SPY reversal danger

I hope you had great New Year‘s Eve celebrations, and once again Happy New Year! S&P 500 was again rejected at 4,840, and started slowly losing altitude into Chicago PMI, which ushered in selling wave as the figure (46.9 vs. 50.1 expected) didn‘t really boost the ruling soft landing narrative in a heavily optimistic market.

Let‘s bring up the premium daily analysis published on my site, which I‘ll put into fresh light following Friday‘s close:

(…) It‘s the Santa rally after all, yet S&P 500 is having issues extending gains much above 4,830s. Blame the year end positioning and unwillingness to deploy big institutional money this late in the year. There probably is still some tax loss harvesting (some may lock in gains) to be done today, and if that happens in the best runners of the year (SMH, NDX, even ES), once these get (re)bought into Jan 02, this may affect them most of the way into Tue Jan 09. Things would work similarly to a springboard, reversing last trading day‘s moves to a degree on Tuesday.

As regards Russell 2000, the fuse was lit only late Oct, so this effect would be less pronounced, and institutions have been shorting it as much as biotech or real estate probably (that commercial real estate crisis that didn‘t come still, regional banks situation papered over successfully in Mar, or dramatically improving liquidity ever since late Oct with all the increasing rate cut bets and soft landing hopes returning as per my early Nov call).


Source: stockcharts.com

Today‘s analysis is shorter than intended, shorter than usual, as I‘m slowly getting better following the quick bout of weakness and feeling cold as of Friday, which requires more a single weekend to get rid of in full. Thank you for your understanding and Happy New Year!

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