2023 S&P 500 Forecast

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on January 12, 2023. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

I’d like to ask you to participate in a brief mental exercise as you read these lines:

How often have you read or heard the words or phrases recession, economic contraction, stock market crash, inflation is bad for stocks, etc. in the last few weeks? Ok, think about it for just a moment …

Now, did stocks perform as you thought based on the news you heard?

The simple chart shows that the S&P 500 today is trading exactly where it was on May 9, 2022. Nine months with progress (or crash).

We live in a world where boring doesn’t sell, and the media wants to capture your eyeballs at all cost. The most effective way to do that is with sensationalistic headlines. Truth and analytic integrity are at best secondary considerations.

Unnecessary sensationalistic stock market analysis irks me to the core. That’s why my Profit Radar Report is different. You read what I see, and I haven’t had to stray from the BORING assessment shared in the November 13 Profit Radar Report, which was:

Chart gaps at 4,083.67 and 4,218.70 remain open. The next serious resistance zone is around 4,100. Short-term support is around 3,900. A pullback can happen any moment and price action may well be choppy in coming days/weeks, but odds of further gains following pullbacks are good.”

You may recall that I added the following in my last free Market Outlook (from December 16, 2022):

I’d like to point out that support around 3,900 has become quite obvious, which makes a seesaw across it more likely, and today’s drop created another chart gap at 3,965.65 which should be closed in the not so distant future.”

As anticipated, the S&P seesawed across 3,900 (multiple times), moved back above it, and closed the open chart gat at 3,965.65 (dashed purple line) yesterday.

A word of caution: The fledgling 2023 rally has pushed the S&P 500 into the next resistance cluster. I consider this an inflection zone that needs to be watched carefully.

2023 S&P 500 Forecast

This is the time of year where I’m working on the full year S&P 500 Forecast. This forecast includes the most pertinent facts and indicators and an actual price projection based on those indicators.

The proof is in the pudding and the chart below plots my 2022 S&P 500 projection (yellow line) against the actual price action (you can see the original projection at the bottom of this page).

The full S&P 500 Forecast is available here for your review.

Below are some of the warning signs mentioned in the 2022 S&P 500 Forecast BEFORE the stock market fell into a pothole:

– “The bearish divergence (NY Composite a/d lines) reappeared again at the January 2022 S&P 500 highs. This internal market 

deterioration is a concern and a warning sign.”

– “The 6-month average of Titanic signals exceeded 25. It’s been a good bear market indicator. Although the majority of breadth studies are positive, this is one that should not be ignored.”

– “We’ll focus on the commonality of all 3 (Elliott Wave Theory) scenarios: Up side is limited and down side risk is increasing.”

– “Trend line resistance is around 4,915. We do not expect the S&P to break above this trend line in 2022.”

– “Short-term, the January 10, 2022 low at 4,582 is important. Failure to hold above this level would be a warning signal with the potential for a quick drop into the 4,200 – 4,300 range. If the 4,200 – 4,300 support zone fails, a test of the 4,000 zone (as low as 3,700) is possible.”

– “2022 is the mid election year, which is the weakest of the 4-year presidential election year cycle. Historically (going back to 1950), the S&P 500 declines on average about 20% into the mid-term election year low.”

– “Since the Fed is planning to unwind and reduce purchases (and shrink its balance sheet) in 2022, the risk of a more serious correction this year is much greater than in 2021.”

To receive the 2023 S&P 500 Forecast and for continued updates and purely fact based research, sign up for the Profit Radar Report and become the best informed investor you  know.

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

Has the Crash Arrived?

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on December 15, 2022. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

Which 5-letter word grabs investors’ attention like no other?

Crash!

There’ve been a lot of crash warnings lately. Here is just a small sampling of headlines:

– This bear market rally could prompt a 2001-style crash

– As the reality of recession sinks in, prepare for market to crash

– Stock market crash: S&P 500 has 19% further downside

– Stock market crash warnings grow

– Stock market crash is coming even if US economy avoids recession

Most of the above headlines are already a few weeks old. Will today’s drop finally usher in the much anticipated crash?

