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Stock Market Commentary 04/06/23
By Lawrence G. McMillan
"The fact that $SPX broke over the downtrend line that had existed for most of February and March doesn't necessarily mean that the $SPX chart is outright bullish, though, for there is formidable resistance at both 4200 and 4300. It's just not a bearish chart right now. Several indicators are overbought at this time, and some of them might be issuing sell signals soon. In addition, $SPX has advanced above its +3å "modified Bollinger Band."
There is minor support near 4050 with stronger support at 3970 (where the small gaps on the $SPX chart would be filled). A close below 3950 would be bearish, though, as it would more or less negate the positive work that was done over the past couple of weeks.
Equity-only put-call ratios remain on buy signals after faltering a bit this week. The ratios turned up modestly for a couple of days but have now moved back down to a new relative low as of yesterday thus solidifying the recent buy signals. The Total put-call ratio remains on a buy signal as well. These indicators will remain bullish for stocks as long the ratios continue to decline.
Breadth, however, has become something of a problem. Breadth was tremendously positive during the rally, with positive breadth on every one of the seven trading days between March 24th and April 3rd. Since then, however, there has been a vast deterioration in breadth, and the breadth oscillators are on the verge of rolling over to sell signals. They would do so if breadth is negative today.
$VIX continues to remain at low levels. That means the that the "spike peak" and trend of $VIX buy signals remain intact. The only potential problem is that $VIX is once again at or below 19. Over the past year, that has generally been an oversold condition that has manifested itself in a decline in $SPX sometimes minor, sometimes more serious.
Overall, we exited our "core" bearish position when $SPX rose above resistance at 4080, simultaneously breaking the downtrend line from February and March. However, the $SPX chart is not bullish. Meanwhile, we will continue to trade signals from our individual internal indicators as they arise."
Home ›Weekly Charts
Weekly Charts
S&P 500 (SPX), CBOE Market Volatility Index (VIX), 21-Day Equity Only Put Call Ratio (PC21), and Weighted 21-Day Equity Only Put Call Ratio (PC21 w) charts updated each Friday.
http://www.optionstrategist.com/sites/default/files/SPX.JPG?v=1681098935066
http://www.optionstrategist.com/sites/default/files/PC21.JPG?v=1681098935066
http://www.optionstrategist.com/sites/default/files/PC21_W.JPG?v=1681098935066\
http://www.optionstrategist.com/sites/default/files/VIX.JPG?v=1681098935066
UP UP and away! trillion dollar banking crisis, run on banks and the market immediately goes HIGHER! Dismal quarterly earnings as they continue to fall and the market goes HIGHER! How this quarter doesn't get positive BEAT on a 10 percent projected drop is beyond me. Rally over that for sure. Future projects get lowered once again? Positive for stock market. Expectations for both a stop in rate hikes and a subsequent lowering of rates is a given based on no real economic data supporting that. but hey the market will always find positive reasons to stay positive.
Like the last 7 years of TRUMPISM we still see only positive results even after 4 likely indictments. In fact the GOP is emboldened by it. Tennessee just ousted TWO of the THREE DEMOCRATS for protesting the assault rifle killing of children. They immediately got rid of 2 black men who became too uppity. the third person who did the EXACT SAME THING was not ousted. You already know why. A 60 year old WHITE WOMAN can't be touched in Tennessee. that's like a black man daring to look at a white woman. they know the consequence of that.
You the investor will read these words ignore them and find my post offense. If anyone wants to know why the market will follow the path of our dismantled republic all i can say is cover your eyes ears and mind. All seems to be coming to a head at the same time!
"SPX remains in the light blue circle inflection zone, so it remains to be seen if this will generate a reaction. If this is blue ii, then a reversal should be on the horizon. If it isn't, then it isn't, and we may know that soon enough, too."
http://www.pretzelcharts.com/
"I think we only need one chart today. Weeks ago, I said that "unless/until blue 2 is broken, we're going to presume we're in blue ii," and we're now at the "do or die" stage of that presumption, since blue 2 is not far overhead. So while Red 2 remains possible, it doesn't gain significant traction until blue 2 is broken."
"In conclusion, SPX remains in the light blue circle inflection zone, so it remains to be seen if this will generate a reaction. If this is blue ii, then a reversal should be on the horizon. If it isn't, then it isn't, and we may know that soon enough, too. This market has been tough because we've been stuck in a trading range for almost a year now, and patterns get increasingly difficult the longer a range continues. Trade safe."
