Food for thought

September 8, 20222 Comments

If you subscribe to our newsletter, you will have received the research report noting our argument for the potential of a sideways-entrenchment for the major markets in the coming years. If you didn’t get a copy, you should subscribe to the newsletter here, and AFTER you have subscribed, send me a note on our contact link. I will send you the newsletter with the link to that report. Today’s blog ties into that thesis. That is: It is possible that the sideways range-bound market has already begun. Let me explain.

Why the market may rally next week

I’ve been thinking about the recent market pattern lately. First – please re-visit this blog, where I presented the neartermed market timing system I use to identify short termed moves. It was just in the zone of staging an oversold rally  – and it looks like we may be getting that rally now.

Next, you will note on the daily chart below a few developments. The summer rally brought the SPX right back to its 200 day SMA/ simple moving average (blue line) while also testing a point of resistance. And then it fell.

True, it did take out its June peak – which suggested the possibility of the bear market ending. However, we need to see that last peak, marked by the middle dashed green line (significant support/resistance area) taken out AND a move through the 200 day SMA. That didn’t happen. However, if we look at the market today, we can see that a solid point of support has been successfully tested over the past few days.

What does this mean? Well, the evidence suggests that we are NOT in a new bull trend, despite the headlines that I spoke about on this blog ( why you need to think for yourself!). However, unless we put in a lower low (below 3600) on the SPX, we are not necessarily doomed to stay in the bear market either. We must keep an open mind to ALL possibilities! Do not get clouded by your bias.

Based on the failed takeout of the 200 day SMA and the last high, yet the (so far) adherence to a decent support level near 3900 – I am wondering if the sideways market that we outlined in our research report has indeed begun.

Fundamentally, there may be some evidence for the current rally to carry on next week

Keep in mind that its just a few days so far–so its early yet…My reasoning behind this thought is the strong potential for a lower US core inflation being reported with the CPI release on September 13. You will have observed for yourself  the very recent moves in core inflation pricing:

  • lower oil/fuel prices,
  • lower housing prices and housing sales,
  • lower auto sales,
  • lower clothing prices,
  • lower metal prices, etc.

These will likely show up in next weeks CPI report. That could inspire the market to become a bit less bearish and rally, on the hopes of a softer monetary outlook.

My take: As such, we could see a rally back to one of the top two green horizontal resistance points. That doesn’t mean we are in a bull market. But it may mean we are witnessing the beginning of a base formation – or – a very long termed sideways pattern, per our research report.

As I note above, we need to be open to all possibilities. Follow the charts. Follow your discipline. Don’t pre-suppose anything.

As an aside, Craig and I are doing our filming of the Ask Us Anything video tomorrow. We are answering 24 questions (yikes!) – lots of topics that will be of interest to you all. I hope to have it posted sometime in the middle of the week.

And once again – don’t forget to register for my Saturday Sept. 17th appearance at the MoneyShow. Registration will allow you to attend all of the seminars at the show on both the 16th and 17th as you wish. I do hope to see you there! Click the picture below to go to the MoneyShow landing page:

 

 

 

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2 Comments

  • So we have a move up Sept 6,7 and 8th. This could signal a cautious buy on your favorite movers but the first line of resistance as above looks to be about 4125. Given the 3960 close today (Sept 8th) that is not worth the play.
    The question is do you make a move looking for the break and move to the next level or sit it out and wait for larger swings.

    Reply
    • Given that the Bear-o-meter reads negative, and the seasonality is “iffy”, and the trend is not yet proven–I think we are sitting this one out, despite the high probability of some sort of rally–per my observations.
      Problem is, it could rally and fall after next week’s CPI good news is baked in.
      Or, it could rise and break the 200 day SMA. In which case, I will change my stance and place at least one leg back into the market.
      I am not biased, and open to any potential, as noted in my blog.

      Reply

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