Over the past few weeks I’ve been pointing out 3 things:

– There’s resistance (acting as inflection zone) around 4,100

– Support is around 3,900

– Market action could be choppy, but pullbacks should recover

You may recall my exact words from the November 13 Profit Radar Report:

“Chart gaps at 4,083.67 and 4,218.70 remain open. The next serious resistance zone is around 4,100. Short-term support is around 3,900. A pullback can happen any moment and price action may well be choppy in coming days/weeks, but odds of further gains following pullbacks are good.”

As the weekly chart shows, the S&P 500 tested resistance around 4,100 twice and is now – for the first time since November 10 – testing support around 3,900.

I’d like to point out that support around 3,900 has become quite obvious, which makes a seesaw across it more likely, and today’s drop created another chart gap at 3,965.65 which should be closed in the not so distant future.

To sum up: The S&P 500 met resistance around 4,100 and reacted (first step of a reversal). The S&P is now testing support around 3,900 (potential second step of confirming reversal).

Although price is currently just below 3,900, I wouldn’t consider this as second step to confirming a bearish reversal yet (due to seesaw risk).

Nevertheless, any potentially bullish patterns (or “odds of further gains”) are on hold and more down side is possible as long as price stays below 3,900.

At this point, the decline from Tuesday’s high looks like 3 waves. According to Elliott Wave Theory a 5-wave decline is needed to start confirming a trend change.

Continued updates and purely fact based research are available via the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

S&P 500 on Schedule into Inflection Zone


Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on December 1, 2022. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

It’s been a while since the last Free Market update, but no updates were required as the market continues to follow my ‘keep it simple’ blueprint (almost like painting by numbers).

The complexity of current world events confuses many analysts and investors. I try to ‘de-confuse’ and simplify this incredibly complex environment … and the market is allowing me to do this (it’s not always this way).

The November 13, Profit Radar Report outlined our most recent ‘keep it simple’ blueprint:

Chart gaps at 4,083.67 and 4,218.70 remain open. The next serious resistance zone is around 4,100. Short-term support is around 3,900. A pullback can happen any moment and price action may well be choppy in coming days/weeks, but odds of further gains following pullbacks are good.”

The blue box pinpoints the price action since November 13. Within a choppy environment, the S&P 500 first tested support around 3,900 and today closed the open chart gap (dashed purple line) at 4,083.67. Resistance around 4,100 is just ahead.

What caused this rally to 4,100? “Seasonality and the weight of evidence favor higher prices, which is our base assumption,” is what I told subscribers weeks ago.

There was also an absolute investor sentiment oddity, which I first pointed out in the November 9, Profit Radar Report: “According to the CBOE, the equity put/call ratio soared to 1.30 yesterday, which is an absolute panic reading that even exceeds the COVID extreme. If this data is correct, it should be a positive for price.”

The fifth graph in the chart below shows the bullish (for stocks) put/call ratio extreme, which means that option traders panicked more in the second half of November than at the 2020 meltdown low. Hard to believe, but that’s the CBOE data. The spike in the CBOE SKEW (blue graph) sent a similar message.

What’s next though?

The weight of evidence and seasonality are still supportive of higher prices, but something changed: The S&P 500 has now reached an important resistance and inflection zone.

This is a price zone where risk management takes on a more important role and prudent investors should consider reducing exposure or setting stop-losses below support.

Inflection zones are like traffic lights, they don’t have to be red, but if a car is going to have to stop, it’s likely at a traffic light.

King dollar … de-crowned?