The market has developed one note themes these last few years.
1 - Pandemic
2 - Inflation with the eventual realization it was not transitory
3 - Fed Funds Rate hitting critical mass at 4.5%?
4 - Speculative bets using the addicted notion that disinflation was here to stay. Bank Crisis resulted.
5 - Unanimous focus on anything and everything relating to Inflation. The Goldilocks scenario is now predominant theme.
6 - CHINA, not yet on the radar but will soon become the most watched cause for continued inflation.
For now and likely thru April we should stay in a belief that disinflation is about to reemerge. Without it this addicted stock market will go thru withdrawal symptoms. It will not be pretty. But we are getting our supply now to keep the market happy.
"I want to see if and how the market reacts to these inflection zones before commenting too much further, so we'll take a deeper dive on Wednesday."
http://www.pretzelcharts.com/
"Let's jump right into the charts, starting with NYA, which has now captured its second upside target box:"
"SPX is, interestingly, back into the inflection zone I mentioned a couple weeks ago:"
"In conclusion, I want to see if and how the market reacts to these inflection zones before commenting too much further, so we'll take a deeper dive on Wednesday. Trade safe."
BEWARE Leveraged ETFs: Invest With Caution
Tom Bowley | April 02, 2023 at 12:36 PM
http://stockcharts.com/articles/tradingplaces/2023/04/beware-leveraged-etfs-invest-w-662.html
The following was a special educational Daily Market Report that I sent to our EB.com members last week....
"I always refer to EarningsBeats.com as a "Research, Guidance, and Education Platform", because that's truly what we strive to be. HERE IS WHAT WE ARE NOT - REGISTERED INVESTMENT ADVISORS. I'd love to try to help everyone on an individual basis, but it's virtually impossible. There isn't enough time in the day for me to work with our members on a 1-on-1 basis and the even-bigger issue is that I'm not licensed to do so. It's vital to understand each individual's risk profile and tolerance before considering/implementing any type of investment or trading plan. Therefore, we're limited at EarningsBeats.com to providing each of you information in the form of market research, guidance, and education, and then what you do with it is completely up to you. I've learned a lot about the stock market over the years and my passion is teaching others what I've learned. I give plenty of credit to John Murphy, whose books taught me so much and inspired me to do the research that I've done over the years. Perhaps the biggest lesson I've learned is that we have all the information we need in the price action on the charts. We don't need an MBA in Finance. I honestly don't need my CPA license. The big Wall Street firms do all the heavy lifting and they essentially provide us personal reports based on the price action. We simply need to know how to use it.
In this special report, I want to focus on leveraged ETFs, providing you key information to help you better trade these products.
I've been requested on many occasions to keep everyone posted on my use of leveraged ETF products, specifically relating to the timing of purchase and sale. I don't mind discussing this when I believe it's appropriate to do so, but let me also say that I cannot be held responsible for anyone's personal decision to use these leveraged products. That's completely up to you. I discuss it to help further educate the use of such products. I am NOT recommending or advising any of our members to buy or sell ANY INVESTMENT PRODUCTS - EVER. I don't even like to use the words "recommending" or "advising", because I believe that's best left to those who manage money or are registered investment advisors.
So now that all of that is out of the way, let me discuss how leveraged ETFs are designed to work. First of all, there are two very important elements of leveraged products that you MUST be aware of:
They are designed to track at a 2x or 3x rate on a daily basis, not long-term
Holding leveraged ETFs for extended periods of time (especially during volatile periods) can and usually does result in "erosion" (meaning that your returns will be worse than promised - 2x or 3x)
I want to give you two examples - the first will be a long-term example, explaining why holding leveraged ETFs for the long-term makes little sense. The second will be a short-term example that hopefully highlights the PERFECT way to use leveraged ETFs.
Example 1 - Holding Long-Term
I called an S&P 500 bottom in June 2022. If you had timed your entry into the NASDAQ at the close on June 16, 2022, that would have represented darn-near perfect timing (a slightly-lower bottom printed in October, just below the June low):
As of the March 27th close, the QQQ had risen 14.64% from the June 16, 2022 close. That's awesome, but what if you had been aggressive and decided to purchase the QLD or, even better yet, the TQQQ. These leveraged ETFs track the QQQ at a 2x and 3x rate, respectively. You'd have made a KILLING, right? After all, that 14.64% return would balloon to 29.29% and 43.93% on the QLD and TQQQ, respectively - at least in theory. But how did the QLD and TQQQ actually perform? Here's how.....
