Knock Knock…

…who is there?
– Markets.
Markets who?
– $&P 500, stuck under the 200DMA!

That’s right. S&P has rallied hard from Christmas eve and now at the doorsteps of 200DMA (2739). It has to break above this to reclaim its previous high (2930) and beyond, but there are challenges. This breakout hinges on a 3 prong support.

A> Dovish Fed Reserve
B> Trade war resolution
c> Slowing Global growth

We have A checked so far with the Fed Chair Powell anchored for now. B is most likely going to happen in some form or other as it has got Trump’s put. He regards the Market as a barometer of his success. C is something beyond anyone’s control and all signs so far indicates that we are headed to a recession, although not sure when. But here is the interesting part. All the three factors are feeding into each other. The fear of a slowing global growth will keep the Fed at bay. Trade war resolution will happen or else everyone involved stands to lose in the long run and further jeopardize global growth.

Long story short, S&P is trading at 16 times multiple but fear of earnings recession is also simmering. Bears think that conditions are ripe for a pullback but the Bulls have the backing of Powell and Trump. While we wait for this tug of war to resolve, lets do another round of …

Knock Knock…
– who is there?
Investor
– Investor Who?
Investor who is confused whether to stay long or go short!

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