Crisis Over or Time to Panic?

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.”

Goldflation and the S&P 500

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on February 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).

The last Market Outlook discussed the S&P 500 breakout, which was good for 200 points … before fizzling. What happened?

Via the February 1, Profit Radar Report, I pointed out a wedge (purple lines) and that a break below the wedge would caution the rally is due to pause.

The chart below shows the longer-term breakout above the green trend line. The chart insert zooms in on the wedge following the breakout.

In short, the potential for a bearish wedge conflicted with the breakout follow through.

As the chart (especially insert) shows, the S&P 500 broke below the purple wedge on February 9. What does that mean?

“The S&P 500 broke below wedge support, which allows for lower prices. The weight of evidence suggests an eventual rebound, but as long as below 4,160 it’s prudent to allow down side to develop” (February 12, Profit Radar Report).

The situation becomes clearer when looking at the IWM (Russell 2000 Index of small cap stocks) chart.

Resistance at 197.60 and 200 was mentioned in the February 1 and 5, Profit Radar Reports along with this comment:

“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.”

Summary: The S&P 500 is below support, which allows for lower prices. However, a majority of my studies and indicators suggest higher prices (two studies conducted last week have a historic success rate of 100%). Unless there’s a break below support, higher prices deserve the benefit of doubt.

Gold and silver were taken behind the woodshed for a beating. Hopefully that wasn’t a surprise for you.

Silver’s refusal to confirm gold’s January high suggested risk for both metals.

I published the chart below in the January 25, Profit Radar Report and warned: “Gold continues to grind higher as silver moves sideways without taking out its prior highs. While above 1,905 gold can continue to grind higher, but risk appears elevated, especially while silver stays below its prior reaction high.“

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 1,836. This may meet the minimum requirement for a wave 2 pullback (green projection), but cycles and seasonality suggest that we should see further weakness.

Continuous updates for the S&P 500, gold, silver and other assets are available via the Profit Radar Report.

Not convinced yet? Now is a good time to find out what’s ahead for 2023.

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.

The full 2022 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

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.”

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.”

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

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.”

Historic Price Thrust

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 24, 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).

Last week’s Free Market Outlook discussed how the ‘death cross’ – which triggered on March 14, when the S&P 500 traded 320 points lower – is actually bullish for stocks.

The Sunday, March 13 Profit Radar Report stated that: “In terms of timing, early this week is likely the best window for a low.”

On Tuesday, Wednesday, Thursday, Friday (March 15 – 18), the S&P 500 gained more than 1% each day. There have only been 4 other times (since 1970) where the S&P 500 gained more than 1% on 4 consecutive days. Those 4 times are highlighted below.

So far so good, stocks bounced when they were ‘supposed to.’ The S&P 500 has now reached the bottom of the ‘where the rubber meets the road’ zone.

This zone is likely where we will find out if the bounce has legs or will roll over.

I have a clear preference, which is based on hundreds of indicators making up the Risk/Reward Heat Map.

Here is the latest study to be included as part of the Risk/Reward Heat Map:

It looks at the years where the YTD performance is most similar to 2022 and how the S&P performed those years.

This study was published in Sunday’s Profit Radar Report update.

For a continuous flow of fact-based analysis, 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.”

Will High Oil Prices Sink Stocks and Economy?

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 10, 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).

Oil prices have gone parabolic and in California (even at Costco) we’re paying almost $6 for a gallon of gas.

I remember back in 2008, the last time oil soared like this, the pervasive narrative was that rising oil kills the economy (and stocks). This narrative resurfaced in 2011 and 2017.

Do rising oil prices really kill stocks and the economy?

The chart below plots oil prices against the S&P 500 and highlights periods of rising oil. While this did eventually have an effect on stocks in 2008/09, it didn’t matter in 2011, 2017, 2020/21.

Let’s zoom out further and use a rules-based approach to identify similar precedents of rising oil prices. On Tuesday, crude oil closed 60.61% above its 200-day SMA. This is not the highest ever reading, but it’s up there.

The chart below identifies all other times when oil prices traded more than 40% above their 200-day SMA. There are 4 distinct clusters. Around 1990, 1999, 2008, 2020.

2008 was the only instance with an immediate effect (the decline, however, started already earlier and was triggered by the financial crisis).

The first signal in 1999 was followed by one more rally leg to new S&P highs.

