since they are part of The Great 2000 Recession. They are in the middle of a long-term downwards trend.

So where does this leave us? If this chart has any meaning, we are in the middle of the air, with incalculable drop for the chart in the future...

One target can be pinpointed using probable fib-extensions, using retracements drawn from important highs and lows.

It is 12 times lower than now, or 92% drop. It depends on how you look at it...

PS. I know that charts don't go back in time. The red arrow is drawn towards the left for aesthetic reasons.
Who knows how far downwards is the trend now...

PS2. I invented a new name for the Head and Shoulders pattern. I call it Cerberus, the three-headed beast guarding the Underworld.
Look at it in action:


The tail of Cerberus is a dragon's head spewing flames, which in trading would be a bull-flag.

Chart taken from SPY_Master

Tread lightly, for this is hallowed ground.
-Father Grigori

١٤ يناير ٢٠٢٣

ملاحظة

Curiously, on the cover chart the McDonald's logo appears...

١٥ يناير ٢٠٢٣

ملاحظة

In the past few ideas, I posted about the importance of chart transformations.

In the idea above, inflation (PPIACO*GOLD) is used as a transformation tool. This shows tremendous importance in very long-term charts.

In a previous idea, I talked about modified-yields, for more sensitive, near-term analysis of equities and oil.

Look at the similarity below, by analyzing NDQ:

١٥ يناير ٢٠٢٣

ملاحظة

١٥ يناير ٢٠٢٣

ملاحظة

I got a little confusing on the latest comments:

Transforming charts by using the PPIACO*GOLD transformation is useful for long-term analysis.
- Dividing by (PPIACO*GOLD) takes inflation out of the equation.

For more accurate short-term analysis, a yield transformation should be used. Dividing by US10Y proves a useful tool for short-term analysis. I would however advise on using one of the following alternatives:
- DXY is an orthodox alternative to US10Y.
- The (US10Y+1+1/US10Y) modificator is one I invented and shows excellent performance throughout the years (especially the 2020-2021 period with yields in all-time-low levels)
- You can use the TLT ETF, or a similar one, as an alternative to 1/US10Y. Do note that these are inversely related and you should take care on how you use them.

The NDQ chart above shows that both transformations (long-term and short-term) give us a similar result for 2022.

١٥ يناير ٢٠٢٣

ملاحظة

١٩ يناير ٢٠٢٣

ملاحظة

SPX/PPIACO

Do note that the retracements are drawn using the magnet tool, and they are incredibly precise.

٢٠ يناير ٢٠٢٣

ملاحظة

One more chart comparing SPX and SPGSCI

SPGSCI is a measure of energy cost, by Standard & Poors. Both indices are calculated from the same people.

٢٣ يناير ٢٠٢٣

ملاحظة

The violation of this trend marks the end of QE. This shows the true effect. I hope you all understand it.

With Green and Red arrows, I have marked the points I used to draw the rays.

These long-term rays, prove as significant resistance.
Hitting one of them, was a fundamental reason the Black Monday was so severe.

٧ مارس ٢٠٢٣

ملاحظة

I've been hearing people on YouTube, in a channel called Real Vision Finance, where they talked about how the "bottoming" behavior that occurred this summer had the features of a "topping" structure. We had significant gap-ups instead of significant gap-downs. Someone smarter and more experienced than me talked about it. Unfortunately, I don't remember on which video they talked about it.


It's not me that first talked about how equities are not in a recession yet. spy_master invented the incredible SPX/(1/US10Y) chart which calculates just that. SPX Transformations with either bonds or the yield curve, result in similar conclusions. There is much room for us to drop.

In QE Booms, like 2018-2020, equities lost real value while their price got higher. In QT Booms like 2022, equities gained real value while their price got lower.

It is a lose-lose scenario. In 2018-2020 an investment in SPX would give out more money, but the output would be of less value. In a sense, no real wealth was made. In 2022 an investment in SPX would lose money, but it would be more of value.

This upside-down scenario is concerning... Are we entering a period when a dwindling SPX is "more profitable" for certain massive investors? Those who own fundamentals of the economy (banks, commodity producers), not those who seek to invest in their dollar-denominated price.