Since September 28, when the US Dollar Index hit a 20+ year high, the USD dropped from 114.7 to 105. On that day, September 28, I happened to share the following chart and warning via the Profit Radar Report:

The US Dollar Index has been on a tear, rising almost vertically. Normally I would draw ‘bowl’ support (previously used to predict major drops for TSLA and Bitcoin, see January 10, 2021 PRR), but currencies are prone to trend longer than equities. For this reason, the USD should be given a longer leash, but the parabolic rise combined with trend channel resistance suggests that at minimum a temporary pause and/or pullback is getting close and chasing the USD carries a fair amount of risk.”

Price got repelled by one trend channel and is now also trading below the other trend channel (currently at 107.5). This is now resistance and as long as price stays below resistance it can continue to work lower.

We live in uncertain, complex and confusing times. Get access to straight-forward, purely fact based research, and become the best-informed investor you know! Sign up for the Profit Radar Report

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Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

The Dow and Now: Will Blue Chips Rule?

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on November 3, 2022. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

The Dow Jones Industrial Average (DJIA) has been on a tear, gaining 15.38% from October low to high, outperforming all major indexes.

This DJIA pop came seemingly out of nowhere, and yet it didn’t. Via the October 12 Profit Radar Report (one day before DJIA started taking off), I shared a bullish divergence and stated that: “For the first time since the January highs, DJIA is diverging from the S&P 500 at the low.”

The chart below, published on October 12, shows the divergence.

This spirited DJIA rally carried price towards major resistance outlined below.

I published a chart very similar to the above in the October 30 Profit Radar Report along with the following commentary:

“RSI-2 is over-bought and the trajectory of the advance is obviously not sustainable. Major resistance is coming into play around 33,200. Now is not the time to chase DJIA.”

The pullback from resistance was pretty obvious, the big question is what happens next.

Since 1970, DJIA rallied more than 12% in a span of 13 trading days only 32 other times. Looking at those times, which of course I did (see November 2, Profit Radar Report), provides some helpful clues.

There is also a huge mega trend affecting blue chip stocks in play. I plan to share this trend even via the free newsletter soon.

While the benefits of the above DJIA study are long-term in nature, below is the expected short-term S&P 500 trajectory (published in the October 30, Profit Radar Report).

The S&P 500 appears to have completed an up side pattern in the 3,900 zone, which should cause a corrective pullback (now underway).

Based on seasonality and some other factors, the pullback should be corrective, but the S&P pattern (and major DJIA resistance) allows for a more bearish turning point as well.

Although I’m leaning towards more gains once the pullback is over, I’m watching this decline very carefully for red flags that’d suggest otherwise.

Continuous updates are available via the Profit Radar Report. If you want to be the best-informed investor you know, and have access to always relevant and purely fact-based research, sign up for the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on January 28. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

Continued updates and factual out-of-the box analysis are available via the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

S&P 500, Bitcoin, Treasury Update

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on October 27, 2022. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

S&P 500

Are you going to talk about the expanding diagonal again?

If a simple pattern works so beautifully in an incredibly challenging environment, you ride it and milk it as long as it works (if you haven’t read about the expanding diagonal yet, you can do so here:

S&P 500 Path is Deceptively Simple

The October 12 Profit Radar Report that: “This week’s new S&P 500 low meets the minimum requirement for a wave 5 low, and RSI-2 is nearing over-sold again.”

Starting on October 13, the S&P soared almost 300 points.

Obviously there are still a ton of economical and political cross currents, but the KISS approach is to look higher as long as double support (shown on the monthly chart) holds.

Treasuries

Distrust in government is a global mega trend. The US Treasury market may just have carved out a key reversal and perhaps major market top.” March 15, 2020 Profit Radar Report

30-year Treasury bonds just suffered the worst one-year decline on record and are down 35% from their all-time high. The last 2 1/2 years have erased about 43% of the gains racked up during a 40-year bull market.

But, as mentioned in the October 23 Profit Radar Report, there is long-term support near current price, short-term RSI-2 is over-sold, RSI-35 is around support, and a furious rally is becoming likely.

