Don't Get Caught In The Bull Trap

Summary

• I've been cautious about the markets, predicting uncertainty until the "Fed put" is tested during a significant downturn.
• This article covers both market fundamentals like the Fed put and macroeconomic data, but also technicals through the charts of SPX and the Magnificent Seven.
• There is a good reason to believe that the current rally is a fake-out and that more pain is in store. This all depends on the coming earnings and economic data.
• If these catalysts are all soft, we may expect more pain and can see some bearish signs in both fundamentals and technicals currently that point toward more “soft” data ahead.
• Currently, I am playing defense, but I am not short and don't believe others should be.

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Introduction

A “bull trap” is a false break-out where markets trend higher but then reverse sharply lower. I currently see several fundamental and technical reasons for the current market rally to be, at least in part, a bull

Analyst’s Disclosure: I/we have a beneficial long position in the shares of MSFT, GOOG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.