One of the concerns we have is that, like the 1970’s, we will see rotation in leadership on each rally within the trading range. Bonds still look like a range, but surprises could be to the upside in bond prices.
We still expect an upward bias into April. Keep trading large cap stocks that move with the indexes. It may be that the big gap up in TLT we saw on the banking news was the peak of the trading range.
We looked at our accumulation models and market internals over the weekend. There are some good and bad readings, but overall, there is nothing to suggest that our forecast of more trading range is unlikely to work. We will be looking at a short-term peak in April.
Advisors should be investing in models, looking for a rally into the end of April, to the top of the range, and may want to ignore the wiggles and waggles this week.
Traders should be putting money to work in this area, looking for a rally to the top end of the range. We note that good trading bottoms are formed on emotion and are seeing this. Our concerns suggest that the market will NOT break out to the upside on the rally we see out of this area, but rather will move to the top end of the range and fail (this is in line with our forecast). Our indicators have suggested that rates will be in a range for a while, and we see nothing to change this.
If SPY can close below 396, we would say that this second decline in 2023 is underway. That should provide a decent buy point for a rally in April and into May.
Understand that while we have seen improvement in indicators and are intermediate-term bullish because of this, the short-term picture is less clear – we still think a low later in March is coming. The recent gap down on GLD on February 3rd illustrates what can happen to a market where there is no accumulation. There is support in the 28 to 27.50 area that should hold for at least a bounce in UUP.
Oil has a tendency to rally in the winter and decline in the fall and spring, when it is warmer. Usually that means a peak in the February to March contract, a bottom in the May/June contract.
Realize that while the daily stochastic is oversold, the weekly has just gone into sell mode, suggesting further consolidation/decline. March expiration still looks like it could be important. We feel confident that new leadership is coming from outside the NASDAQ. The Latin American charts suggest that Emerging Markets are still in a holding pattern.
The big question is whether the S&P can break the October low, as various strategists are suggesting, or whether The FRED Report will be right and those lows will hold? We will re-deploy that cash in the 380-area on SPY if that occurs.
We are looking for movement down across the trading range, where we will add some trading positions back. Those who want to take more risk should consider BKLN, rather than HYG.
The daily stochastics on SPY and QQQ have moved into sell recycles. This implies some more choppiness as these indicators move down and reset. We realize that the consensus in the marketplace is that rates have peaked – but from a technical perspective rates can move higher, and possibly retest the highs.
while the market tone continues to improve, we continue to churn near our trading target of 420 on SPY. Remain fully invested in models, ready to add new money on a drop toward 380 on SPY (SPDR® S&P 500 Trust). We would consider selling trading positions in oil on this rally.
Stocks have rallied into the end of January as forecast. It is overbought and should pull back over the next week or so. We still believe the market is in a trading range, for at least the first part of 2023. The pullback from the 31-area high for UUP has tested that area, and it appears this is starting to rally again.
Investors continue to hold, but realize stocks are short-term overbought and could easily pull back. For GLD a move below 177 to 176 would target lower prices. We looked at the dollar, and it could advance on the FED meeting as well. This has been one of the best years for the tax bounce list, with no losses.
SPY is still challenging resistance in the 400-area, and while we continue to have a target of 420 by the end of January this may be too bullish. We continue to have a TLT target of 110 by the end of January, and we have started to rally again after a short pullback, as forecast.
Stocks have been rallying, and last week’s pull back was as forecast, and does set the market up for an advance into the end of January. GDX has had a great run and the lack of accumulation suggests a substantial retracement is possible, so safeguard profits.
We have had questions as to what to do when SPY hits the 420-area, and our answer as of now is we will “stop, look and listen” and not just sell. Healthcare remains one of the best chart patterns in the sectors, and Biotech may represent the most speculative area of Healthcare.
