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Absolute Growth
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My name is Jeffrey Derose, I am 25 years old, and I have been working in the financial industry for the past six years. I am currently a trader at a hedge fund. I have been studying the stock market since I was 16. My father introduced it to me as a kid but I really got into the market when I... More
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Absolute Growth
  • Bearish Catalyst For S&P 500 0 comments
    Jun 6, 2013 7:42 AM

    (click to enlarge)16 year chart of S&P 500 Above we have a chart of the S&P 500(NYSEARCA:SPY) dating all the way back to 1997. For the past 16 years we can see the S&P has been channeling between 1550 and 800. During that period we experienced the tech bubble, the housing bubble, and the financial crisis. The rapid rise that we see beginning from March '09 is due to low interest rates and monetary easing by the Fed. I feel this as an artificial appreciation in the market. We've had 3 rounds of quantitative easing since 2008. The latest has the Federal Reserve buying $85 billion in bonds every month. All this buying of debt has been pushing the markets higher. As we're seeing an improvement in the economy the Fed has been hinting towards ending its easing policies. Although we did break through the all time highs, the S&P looks ripe for a downturn according to this chart. It's not a matter of if but when the Fed decides to end its easing policies, we can definitely expect a sell-off in the market. This chart shows us we could possibly expect a reversal, the catalyst may be the ending of quantitative easing.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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