LOOK OUT BELOW!

Currently, the S&P is showing early stages of a correction. I have noted recently that my target is for the SPX to correct is 4800, to a probable maximum retreat to 4600. Today lets ponder on the neartermed, and possible mid-termed action for the SPX and the TSX.

SPX

Notes on this daily chart suggest that the last standing cowboy in this shootout is the 50 day moving average, at about 5100. If that cracks, the case for 4800, or lower, grows stronger.

TSX

A bit better picture for the TSX (which has less tech than the SPX, which, as predicted on this blog, would be the first to roll over in a correction). Intersecting trendline near 21,800 and 50 day moving average around 21,600 is being tested. Price Momentum didn’t diverge negatively ahead of this move (bottom two panes), but moneyflow momentum (MFI, pane below price) did give a heads up. Keep an eye on 21,600.

Not so Fun – damentals

The market is reacting negatively to the recent inflation report.  As you know, there’s been absolutely doubt in my mind we would be seeing reports like this.  I’ve only said so about 1,000,000 times in the past 3 years (ok, I “inflated” that claim).

So, will the Fed cut in 2024? Sure it could and probably will cut in 2024, but I believe not so much to orchestrate a return to normalization. I think rates would fall (assuming they do) in response to:

  • Political pressure (see my blog on Biden comments)  or
  • Softening/ recession. No prediction, but nobody seems to be considering the distinct, historically normal case for such an event. See below.

So…Is it different this time?

The S&P 500 could be facing a prolonged downturn.

Bubbles burst when growth expectations disappoint.  Given the expectations that tech companies front-loaded AI-based spending in 2023 due to the fears of being left behind, it may be that some of these mega-cap tech firms could disappoint as Q1 earnings come out. If they do come out a bit soft (no prediction, just thinking of “what could go wrong scenarios), they will be downgraded. And that, in turn, could create an ugly market environment, indeed. Keep an eye on NVDA stock, and others.

The uber long termed chart below shows that after 2009, the market arched off of its long trendline by a wide margin. Will it pull back partway, or is this angle of accent the new deal? Hard to say, but food for thought.

 

 

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4 Comments

  • Looking at lumber chart ($lumber) and natgas ($natgas) and thinking that it could be a great opportunity to enter those commodity at some point (but not now). i think you have talk about it lately. it still is true!

    good day

    j.p.

    Reply
    • Buy low, sell high! But don’t catch the falling knife! To do this, you look at basing action near or at a mega support low point. Nat gas is in a triangle right at multi year low support, so it fits the bill. It may take a bit of time to break out (assuming it does)–but you know your stop point if it fails. Lumber is still making lower highs and lows. I would want to see a base.

      Reply
  • Thank you Keith for posting more recently! Will you be open to the idea of doing a blog on big individual stocks if we post them in the question section here? We see you on BNN sometimes but would be nice to reach out to you here. Thank you! Joyce

    Reply
    • I will be back on BNN in May, Joyce. I’ll announce the date soon. I don’t do many stock writeups here unless its a mega-cap that influences the market (FAANGS, MAG-7, etc). But I will do a “Ask Me AnyThing” soon.

      Reply

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