QLD: +18.37% (should have been +29.29% in theory)
TQQQ: +16.98% (should have been +43.93% in theory)
During a period in which the QQQ gained more than 14%, the 3x leveraged ETF (TQQQ) barely outperformed the QQQ and it UNDERPERFORMED the 2x leveraged ETF (QLD)! In the end, you took on inordinate amount of risk and your results simply didn't justify taking that risk. If you want to see it on the chart, check this out using a 194-day rate of change (ROC):"
http://d.stockcharts.com/img/articles/2023/03/28/216bf63d-86c5-4f3e-8510-ab5677d82efb.jpg
"There were 194 trading days from June 16, 2022 through yesterday, March 27, 2023. Now, to prove the numbers that I gave you above on the QLD and TQQQ, here are those two charts using the same 194-day ROC:
QLD (2x leveraged ETF):"
http://d.stockcharts.com/img/articles/2023/03/28/2872a56a-a9af-419e-aff0-5b80670e0739.jpg
TQQQ (3x leveraged ETF):
http://d.stockcharts.com/img/articles/2023/03/28/464cce1e-9633-4ba0-945a-57df39c3389f.jpg
"Let me ask you a question. Do you feel differently about those leveraged ETFs now after reading this? I've been trying to educate folks that it makes no sense financially to take on the risk of leveraged ETFs and hold on for the long-term. However, not all is lost. The time when these ETFs do what they're supposed to do.....and then some.....is when the market is trending.
Example 2: Trading Short-Term
Timing is EVERYTHING with leveraged ETFs. Think about the best times to buy the QQQ. I'd say either on a major breakout or when it pulls back to key price or moving average support. The QQQ is currently in a cup and pulling back within a handle:"
http://d.stockcharts.com/img/articles/2023/03/28/0628a40e-486d-4212-9ef8-977b79288561.jpg
"If you're bullish, the pullback into a potential handle and the rising 20-day EMA provides an excellent opportunity to take a shot with leverage. My strategy is to use this short-term weakness to build a reasonably-sized leverage position. If the QQQ were to trade down below the 300 level, I'd likely take a fairly small loss on my leveraged position and move back entirely to the QQQ. If you're bullish and decide to use leverage, the decision whether to buy the QLD (2x) or TQQQ (3x) simply comes down to how much additional risk you're willing to assume.
Let me show you what happens when you catch an uptrend and you use leverage, because that's when leveraged products work really well. Back on Thursday, January 5th, I sent out a DMR (Special Report), highlighting that I was seeing positive correlation between the VIX and S&P 500 and that usually means a market reversal. The S&P 500 had been downtrending and I suggested that we could see a big rally out of nowhere and that I was using the opportunity to build a leveraged ETF position. If you bought the leveraged QLD or TQQQ at the close on January 5th and held through the entire uptrend that ended on February 2nd (19 trading days, so the charts below will show a 19-day ROC), you'd have done very well. How did the QQQ perform and how did those leveraged ETFs perform?"
QQQ:
http://d.stockcharts.com/img/articles/2023/03/28/cd974fb9-8b1c-49e5-89b4-ca18f01f2835.jpg
QLD:
http://d.stockcharts.com/img/articles/2023/03/28/4e63f3de-aa51-4d3d-8d33-c7e7bf6b1254.jpg
TQQQ:
http://d.stockcharts.com/img/articles/2023/03/28/669d41da-60ab-471a-b90f-14bc01acfb90.jpg
"In this example, the QQQ and the leveraged products gained the percentages shown below for the 19-day holding period:
QQQ: +19.17%
QLD (2x): +40.57% (should have been +38.34% in theory)
TQQQ (3x): +64.49% (should have been +57.51% in theory)
Not only did the leveraged products achieve their desired 2x and 3x returns, but they also exceeded them! You'd have made MORE than what was expected. While erosion is a problem over the long-term, because of volatility (ups and downs), compounding actually provides BETTER RETURNS when the trend is primarily in one direction.
