So far, we have seen some tech earnings that have been better than expected, so stocks could bounce early Wednesday on this news. If the market fails to rally nicely on this news, then it would tend to confirm our view that the next pullback is underway. For GLD, failure to exceed 187 on this move would be a concern, and below 184 would suggest lower prices are coming.
There are signs of a short-term top in the market. We still do not see a move to 300 on SPY, however, and will take trading positions on any buy signal around 380 or so.
One interesting time is the “as good as it gets” phase, when the market is expecting a series of bad earnings reports, so it sells off on good news. This often, but not always, happens ahead of recessions. We would use this week to sell some trading positions and prepare for another pullback toward the 380-area on SPY.
Stocks continue their choppy rally and we have no reason to change our opinion or upside target (420 to 440 on SPY) for this rally. Recall we went back in at 381 on SPY for trading funds and will look to liquidate that portion as we get selling indications in the 420 to 440 area.
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.
