SPY - Crash is coming?
-Looking at the current levels, SPY is super close to the danger zone which is at $427 and the second one is at $420. If SPY breaks below these two, we might have some serious problems!
-Alright but before panic selling, hedging, and liquidating, what is our plan? Why should we be scared or maybe not?
1) U.S debt level increased a lot during that bond purchase period where FED was infusing money into the economy, if we should talk more specifically, we are talking about $100 billion USD each month. Now we are looking at recovering from the pandemic's negative economical effects, to do so we have to implement these monetary regulations (Tapering).
-But will rate increase help the economy?
Well, it will help the dollar add value to itself for sure, but what about retail sales and consumption? People won't feel that free to take them loans and spend it as if interest rate ain't a thing. The drop in consumption might cause a possible recession.
2) Inflated market needs to chill down. During the pandemic, we saw one of the fastest rebound from the drop to the highest-highs. Tech sector had enormous gains and attention which gave a lot of bubble feeling to professional investors and the whole finance world. With the current uncertainty, all of them, especially unprofitable ones are dropping. Will they be able to hold on the game when they will have to roll their loans with bigger rates? Or will their private investors be willing to give out the valuable cash when the whole market drops, to support the business?
-A lot of these companies are not expected to get into profit zone any soon, and we are talking about the future 3-5 years. So market definitely looks more bearish than bullish.
When it comes to technicals, SPY must stay above $427 which we doubt it will.
OUR TARGET:
1) $427
2) $485
-Alright but before panic selling, hedging, and liquidating, what is our plan? Why should we be scared or maybe not?
1) U.S debt level increased a lot during that bond purchase period where FED was infusing money into the economy, if we should talk more specifically, we are talking about $100 billion USD each month. Now we are looking at recovering from the pandemic's negative economical effects, to do so we have to implement these monetary regulations (Tapering).
-But will rate increase help the economy?
Well, it will help the dollar add value to itself for sure, but what about retail sales and consumption? People won't feel that free to take them loans and spend it as if interest rate ain't a thing. The drop in consumption might cause a possible recession.
2) Inflated market needs to chill down. During the pandemic, we saw one of the fastest rebound from the drop to the highest-highs. Tech sector had enormous gains and attention which gave a lot of bubble feeling to professional investors and the whole finance world. With the current uncertainty, all of them, especially unprofitable ones are dropping. Will they be able to hold on the game when they will have to roll their loans with bigger rates? Or will their private investors be willing to give out the valuable cash when the whole market drops, to support the business?
-A lot of these companies are not expected to get into profit zone any soon, and we are talking about the future 3-5 years. So market definitely looks more bearish than bullish.
When it comes to technicals, SPY must stay above $427 which we doubt it will.
OUR TARGET:
1) $427
2) $485
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