If you're going to use leveraged products, you want to invest in them and hold while the trend is in play, then EXIT STAGE LEFT! Holding these products long-term can produce returns that are much worse than what you expect. They're not worth the risk of holding long-term.
Current Environment
I like shifting a portion of my QQQ investment to either the QLD or TQQQ now, because of the following:
Bullish cup with handle continuation pattern
Historical tendency (April is very bullish and the first half of calendar quarters - April 1 to May 15 - typically perform well)
Despite the weakness since mid-February, the VIX currently resides just above 20; fear is eroding
I can limit my risk as the QQQ is trading relatively close to its rising 20-day EMA
NONE of this guarantees us a higher market ahead. Trading success stems from patience, education, and managing risk. I believe the QQQ is a solid buy as it falls and approaches its rising 20-day EMA, which is currently just beneath 303. I've begun using leverage and will continue to do so down to the 20-day EMA. I will hold it unless the QQQ closes beneath 300. This is a prudent use of leverage, in my opinion. Many of you that are risk averse probably should simply stick with ETFs like the SPY or QQQ and avoid using leverage. But those of you that want to take on more risk for the potential of higher reward may find the use of leveraged products a major benefit - just pick your spots judiciously. I don't believe in the philosophy of buying leverage and holding it long-term. The ultimate reward is not worth the additional risk, in my opinion.
UPDATE:
After this email to EB.com members, the QQQ spiked 3.94% over the next four trading days. On the chart below, I should the 4-day ROC on the QQQ, QLD, and TQQQ. You can see that leveraged products work GREAT while trending higher:"
http://d.stockcharts.com/img/articles/2023/04/02/967438ef-fc1c-4517-b68a-d513ce69ba24.jpg
"My suggestion: Please be careful when using these leveraged ETF products. They most definitely can help a portfolio achieve more aggressive positive results when a trend is in place, but periods of volatility and consolidation will result in considerable erosion.
Pre-Announcement: Big Event on Saturday, April 15th
We are going to open up registration this week for a HUGE event on Saturday, April 15th. It'll be FREE to everyone and I'll be:
discussing the current technical state of the stock market
providing an update on sentiment and market manipulation
reviewing key historical and seasonal tendencies
and much, much more!
Seating will be limited, so if you'd like to ensure your spot, sign up for our FREE EB Digest newsletter (we'll send out invites to all EB Digest subscribers). Simply CLICK HERE and enter your name and email address. I'll see you on the 15th!"
Happy trading!
Tom
NASDAQ Breaks Out Again; 2 Stocks To Consider NOW
Tom Bowley | March 31, 2023 at 11:34 AM
http://stockcharts.com/articles/tradingplaces/2023/03/nasdaq-breaks-out-again-2-stoc-138.html
"U.S. equities are wrapping up the first quarter in grand style. The QQQ, which tracks the NASDAQ 100, is zeroing in on a 20% gain for the quarter, as I write this. We saw a huge rally in January 2023 and strong Januarys usually suggest a strong year ahead. Based on our Q1 performance, it'd be hard to argue at this point. There's more technical work ahead, which is to be expected after the completion of a cyclical bear market. If you follow the "20% rule", then the QQQ is now in a bull market, having moved up more than 20% from its low of 253.26 on October 13, 2022. That confirms the end of the 2022 bear market for the NASDAQ.
So, for now, let's assume the worst is behind us and we'll be looking at higher prices ahead. What stocks might we consider buying and why? Here are two that I like:
Amazon.com (AMZN)
If the stock market does well this year, it'll likely be due to the Fed hitting the brakes on interest rate hikes, promptly a lower 10-year treasury yield ($TNX) in the process. In that type of environment, I believe growth stocks will be where most of the leadership resides. Amazon.com (AMZN) certainly fits the bill. Technically, AMZN just broke out of a bullish inverse head & shoulders continuation pattern and broadline retailers ($DJUSRB) are finally showing relative strength:"
http://d.stockcharts.com/img/articles/2023/03/31/7998729d-a9be-4532-9993-781bd25b1edb.jpg
"There are a lot of positives here. Nothing has been confirmed yet, in terms of relative strength, but the improvement in 2023 is rather obvious. The February absolute and relative highs are key target levels. Moves above the February high would be extremely bullish.
