The S&P 500 (SPX) experienced a pretty bad week. This, of course, turned sentiment more bearish than in July, which is a good thing from a contrarian perspective. On the other hand, the really important question is whether this is a start of a longer downtrend, especially with the Fed’s guidance ‘higher for longer’.
We addressed the last point in Will Rates Move Much Higher And Will They Break Markets?
We are not too concerned, certainly not with hysteria around a market crash. We have experienced a rotational recession, which is not over yet, this is something different than a market crash.
In our premium service, particularly Momentum Investing, we have detailed the rotational dynamics of this market: epic sector rotation. In our writings, we try to find the next sector that might go up, but equally important we guide our members to stay calm by helping them understand ongoing market dynamics. Being patient, picking quality stocks, is the combination that works in this current market environment.
That said, if we look at the S&P 500 chart, we don’t see any reason to be concerned, at least not at this very point in time. A few highlights:
- The S&P 500 index is moving inside a rising channel (green shaded area). This is bullish until proven otherwise.
- While we do not care about any moving average, simply because all of them are lagging, it is ‘interesting’, from an anecdotal point of view, to check from time to time the most followed moving average, i.e. the 200 dma. At this very point in time, the S&P 500 is inches away from hitting the 200 dma.
- In January and March of this year, the S&P 500 moved above the 200 dma, since then it has remained above it. It does make sense to test that same ‘200 dma breakout point’ exactly six months later.
- The purple box on our chart is the one we annotated nearly 2 months ago, but only in our premium services. The purple box is a time/price combination which we forecasted would be hit. Our premium members knew, almost two months in advance, that the current price point would be hit.
Moreover, not shared on this chart but available on other charts in the restricted area, our timeline readings suggested a volatility window to start around August 20th. Those same timeline readings suggest that a more bullish window is about to start, not later than Oct 12th, 2023.
Do we believe that the S&P 500 will find support at the 200 day moving average? Yes, we think so, but this has truly nothing to do with the 200 day moving average itself. As evidenced by our chart, with our annotations, we forecasted that the S&P 500 would hit current levels, already two months ago, as a time/price forecast, only available to premium members.
Recommended (public blog): Sector Rotation Is Here, Once Again – 5 Potential Beneficiaries For H2/2023.
Recommended (premium research): we shared a few really juicy trade suggestions in recent weeks which we believe will be as accurate as the time/price prediction shown on below chart.