Have the Stock Market Killers been Killed?

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 30, 2021. 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).

You’ve probably read them, all the reasons why a bear market is just around the corner (or already here):

• Stocks are overvalued
• Inflation
• China’s Evergrande group
• Weakening internal breadth and divergences
• Rapid spread of new omicron variant
• VIX is high and showing fear
• Fed’s decision to taper sooner and harder

If you’ve read these e-mails, you also know that I’ve steadfastly looked for higher prices. For example, the December 2, 2021 Free Market Outlook featured this chart with S&P 500 support around 4,500 (which has held nicely).

The December 9, 2021 Free Market Outlook stated that: “Short-term, there is solid resistance around 4,700. This is a hurdle, but I think this will be overcome eventually too,” (the S&P bumped against it a couple times but spiked above this resistance on December 23).

And of course there was this projection, published in the December 12 Profit Radar Report (and here), that essentially nailed the S&P’s performance for the rest of December.

In the process, we’ve looked at dozens of studies. Like the TV show “Mythbusters,” most such studies showed – based on history – that none of the reasons discussed above have historically led to bear markets. 

I don’t always know what the market is going to do next, but one thing subscribers to the Profit Radar Report always get is factual, objective information. Statistically, fact-based information is just more accurate that personal opinions.

So most pertinent question right now is this: Have all the potential stock market killers been killed? Is there anything that can keep the market down?

The 2022 S&P 500 Forecast (to be published in January) will answer this question and provide a detailed 2022 S&P 500 projection based on a composite of studies and indicators.

Studies include how the S&P performed after years most similar to 2021 (it answers the question whether strong gains feed on themselves or cause overvaluation and crash) and one pattern that stands out among the many. This recent pattern occurred 8 other times since 1970 and was followed by the same outcome every time.

Continued updates, out-of-the box analysis, forward performance based on historic precedents (Risk/Reward Heat Map) and the 2022 S&P 500 Forecast 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.”

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An Incredibly Predictive Pattern

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 8, 2021. 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).

Last week’s free Market Outlook featured this S&P 500 chart with focus on support around 4,500. The S&P dipped as low as 4,494 on Dec. 3 and is up some 200 points since.

4,500+/- is important because it was also the approximate mid-point of two Fibonacci support levels (4,566 and 4,456). Those two levels were used to draw the dashed target box for a wave 2 pullback (left side, chart below).

The left chart was originally published in the November 28 Profit Radar Report. It projected a wave 2 correction into the 4,566 – 4,456 target range followed by a rally to complete waves 3, 4, 5.

The right side also includes price action since Nov. 28.

One important reason I favored at the very minimum a bounce back from support around 4,500 was the open chart gap at 4,701. Gaps act as magnets for prices, and this gap was closed yesterday (corresponding gaps for IWM and MDY remain open).

Short-term, there is solid resistance around 4,700. This is a hurdle, but I think that it will be overcome eventually too.

During the midst of the selloff, I shared this assessment via the Profit Radar Report:

“Based on the weight of evidence, the bullish case deserves the benefit of the doubt. This is a bold preposition, but – based on the VIX – there was enough blood on the street to offer at least a short-term buying opportunity for aggressive traders.“

Sentiment readings registered at last week’s low confirmed this assessment. Highlighted below are other times when 5 different sentiment gauges were at nearly identical levels (see chart insert for actual sentiment indicators and criteria) while the S&P 500 was still within 8% of an all-time high.

The S&P obviously tumbled in March 2020, but it did so without any strong up day (like last Thursday) in between. The other 3 signal clusters led at the very minimum to decent bounces.

To sum up, the S&P 500 bounced from highlighted support and closed the open chart gap at 4,701, which was my minimum target. Resistance around 4,700 may pause the advance, but I think will eventually be exceeded too (at least for a while :).

As you know, I study many historic patterns, and one recent one absolutely stood out. This pattern, seen during the last couple weeks, occurred 8 other times since 1970 and and was followed by the same outcome every time.

Not only was the outcome consistently the same, it was also in the double digits. It is incredibly rare to find such a persuasive pattern.

The exact pattern, whether bullish or bearish, and when it happened before is featured in last night’s Profit Radar Report. Don’t invest blindly, get the radar.

Continued updates, out-of-the box analysis and forward performance based on historic precedents (Risk/Reward Heat Map) 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.”

Stats That Make You Go WOW!

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 2, 2021. 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 tweeted this chart prior to Thanksgiving. Turns out turkeys weren’t the only diminishing ‘asset’ this time around, stocks took an ‘oops’ too.

For much of 2020 and 2021 we shelved Elliott Wave Theory, but prior to Thanksgiving I made this statement in the Profit Radar Report:

“Monday’s (Nov. 22) intra-day high could have concluded what can be interpreted as a 5-wave rally from the October 4 low.”

The decline from the November 22 high, although unusual for this time of year, wasn’t a total surprise, and neither is today’s pop.

Yesterday’s Profit Radar Report featured this S&P 500 chart, with support right around 4,500 (this morning’s low was 4,504). It’s certainly possible that stocks will relapse and fall further, but 2021 has taught us not to front run the down side.

The last week of market action has delivered some eyebrow-raising developments.

1) The S&P 500 fell 3.16% from yesterday’s high to close near the daily low. This created the biggest such candle since 3/4/21. When within 5% of an all-time high, the S&P carved out similar candles 24 other times. The chart below highlights the 6 signal dates since 2007.

2) Stocks suffered two rather negative breadth days since Thanksgiving.

11/26/21: 85.90% declining stocks, 90.62% declining volume

11/30/21: 79.29% declining stocks, 88.00% declining volume

Similar days, when within 5% of an ATH, occurred 24 times, 22 of those since 2007 (see chart below). But, 2 signals within 3 days happened only once before (I shared that date with subscribers).

3) Last Friday, the VIX popped 54.04%, the fourth biggest one-day spike ever. Since inception of the VIX, there were only 7 other times when the VIX jumped more than 40% while the S&P was within 5% of its all-time high.

What’s the point of all the data?

As a DIY investor look at how many signal dates (orange lines) preceded major selloffs. This helps you gauge the risk of a correction or bear market.

The Profit Radar Report makes this easier by providing forward returns for the next 1, 2, 3, 6, 9, 12 months following each signal.

The above charts certainly include signal dates that turned out to be significant market tops. Therefore, we are alert of this possibility. But, it will take sustained trade below important support to confirm.

It’s interesting that many analysts that were bullish a week ago have out of a sudden turned bearish. The ones who predicted the selloff are the ones that have been crying ‘bear’ every time stocks dipped a per&Pcent or two.

Others deliver cliches like “the easy money has been made” or “the market is closer to a top than a bottom” (I just read that one, which is a ridiculous statement considering the bottom is a 52% drop away).

We live in probably the most unique market environment ever. The only way to gain an edge is to rely on objective facts.

Continued updates, out-of-the box analysis and forward performance based on historic precedents (Risk/Reward Heat Map) 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.”