S&P 500 Update: The Return Of Volatility

A couple of weeks ago we looked at resistance bands for the S&P 100 and said we were at very strong levels of support in this pricing area but that I expected pricing to ultimately break down. Changes in trend always exhibit substantial volatility so it wouldn't be surprising to see another rally attempt at the highs of late April and early May. That said, 1150 on the S&P 500 is very substantial upside resistance. A price point that was substantial support on the way down yet the market sliced through 1150 like a hot knife through butter during its collapse.

If anyone questions whether we were in a period of low volatility to be followed by a return to volatility, our consistent premise on here, one only needs to witness global finance imploding before our very eyes. Bonds are cracking around the globe. Equity markets have once again become wild. Industrial metals are schizophrenic and gold and silver have bounced back and forth with very substantial moves. The back end of the storm is starting to reveal its violence.

Ultimately, markets have rhythms and patterns that, while often unreliable, do in fact repeat themselves. One can argue as to why, but as shown on the S&P 500 chart above, the red price band has provided substantial difficulty for twelve years. Once again, we are in the soup. Three prior attempts to break this level to the upside were repelled, and in fact, on the two occasions that the market broke through this level for some period of time, it took enormous growth in the money supply to shove us through. Today, that dynamic does not exist. There is no internet bubble fraud or housing bubble fraud or globalization fraud working in Wall Street's favor. But we do see massive fraud involving risk-shifting of global finance's massive mess onto the backs of societies.

Recently, people in the finance community seem to be debating whether stocks or bonds are the best investment. And their basic disagreement is around inflation or deflation or some 'ation'. I believe this is clearly a false argument of irrelevance. In fact, I believe this false argument is primarily driven by the motive of personal profit within the financial community, as is most any remarks. If cash is king, then how are Wall Street professionals ever going to rationalize charging a client 2-5% of their assets annually (or more) to be in an investment that pays next to nothing in investable terms. Yet without the usury of Wall Street's money managers, cash is gaining value at a double digit annual rate against many asset classes. And, I clearly expect that to continue and expand without a change in policy. ie. We've been bearish on anything that is tied to Wall Street since starting this blog.

If the bulls are going to be rewarded, and there are many who believe since individuals are piling into bonds that stocks are the place to be, they have a lot of pushing to do to get past this price band and to break free of its pull. Mind you, to be bearish on bonds and bullish on stocks because of what the small investor is doing, or hope that central banks can or will re-ignite inflation is really quite a stretch at this point. Wall Street has created all of these messes. Betting with Wall Street or the status quo is now the fool's game. In other words, you can take traditional sentiment perspectives as being contrarian and fuggetaboutit.