ServiceNow (NOW)
NOW is breaking out of a similar bullish pattern, clearing key overhead price resistance. But does it sustain the move through today's close? That'll be what I'm watching, because if it does, I could see a nice run back to that February high.
To the downside, NOW held up in the support zone between price and gap support and is "NOW" poised to run:"
http://d.stockcharts.com/img/articles/2023/03/31/00ff83e6-d02e-412d-9918-a8cc40812d49.jpg
"Average volume on NOW is 1.58 million over the past 50 trading days. Today's volume is over 800,000 in the first 90 minutes, so we're seeing confirming volume. It's fairly simple - either today is going to be a meaningful breakout or it's going to be a false breakout. It just depends on where we close. NOW was leading the software group ($DJUSSW) higher in January. It's lagged badly during its recent consolidation, but the NOW relative strength line has begun turning higher again (blue circle) and a breakout could trigger much further relative strength ahead."
"I'll be hosting our latest market outlook on Saturday, April 15th at 10:00am ET. If you're unsure of the bull vs. bear market debate and where we currently stand, mark your calendar for our event. It'll be very educational and open to the public. We will be sending out invites to our entire FREE EB Digest community, along with our EarningsBeats.com members. Simply CLICK HERE and sign up with your name and email to save your spot!"
Happy trading!
Tom
Stock Market Commentary 03/31/23
By Lawrence G. McMillan
McMillan Option Mentoring
A rather large dichotomy is emerging in this market: the chart of $SPX remains bearish, while most everything else is taking on a bullish slant. This has happened before, and usually the negativity of $SPX wins out. However, each market cycle is different to some extent, so we will continue to watch these rather interesting developments.
The chart of $SPX still shows lower highs and lower lows since the beginning of February. The current rally is carrying up towards resistance at 4080, which has proven to be formidable so far. In fact, that resistance area extends from 4080 up to 4200, so $SPX would need to break out over 4200 in order to upgrade the chart's status to bullish.
Equity-only put-call ratios rolled over to buy signals about two weeks ago, and they remain on those buy signals currently. That will continue to be the case as long as the ratios are declining.
Breadth has been positive every day since we last published. That has confirmed new buy signals from the breadth oscillators and has already pushed them into overbought territory. New buy signals from the breadth oscillators often get overbought right away, and it is not necessarily a problem.
The entire complex of indicators having to do with volatility is bullish for stocks. There is a $VIX "spike peak" buy signal, where we have begun tightening the stops since $VIX has fallen so much. Also a trend of $VIX buy signal is in effect (circle on the chart in Figure 4).
So, we have are at something of a crossroads. Bulls can take heart from the various buy signals from the internal indicators and plenty of new bulls are showing up every day. However, unless $SPX can rally through the overhead resistance, the bears will still have a case.
this is a wave 3
1 tic has closed below 0
this is a trickle up goldilocks market. not too fast not too slow
complex ew traders try to make everything as complicated as possible
as soon as EW trader says it might go up unless it goes down and here is the
alternative count. They successfully confused everyone.
Using just price is 1980 thinking
so wave 3 with 3 gaps should do fib 1.61 golden ratio
"....the near-term bear count in SPX hasn't quite been invalidated, but it's on the ropes."
http://www.pretzelcharts.com/
"Since last update, SPX has made the previously-favored b-wave low count seem less likely:"
"NYA has captured its first upside target zone:"
"If NYA reaches 15400-15800, then that is a very significant inflection zone, so I would be interested to see how the market reacts to it.
In conclusion, the near-term bear count in SPX hasn't quite been invalidated, but it's on the ropes. NYA is now in the process of forming three waves up, and recall that three waves can be an ABC correction. The current wave can run higher, but be aware that this can become a very significant inflection and reverse. I'd like to see a bit more from the market before calling for a reversal, but just putting that option out there for now. Trade safe."
Realists and Common Sense during major discrepancies usually lose out to extreme exuberance supported by 40 years of disinflation and a mega hyperbolic stock market. The ease at which all debacles get resolved in a quick and profitable manner reinforces why we had a banking crisis to begin with. Speculative bets, greed and hubris have actually increased with the increase in past mistakes causing massive temporary damage and equally massive bailouts shortening that damage each time. The ability for governments to mitigate such disasters is due to the acceptance that they can always increase their balance sheet with massive debt and have it paid for using future disinflation cheaper costs.
