As traders and investors begin thinking about the new year and what may come, it's critical to thoroughly examine where the S&P is at now and in previous multi-year runs.
click on image to enlarge
In the chart above showing thirty-five years of trading in the S&P using yearly candles, I have recorded how overextended the 1999 internet bubble got above its twenty-year EMA line and fifty-year EMA line. I have also recorded where the S&P is at now relative to its twenty-year and fifty-year EMA line. It's not difficult to see that we are at the long term over-extension again. The small chart to left above shows the same thirty-five year view.
click on image to enlarge
In the monthly bars chart above, the S&P shows that it has maxed out in both its six-year bull run channel shown with red lines and its twenty-year incline channel shown with blue lines.
For the time being the Fed's all powerful buying algorithm is keeping the market up and continuing to inch out new highs. How long they can continue to do so is what everyone wishes they knew.
Trade well my friends
Alan