The daily chart shows TLT up some 6% since October 24, now nearing over-bought and resistance, but price is compressed from almost 9 month of steady losses, so further up side (perhaps after a pullback) is very possible.

Bitcoin

October 23, Profit Radar Report: “Bitcoin futures are trading above trend line resistance. RSI-35 has been rising over the past 4 months where price was range bound. This is not a screaming buy signal, but the development is overall positive.

Aggressive investors may consider either 1) buying bitcoin with a stop-loss below either of the support trend lines or 2) buy after a break above resistance around 20,400. One ETF alternative for bitcoin is the Grayscale Bitcoin Trust (GBTC).”

Bitcoin has since broken out, and previous resistance is now support (and potential stop-loss) for longs.

Continuous updates for the S&P 500, Treasuries, Bitcoin are available via the Profit Radar Report.

If you want to be the best-informed investor you know, and have access to always relevant and purely fact-based research, sign up for the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

2022 S&P 500 Path Remains on Track

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on October 13, 2022. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

For months, the S&P 500 has been following the expanding diagonal pattern. This has been a surprisingly easy way to navigate an uber complicated political and economical environment.

If you haven’t read about the pattern that’s almost worked like painting by numbers, you can check it out here:

S&P 500 Path Deceptively Simple

As shocking as the 2022 stock market performance has been to most, it is actually very much in line with another historic pattern; the 4-year presidential election cycle:

2022 is the mid election year, which is the weakest of the 4-year presidential election year cycle. Historically (going back to 1950), the S&P 500 declines on average about 20% into the mid-term election year low.

The following year (the pre election year, 2023) is the strongest year of the election year cycle as incumbent presidents prime the pump to increase the odds of reelection. Historically, the S&P 500 gains on average about 50% from the mid election year low to the pre election year high.

Cycles project a fair amount of political and economic turmoil starting in Q1 of 2022. Based on seasonality and cycles, 2022 will be a tough year to navigate where high stocks prices early in the year should be used to raise cash for a better buying opportunity later in the year.”

Some may say; ‘hindsight is 20/20, it’s easy to point this out after the fact,’ but I wrote the above in my 2022 S&P 500 Forecast, published for Profit Radar Report subscribers back in January.

The S&P 500 mid election year seasonality chart that accompanied the above commentary highlights the tendency of a Q4 low.

Is it a fools errand to write about a buying opportunity in a bear market? That’s an interesting question, and my answer along with an interesting statistic is available here.

Does the expanding diagonal pattern and election year cycle guarantee that stocks will rally? Of course not. There are no guarantees in life or investing.

But, and that’s a big but, the odds of an upcoming rally are much higher than many believe them to be.

Of course I’m not recommending to buy blindly, but I am keeping my eyes peeled for breadth and sentiment extremes or divergences that tend to be seen near meaningful lows. I discussed one divergence, that happened this week for the first time in 2022, in yesterday’s Profit Radar Report update.

Since then, S&P 500 Futures dropped as low as 3,502 and soared 150 points over the last 3 hours.

The above long-term support chart may be helpful in identifying a buying opportunity (or failure of one).

If you want to be the best-informed investor you know, and have access to always relevant and purely fact-based research, sign up for the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

S&P 500 Path Deceptively Simple


Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on September 29, 2022. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

The expanding diagonal pattern, first identified in the July 31 Profit Radar Report, continues to play out. The pattern is outlined via the purple lines below.

This pattern has been a surprisingly simple way to navigate an incredibly complex investing environment (I wrote about this here).

To continuously validate the pattern, I’ve also provided ‘the trend is down as long as’ resistance levels, such as the following:

September 18, Profit Radar Report: “Bears have the upper hand as long as the S&P 500 does not sustain trade above 3,920.”

September 21, Profit Radar Report: “Trade below 3,790 is another simple ‘line in the sand for short-term bearish risk.”