Perhaps more interesting is that crude oil prices (gray graph) didn’t do that well after similar situations.

The Profit Radar Report was bullish oil for 2022, but the developments in Russia/Ukraine intensified the move we expected.

Sunday’s Profit Radar Report highlighted resistance (red lines, shown in the first chart) and warned that now is not the time to chase price (crude oil has fallen as much as 20% in the last 3 days).

As regular readers know, I’ve been following the expanding diagonal pattern, which was first published on February 3, again on February 24 and March 3.

Thus far, the pattern (and its down side target) has not been invalidated.

Regardless of the pattern, I warned in the February 6 Profit Radar Report that we are entering a period of extreme choppiness.

This was emphasized again in the February 20 Profit Radar Report, which stated that: “In terms of timing, a low in March would be preferred, which could mean a stair-step decline lower).”

The S&P 500 is getting closer to a potential bounce in terms of timing. I would still like to see one more nasty washout day that meets certain requirements to pull the trigger.

To find out what my S&P 500 buy limit is and to get a continuous flow of fact-based quality 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.”

Will the Shocking January Barometer Come True?

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on February 10, 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 January 30 Profit Radar Report stated that: “Once the S&P 500 reaches the up side target (4,500 – 4,600) we’ll assess whether new all-time highs or another leg lower are next.”

The S&P is still in that resistance zone.

The S&P already bounced over 350 points from January’s low, fooling many bears (we were not one of them). Nevertheless, the month of January entered history books with a steep 5.25% loss.

Many consider this the January Barometer: As January goes so goes the rest of the year (invented and popularized by StockTradersAlmanac).

Other barometers are the Santa Claus Rally (last 5 days of the old and first 2 days of the new year) and the first 5 days of January.

The table below shows the performance of all three barometers. Red numbers mean that the barometer was incorrect. As the table at the bottom shows, the accuracy ratio, since 1970, is 60% – 70%.

Highlighted in blue are other years, there were 4, when the Santa Claus rally was up, and the first 5 days of January and the entire January were down (as this time around). 3 of 4 years, the S&P ended the year with a loss.

The above data is interesting, but it’s not a key ingredient of my analysis. I calculate and tabulate performance to get an objective read on indicators and barometers (StockTradersAlmanac cherry picks a bit and claims the January barometer has 90% accuracy).

I won’t present a ‘faulty 90% accurate’ indicator to my subscribers. There are some very high probability studies and indicators, and when I mention them they are tested and factual.

Since we’re talking about seasonality, I find the average S&P 500 performance for mid years of the election cycle more helpful. It actually harmonizes with many of the indicators and is available in the 2022 S&P 500 Forecast.

QQQ bounced from the support outlined weeks ago and is now approaching noteworthy resistance.

In summary, most indexes have reached resistance which could spark a pullback, the ‘messy’ bearish option outlined last week is still possible.

Continuous updates, the 2022 S&P 500 Forecast and out-of-the box technical and historical 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.”

Nasdaq & S&P 500 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 February 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 January 19 Profit Radar Report gave a down side target of 4,300, which was reached and slightly exceeded on January 24.

The decline into the January 24 low looks like a 3 wave affair. As mentioned in last week’s Free Market Outlook, I thought the decline would turn into 5 waves, but it hasn’t.

In fact, price overlapped the January 10 low (wave 1). In a standard 5-wave decline, wave 4 is not allowed to exceed wave 1 (an explanation of Elliott Wave Theory is available here).

There are other, more messy, patterns that allow for a continuous decline (such as the expanding diagonal outlined in purple below), but a 3-wave move into a low can also mean this leg of the correction is over.

The QQQ chart below, featured in the January 26 Profit Radar Report, highlighted support and the odds of a bounce. QQQ bounced as much as 10% from the low, but this doesn’t change the fact that QQQ dropped almost 17% over the prior month.

This sounds scary, but quick tumbles like that happened before.

Are they a sign of selling exhaustion or do they usually trigger bear markets?

To find out, I identified the time periods that most closely correlate to the Nasdaq-100 price pattern over the past 6 months (which includes the last leg up and subsequent selloff).

I limited the precedents to 10 and calculated the forward returns for the next 1, 2, 3, 6, 9 and 12 months (as usually).

A common theme emerged and the results were quite surprising. The entire study was published in the January 30, 2022 Profit Radar Report.

Continuous updates, the results of the Nasdaq study and out-of-the box technical and historical 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.

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