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).
What is investors’ worst enemy? Banking crisis? War? Rising interest rates? Inflation?
I don’t think it’s any of the above. We’ve essentially seen all of them in the past year, yet stocks haven’t gone anywhere for 10 months.
Here’s an interesting chart: S&P 500 performance over the past 11 months. The blue lines highlight the monthly closing levels for January (2 month ago), November (4 month ago) and May (10 month ago).
The percentage change, or rate of change (ROC), for the past 2, 4, 10 months has only been 1.20%, 1.28%, 2.53% (as of yesterday’s close). That’s a tiny range over multiple time frames!
When we zoom out, it’s not surprising that this trading range is occurring near the center line of a massive 14-year trend channel and that this – and I’m just eyeballing – is probably one of the biggest – even not the biggest – trading range of the 21st century.
Let’s forget about eyeballing things and look at it purely rules based. Going back to 1957, I was wondering how many other periods showed a similar tiny 2, 4, 10 month rate of change (ROC).
There were only 5 other times, that’s pretty rare. When looking at the S&P 500 forward returns following those 5 precedents, I noticed an interesting pattern.
This pattern was discussed in yesterday’s Profit Radar Report update (you can test drive it here).
If you’ve been reading this newsletter, you know that updates have been sparse with no directional predictions. I even admitted the vague nature of my forecasts due to the conflict among indictors, but I also stated that: “I am fairly certain that any upcoming losses will be erased again.”
That just happened again on a short-term time frame, and it likely still applies to a longer-term time frame.
The media is only interested in capturing your eyeballs and monetizing your clicks … and they will do anything to get your attention (including outrageous headlines), which in turn may result in poor investment decisions.
I simply speak the truth based on the weight of evidence, even if it’s boring and infrequent.
If you see the benefits of this approach and appreciate 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 March 16, 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).
Three of the biggest US bank failures hit the fan and the popular CNN Fear & Greed Index just fell into ‘extreme fear’ territory.
But, stocks are up today and U.S. Treasury Secretary Janet Yellen assured congress that the banking system remains sound and Americans can feel confident that their deposits will be there when they need it.
Does that bad news – good news combo mean the crisis is over or that it’s time to panic?
We all know that politicians and heads of in trouble companies and institutions never say the full truth. That’s one reason why I pay more attention to charts and indicators than the news.
In the February 5 Profit Radar Report, I stated that: “IWM reached resistance mentioned in last Wednesday’s PRR. That resistance is comprised of the trend channel, trend line, and equality between 2 of the 3 legs coming off the October low. A reaction at this level is normal. A number of recent studies suggest stocks will ultimately work their way higher, but IWM did reach an inflection zone that at minimum allows for a deeper pullback.”
The updated chart below shows IWM (small cap’s) reaction to triple resistance (red circle). Honestly, the pullback from there was deeper than I expected … but three huge bank failures will do that I guess.
Considering those bank failures, the decline has actually been quite orderly. The worst S&P 500 down days since February were -2.00% (Feb 21) and -1.85% (Mar 9).
The VIX, however, soared 70% from its March low to high. During the worst 3-day span (Thursday – Monday), the daily average VIX gain was 11.65%, the daily average S&P 500 loss was ‘only’ 1.15%. Since the inception of the VIX in 1990, something similar has only happened 6 other times.
The chart below highlights when. None of the dates were particularly nefarious.
In addition to this VIX constellation, I also analyzed overall investor sentiment, market breadth, financial and bank sector charts, and the yield curve to ascertain if it’s time to panic (this analysis was published in yesterday’s Profit Radar Report).
Although I follow the weight of evidence of trusted and time tested indicators, I always monitor new developments and re-run scenarios (such as in yesterday’s ‘deep dive’ update) to see if my base line forecast is still supported by the weight of evidence or needs an adjustment.
My baseline, shared in the last Free Market Outlook, remains the same: Although I don’t know how deep this correction will go, I am fairly certain that stocks will come back later this year. The extent and duration of the comeback will be assessed as it develops.
However, I am never foolish enough to think I’ll be right. The weekly S&P 500 chart shows that the S&P 500 is still in limbo. Now back above the green trend line, but still below the red line … and all of this is happen in a year-long trading range.
