Technically Speaking

January 5, 2021

 Technically Speaking: 

Resistance Range- SP500 3760 – 3800 

Support Range- SP500 3705; 3575- 3600 and 3250 3300 

 

Markets rallied nicely into the end of 2020. When the SP500 declined to around 2200 in March, few expected the massive rally that followed, bringing the SP500 to new all-time highs of over 3750. We enter 2021 with the Georgia Senate election hanging over the market as it will have a great deal to do with how the nations goes forward both politically and economically. If we see a reversal of the tax cuts for individuals and corporations along with an increase in Government regulations, early 2021 could be very volatile and probably have a good size decline. However, if Republicans win at least one Senate seat we should see a continued focus on the economic comeback. Biden’s agenda will be set after the Senate election. The move left is already in the works. but how far left and what is done with stimulus will be determined by who controls government.   Technically the markets are closer to long term resistance than long term support. If selling should accelerate a 10% or so decline can happen. In my opinion it will be short lived decline and a good buying opportunity. My thinking is based on the Federal Reserve promising to keep interest low for at least another year. Couple that with another government stimulus package and Biden’s proposal for a massive infrastructure spending and you have a formula for economic growth. I believe history repeats itself and after the Spanish flu subsided the Roaring 20’s followed. It is not out of the question that we are setting ourselves up for a modern era Roaring 20’s. Ride the wave of stimulus and low interest rates, but remember, the Roaring 20’s was followed by a depression. I am not going to predict a depression, but I will predict that eventually a long-term deep recession can end the modern Roaring 20’s.  Watch interest rates rising for a simple signal that then we may have to pay the piper for all these low rates, government stimulus and massive debt.  For the next few years let us enjoy it while realizing pullbacks will occur and they will be buying opportunities until the day they are not. 

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