If you follow fintwit bears, they all point out to the rising wedge as well as the broadening formation on S&P500 that should eventually lead to the lower stock market prices. I decided to review the daily chart of S&P500 for the last 50 years to see if there were any broadening formations in the past and what was the resolution of those formations.
There are a lot of bears out there but one of the most prominent bearish traders / analysts is Sven Henrich who has recently appeared on CNBC to scare all retail traders with his 2100 forecast on S&P500. I tweeted about that the other day.
Sven and the likeminded bears believe that the stock prices should start falling (soon) to reach the bottom of the ‘bearish’ broadening formation. The S&P500 chart below depicts what bears are hoping for.
Since the market is the game of probabilities, this scenario cannot be ruled out. If we have a bearish reversal next week and all of the breadth indicators turn down again (right now they are pointing up), I would definitely start considering this scenario more seriously. At this time, however, my bias is bullish since my market compass is pointing up.
Since my model is in the accumulation mode, I wondered if there were past instances of the broadening formations breaking out (instead of down) and leading to higher prices on S&P500. Here are all of the instances I found in my research. Enjoy!
1965 – 1968
1983 – 1987
1989 – 1994
1996 – 1997
1997 – 1998
1998 – 2000
2004 – 2007
2011 – 2014
2015 – 2018