If price falls back below the green trend line, it’s time to be cautious and allow the down side to develop.
Regarding gold, I stated the following in the March 8 Profit Radar Report (along with the chart below):
“Prior to gold’s (and silver’s) February drop, the negative divergence alerted us of lower prices. We now see a potential positive divergence.“
The next day gold started to soar over $100.
If you are considering subscribing to the Profit Radar Report, you may be interested to know that I adhere to what I call intelligent integrity; analyze trusted indicators and interpret them intelligently without bias.
For continued updates and based 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.”
Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on March 2, 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).
The various indexes are drifting lower ‘drip torture style.’ For the S&P 500, the drift lower started when it broke below wedge support (in blue). Regular readers remember my warning that we should “let the down side develop” if that wedge breaks.
Honestly, I thought that the S&P 500 would at least close the open chart gap at 4,218.70 before pulling back. But that didn’t happen.
The chart below encapsulates the most important chart developments over the past several weeks in one succinct picture (PRR stands for Profit Radar Report).
I know, ‘allowing for down side to develop’ is a vague forecast. If I knew how much lower the S&P would drop, I’d give a target. But I don’t, and I am ok to admit that.
If I put myself into my subscribers’ shoes, I prefer an honest forecast over a misleading forecast (I myself am I subscriber to other services and read many misleading outlooks).
Nevertheless, I am fairly certain that any upcoming losses will be erased again. That’s based on a number of studies and indicators with outstanding track records.
I’ll address some of those in the weeks to come, but here is one for now. The Santa Claus Rally (last 5 days of old and first 2 days of new year), the first 5 days of January, and the month of January all showed positive returns (the table below lists all returns since 1970).
Since 1970, this happened 20 other times. 19 times, the S&P 500 finished the year in positive territory (highlighted in green in table below), once (2018, highlighted in orange) with a loss.
Based on these barometers, there’s a 95% chance the S&P will end 2023 in positive performance territory.
Is this barometer infallible? Certainly not.
Is it better than most of the other (often biased on tunnel vision clouded) analysis out there? I think so.
The above barometer is also in line with the weight of evidence. But, there are also studies with much more bearish outcomes, which leads me to say what nobody wants to hear:
Bullish and bearish indicators may somewhat neutralize each other and cause a prolonged trading range. It’s not exciting, it’s every investor’s worst enemy, but it’s certainly a real possibility (and another reason I’m not as bearish as most).
Gold continued its declined until it starting catching a bid again this week. I would still like to see lower prices. An upcoming bounce, however, may test my thesis.
Below, again, is why I suspected gold prices to turn down in late January:
1) There was the bearish divergence between gold and silver.
2) In terms of Elliott Wave pattern, the gold chart allowed for two diametrically opposed interpretations. Despite being total opposites, they had one thing in common. A sizable short-term drop.
I showed the chart below in the January 22, Profit Radar Report and warned that: “both options have a near-term pullback in common.”
Since then, gold has dropped from 1,975 to 1,810. This may meet the minimum requirement for a wave 2 pullback (green projection).
I personally would like to see still lower prices after this bounce.
Continuous updates for the S&P 500, gold, silver and other assets are available via the Profit Radar Report. You can take a test drive here.
Now is a good time to sign up for the Profit Radar Report, because you will get instant access to the 2023 S&P 500 Forecast.
2023 S&P 500 Forecast
The 2023 S&P 500 is now available! It includes 24 charts and covers the following indicators and topics:
– 2022 Review
– Supply & Demand, Breadth
– Support/Resistance Levels
– Elliott Wave Theory
– Inflation
– Socioeconomic Peace & Prosperity
– Investor Sentiment
– Seasonality & Cycles
– S&P 500 Barometers
– Valuations
– Money Flow
– Risk/Reward Heat Map
– Summary
– 2023 S&P 500 Projection
Some of the discussed indicators come with a 90% and 95% accuracy track record. All indicators and data points are combined into one forward projection (the S&P 500 is tracking it well thus far).
Below is last year’s projection compared to the actual S&P 500 performance.
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.
By the way, although the free Market Outlook e-mails arrive in your inbox no more than once every week (or two), Profit Radar Report updates are posted every Wednesday and Sunday afternoon.
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.”&P 500
iSpyETF 