The ‘the trend is down as long as’ resistance levels are shown in red below. Neither of those level has been broken to the up side, so the trend continues down towards an eventual wave 5 low.

It’s beautiful when a pattern works out like ‘painting by numbers,’ but the market never consistently rewards one trick pony analysts.

Just last Sunday, I did a deep dive analysis of market breadth and investor sentiment to see if the weight of evidence supports or contradicts the expanding diagonal pattern.

Being aware of a wide spectrum of indicators prevents tunnel vision and getting blind sighted.

Market breadth

Shown below are 6 different breadth measures. Some of them are near their June lows (like the S&P 500) and others are reaching levels where a reversal to the mean becomes more likely.

Investor Sentiment

Only one out of the six short-term sentiment gauges plotted below is at a real extreme, the others still have room to grow.

In addition to just looking at the data, I also identify other times that most closely replicate today’s readings.

For example, there were 3 other signal dates that closely correlate to the market breadth data shown above and 9 signal dates that are closely correlated to current sentiment readings.

Would you like to know how the market reacted to similar conditions in the past?

Those findings, along with purely fact-based analysis is available via the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

Bearish S&P 500 Pattern Still Looms


Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on September 15, 2022. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

Not much has changed since the last free Free Market Outlook (S&P 500 Reverses at Upside Target, Aug. 25).

Below is an updated version of the chart shown on August 25 and many times before. The S&P 500 tagged trend line resistance (of a pattern called expanding diagonal) and reversed.

The reaction to resistance is in line with what I anticipated in the July 31 Profit Radar Report:

The purple lines outline an expanding diagonal (resistance around 4,350). The textbook blueprint for this diagonal would be to tag the purple line and then fall.

The down side target for the expanding diagonal is pretty aggressive (and and seemed even more aggressive when the S&P 500 tagged resistance around 4,350). When I wrote the last free Market Outlook, back in August, I wasn’t willing to commit to that down side target. Why?

The rally from the June low triggered a number of bullish studies. One of those was that the percentage of stocks above their 50-day SMA cycled from below 2% to above 90%.

This rarely happens, and when it does it’s a good thing for stocks. The chart below shows 8 other signal clusters when the % of S&P 500 stocks above their 50-day SMA cycled from below 10% to above 90%. All of them were long-term bullish, and most of them also sparked short-term gains.

Did anything change since then to make you commit to a down side target? Yes something did change.

I noted a bearish overlap (according to Elliott Wave Theory) and pointed it out in the August 31 Profit Radar Report:

One of the things we were watching is the overlap level at wave 1, which is 3,950 for the S&P 500 Futures. It looks like the rally from the June low ended after only 3 waves, and the decline from the August high looks like a developing 5 waves, neither of which is bullish.”

This bearish overlap is highlighted by the dashed red line seen in the first chart, and partially because of this overlap, I recommended the following in the September 5 Profit Radar Report:

An over-sold bounce seems likely soon, and it’s prudent to use this bounce to reduce exposure.”

We reduced exposure last Friday, when S&P 500 soared with 91.74% of trading volume flowing into advancing stocks (this was the fifth 90%+ up volume day since the June low).

The chart below highlights every 90%+ up volume day. It was almost always long-term bullish for stocks.

However, just two days later, on Tuesday, 95.86% of volume went into declining stocks.

Fortunately the weight of evidence suggested to sell into strength, short term.

What about longer-term? Does Tuesday’s extreme down day void the bullish implications of the strong up volume days? Is the aggressive down side target of the expanding diagonal on the table?

Answers based on the weight of evidence (and I consider a ton of evidence) is available via the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”&P 5

Is this still just a Bear Market Rally?


Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on August 11, 2022. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

As regular readers know, for weeks my indicators have been saying that stocks should bounce rather strongly.

The May bounce wasn’t ready for the big league yet (which forced me to take a few bites of humble pie in early June), but the rally from the June 16 low surely delivered (the S&P 500 is up over 15%).

