MY TARGETS FOR THE S&P 500

As always, I like to post links to past blogs for accountability to you, the good readership. In this way, you can continue to note whether my history of accurate market analysis is continuing.  When I can no longer offer valuable insight and – more importantly – winning portfolio management results for our clients, I will leave the business,  join the local shuffle-board club, and become an angry old has-been. Picture Frank Costanza of Seinfeld.

Here goes, with the links:

Today’s blog covers some targets that I’ve put together for the tradable neartermed rally on the SPX that I correctly called here, then here. I’ve also posted some downside targets for the index after my early warning for a possible bigger picture bear market in January, here , and then an outright call for a high risk sell alert in early April, here.

These targets are taken from some lessons I have learned successfully trading through bear markets. I covered that topic here – which is a blog I strongly suggest you read – or re-read if you have not already. Finally, you should take thirty minutes of your time to view the MoneyShow webinar on that same topic (managing your money in a bear market) here.

The tradable rally: How much is left in it?

This chart shows us that we have come into a cluster of resistance for the SPX on the daily chart. That cluster may or may not be broken. We have so far seen about 7.5% upside from my original call  surrounding the doji/hammer candles – and about 4% since the positive confirmation days after those candle formations. That’s where we bought. We need to see a break through about 4175 or so to hit the next level! If it doesn’t, the rally is over! 

So where lies the next level, assuming 4175 breaks, and what is my highest upside target for this rally? If, and only if, the SPX breaks current resistance level of 4175-ish, the market will likely see a return to around the top of the pink trend channel line on the chart below. That target, which lies around 4300 or so, would bring the trough to peak profit (assuming you traded precisely at both ends, which never happens in real life!) to about 11.5%.  This is illustrated on the blue % retracement line.

BTW- note the small retracements (green % retracements) in 2021. Note the greater price swings (pink % retracement lines) this year. Bull markets, especially  after long periods of awesome returns, create complacency and bravery. Why sell? All is good! Bear markets invoke greater emotion, meaning greater, more violent bouts of fear trading selloffs and bottom feeding rallies. You can see how this happened after the COVID crash of 2020. Bigger swings for a few months, then super small swings as markets settled down in early 2021.

Until the current volatility swings settle, we are in for a continuation of the bear, or at best, a big consolidation pattern with lots of trading opportunities.  Not fun for the buy n’ hold investor. As an active trader, this thought brings a smile to my face. Hopefully yours, too! Don’t be a victim of volatility. Be a victor! Here are the gross May 2022 results for the ValueTrend Equity Platforms. No victims here!

The chart below this one shows us that, if the market retraces back to its 200 day SMA (which is a tendency I have noted in the MoneyShow webinar – see link above – then we could see a 13% gain from trough to around 4400-4450.

Bear market downside targets

The SPX recently bounced off of its first downside target at just under 3900. Assuming the current rally does not last, and support of 3900 fails, this will target the SPX towards its next major point of support. That lies near 3500, as you can see on the chart below. First things first. If 3900 holds after the current rally is over, we are likely entering into a sideways consolidation pattern. That would complete the bottom, and a bull market would ensue after whatever high the current rally sees is taken out.  A move above the 200 day SMA will solidify the move. For now, lets watch for 3900 to hold. If it doesn’t, I will be holding out for 3500 with the cash I raise during the current rally.  

Of note: I will be video-interviewing Brooke Thackray  this Wednesday. It won’t be published until Friday (I hope), but in a recent conversation with him, he made some interesting observations that I feel are extremely valuable trading ideas. One potential trade he is anticipating would be an early July rally, followed by a final washout into the August/September period for the markets. This will be a back/forth interview with he and I sharing thoughts from our own perspectives. I am excited about this interview, and will strongly encourage you to watch the video when published! I’ll post a link on this blog. You don’t want to miss this one!

9 Comments

  • Hi Keith,
    Thanks for the targets. Everything seems to be a moving target these days. LOL

    I just wanted to clarify. We are wanting the 3900 level to hold. Got that point👍
    What I wasn’t sure about was if the 3900 level holds here, are we still talking about the potential for a bounce through 4175 to the 200 SMA before the washout or with current markets appearing to decline again today, are we considering that the recent bounce is over and now we are into the next phase.
    Thanks for clarifying.
    Wendy

    Reply
    • Sure Wendy.
      3900 -ish is the recent low. A break below that is bad news.
      4175-ish is neartermed resistance. A break above that is good news (target 4300+ perhaps)
      Between those levels is neutral for now. So for example–We bought a bit of equity – bringing our cash down from 28% to 20%. We will not sell now on the small profit we have made on that trade, in the possibility of 4175 breaking out and 4300 being hit (which is where we would sell those stocks AND more to raise a whole bunch of cash!).
      We have yet to decide what cash level that will be although we are contemplating 35%. But first things first.
      Finally. If 3900 cracks, we sell, take a small loss, move back to more cash.

      Reply
  • Thanks for all the insight Keith, I am concerned about a gap down vs a break in the 200 SMA- 3 bar wait may miss the sell signal – are you worried about a gap down ?

    Second question – when you are on BNN or watch stock shows, there are a bunch of ticker symbols that are displayed -they are different from show to show- who dictates what is shown?

    I took your course- love the fact that you can watch the videos over and over – still have lots to learn but nice touch there for what’s it worth to you in feedback..

    David

    Reply
    • Thanks David
      First, yes, I am very, very twitchy (see my answer to the other David) regarding where to sell. I trust this market like I trust gas station sushi, skinny chef’s, and Justin Trudeaus “I’m sorry” speeches. It could indeed hit a target and gap down as you say. But that’s just conjecture. No themes allowed.

      Next–I haven’t been on BNN since January 2020! That’s 2.5 years! They don’t do in studio interviews yet. Anyhow–I think the ticker is just a running tape of the biggest up / down movers on the day.

      And I’m glad you like the course. Its about to go up in price–possibly next week. Good job jumping on the deal while it was still in place. I really am proud of that course. I took my time trying to make it absolutely accessible and understandable. No fancy-pants stuff–just a pragmatic real world system that anyone can use effectively.

      Reply
  • Keith I understand the levels as clarified above ( Thanks to Wendy for the question) but why would 4300 trigger a sell off by itself. Would you not stay with trend until it is broken? Is it because the usual three day rule may not be quick enough due the bigger volatility swings you mention?

    Reply
    • Darned observant of you David. Lets just say that I have Spidey sense that thinks the move much through 4350 (200 day SMA) is likely not going to last… so I anticipate selling. But–to your point, I will give it a few days. Here I am telling people not to form themes, then I am secretly convinced that the market theme is biased downwardly. Caught me! Anyhow, yes, I will let it ride if it blows above 4300/ the 200 day SMA. But I do have a very, very twitchy trigger finger on that sell button!!

      Reply
  • do we apply the three day (minimum) rule to concluding a break below 3900? ie. a spike below 3900 followed by a quick rise above would not constitute a break, right> Thanks Keith.

    Gary

    Reply

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