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Indicators continued to weaken on Monday and Tuesday, suggesting a bit more pullback for the stock indexes.  Bonds were hit a bit but still remain close to the middle of their trading range.  This is probably a good time to buy Japan with a longer-term horizon.

We would expect this week to be down, but please recall, that our forecast top of the range is 420 to 440 – it is possible that we break above 420 and if SPY fails there it should move quickly to the bottom end of the range.  Small cap generally outperforms coming out of a recession, so the action here suggests we may be going into recession, and not in recession now.

More of a correction would be confirmed by a move below 407, on SPY, very close to Tuesday’s low. Then a break of 400 would target 380 or so.  We note the McClellan Oscillator, at -95 or so, and stochastics plus other indicators, suggests more downside potential here.  Relax, as we should have a good buying opportunity over the next few weeks.

We still remain cautious on the market, and expect to continue within the trading range.  We would be accumulating oil stocks on dips over the next few weeks.

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.

It is better for the market to have some backing and filling days that close up, rather than a more vertical move that can be sold by big money.

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.

This would appear to be a “pause that refreshes” and not an end to the advance to the 420 to 440-area on SPY we have been looking for.

We are starting to see signs of rotation typical of a trading range.  It still looks as if the top end of this range is the 420 to 440-area on SPY.

The bottom line here is that we continue to expect some choppy upside, perhaps into April expiration, but overall this remains a trading range.

The important thing is that under the surface there is improvement in breadth.  We continue to expect a rally into April and possibly May.

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.

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.