The Free Market Outlook from June 21 titled “Blood on Wall Street,” stated there’s panic and blood on Wall Street and that “this is about the time to be rational and go against the trend.”

Even before that, the June 19 Profit Radar Report, published a highly controversial Elliott Wave Theory count. Although the wave count was ambiguous, this was my preferred interpretation.

Based on this count, a 3-wave decline (A-B-C) just ended and the S&P was ready to rally.

This was highly controversial because almost every Elliott Wave analysts expected dooms day scenario-like outcomes (with wave 3 of 3 down about to rip lower).

A few days earlier, in the June 15 Profit Radar Report, I published a bullish wedge which also could unlock much higher targets.

Well, the S&P 500 is now up over 15% and has retraced nearly 50% of the points lost from the January high to the June low.

The S&P 500 has fulfilled my forecast of a significant bounce and (based on price and some sentiment gauges) has reached the zone where a bear market rally ‘should’ soon (not necessarily right away) roll over.

Based on Google searches for ‘bear market rally,’ it seems like that’s what investors expect.

Here is the big question: Is this just a bear market rally, doomed to roll over, or could it be more, perhaps much more?

Last night’s Profit Radar Report featured two historic examples (one of them helped us nail the 2020 low) to help ascertain the odds of a bear market rally.

Last night’s update, an archive of all past research, and continued purely fact-based, out-of-the box analysis are available via the Profit Radar Report Profit Radar Report. Be the best-informed investor you know and don’t get caught following the crowded traded.

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

S&P 500 and Inflation Update


Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on July 9, 2022. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

The last Market Outlook (June 16, how time flies) made only two observations regarding the S&P 500:

– There’s a massive chart gap at 3,900, which certainly will be closed.

– There’s support at 3,600 – 3,300, which could be tested.

In addition, the Profit Radar Report highlighted that 3,664 is where a potential S&P 500 C-wave would be a Fibonacci 1.382 x wave A (the most bullish S&P 500 scenario).

Since then, the S&P fell as low as 3,636 and bounced as high as 3,945 (reaching the up and down side ‘target’ mentioned above).

Investors are emotionally charged and it’s easy to get carried away with doomsday or overly optimistic expectations. I too have a bullish and bearish scenario. I favor the bullish scenario, but I’m not married to it.

I wrote in the June 29 Profit Radar Report that: “We will give the market some space to get itself together and wait for either a move above the 3,950 zone (red bar) or below the 3,720 zone (green bar).

The S&P is still stuck in this zone, and it’s ‘watch and wait’ time as long as it stays stuck.

Now, the more important invalidation level for the most bearish option is not the red zone, it’s a different zone, and it must be cleared to take the doomsday option off the table (I’ve highlighted this level in the Profit Radar Report).

One positive study was featured in the June 19, Profit Radar Report. It showed every time when only 2% (or less) of NYSE-traded stocks closed above their respective 50-day SMA and only 12.8% (or less) above their 200-day SMA. There were 29 signals confined to 5 clusters.

In general, most sentiment and breadth-based studies project at least a short-term bounce while economic indicator-based studies project poor longer-term forward returns.

The best thing to do in a market like this is to look at the facts and don’t get carried away by the media’s attention grabbing coverage.

On a different note, I mentioned in the June 19 Profit Radar Report than inflation may well take a pause for a couple of months.

Since then, prime ‘inflation trades’ (assets that have benefit from inflation fears) have taken major haircuts.

EWZ (Brazil ETF), DBA (agriculture ETF), UNG (natural gas ETF) have suffered heavy double digit losses, gold and silver were summoned for a meeting behind the wood shed and even king oil is down. Many of those assets are over-sold, potentially ready for a bounce.

Continued updates and comprehensive, fact-based, out-of-the box analysis (and the invalidation level for the S&P 500 doomsday scenario) are available via the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”