As of TODAY the May meeting has a 60% chance of ZERO rate hikes. I expect that to reach 80 to 90% days before the meeting regardless of inflation data.
Without breaking any of the numerous EW paths how high can this current wave go? Anytime between May and early July we should see the actual top for a very long time. We have now entered the absurd extrema optimistic view disregarding the laws of nature and common sense. it has only one path left for resolution, a genuine crash scenario.
The setup is there. Absurd altered viewpoint that will ONLY get dispelled in one clean moment of stark realization, like jumping into a pool f very cold water on a hot day. The CRASH: Should have the old fashion signature of a 4 day drop and a 20 percent plunge.
I have ALWAYS predicted how this ends and am even more convinced after the 40 years disinflation mindset went so far in speculative bets that it assures us we are in the twilight zone. FED is in a Catch-22 and regardless of their actions going forward it will not prevent a crash. They have NO CONTROL over inflation as proof of the 80's. if they refuse to raise rates in an inflation cycle that wouldn't stop the damage to the economy and might even exacerbate it.
Let us pray that Inflation is dead. Let us pray that a trillion dollar debacle in banking system will tighten monetary policy enough to thwart inflation once and for all. Get some old fashion religion.
"....not much to add...... Trade safe."
http://www.pretzelcharts.com/
"Last update focused on the near-term potentials, and the market traded sideways/down since then, leaving everything unresolved. I've added the new relevant commentary to the near-term SPX chart:"
"No change in NYA:"
"Finally, I thought about adding this oil chart to Monday's update, then didn't, and I'm still uncertain about adding it now... but will anyway. Oil does NOT yet have an impulsive rally off the low, so keep that in mind, as this may be premature."
"In conclusion, not much to add beyond that. Trade safe."
Interesting insight. The Bank Crisis did for Inflation what the FED could not. that's their theory anyway. We are rallying because all competition to stocks is reversing. Dollar, Bonds, Oil.
Their notion that a bank run that was quickly squashed was enough to get the consumer to contract. The other argument is that banks own problems will force them to be more stringent on loans and present higher costs. They believe the crisis will stop inflation. China and the so called mixed economic readings makes no sense. they should be spending after a 2 year lockdown.
The beauty of a crisis is that any data point before that crisis will also be ignored. We should have a sideways to bullish run till early May at the earliest. heck it took 5 weeks for a known Pandemic to strike us.
"...(If bears are already in control, then we're already in a third wave that may not let bulls up for air for a while.)"
http://www.pretzelcharts.com/
"Everyone should understand the big picture potentials by now, so today will focus on the near-term.
Friday's update offered a near-term option that turned out to be the only chart we needed (at least, for Friday's action):"
"Zooming out a bit, the near-term options appear to be as follows:"
"And then zooming out a bit more, if bulls were to get their ABC (either immediately or after another low), then it could lead to another leg for the rally. (If bears are already in control, then we're already in a third wave that may not let bulls up for air for a while.)"
In conclusion, the first half of Friday's near-term speculative count was a hit, we'll see if the second portion of that count works out too, but be aware of NYA's tag of the second line (above) and the "alt: bull c" option on the second chart. Trade safe.
The NASDAQ Is Eyeing A Major Breakout Level
Tom Bowley | March 26, 2023 at 11:53 AM
https://stockcharts.com/articles/tradingplaces/2023/03/the-nasdaq-is-eyeing-a-major-b-43.html
"Ultimately, breaking out above the August 2022 high represents the key level to reverse the downtrend that began in early-January 2022. I like to use longer-term charts to determine whether we're currently trending higher or lower, and right now the downtrend is firmly in place:"
http://d.stockcharts.com/img/articles/2023/03/26/4ae4709f-8783-4192-8aed-16efeb966fcc.jpg
"The numbers on the above chart identify the lower highs and lower lows that remain in play. Until we clear that August high, the price chart remains bearish. The problem is that if you wait until the long-term price chart turns bearish in a cyclical bear market (January through October 2022), you ride at least half, if not more, of the downtrend. The same holds true when bottoms form. If we're waiting for price confirmation - clearing overhead price resistance a little below 340 - we will have missed the first 30% or more of the move higher.
That's why I do what I do. The price chart only tells us so much. We must be aware of the "under the surface" signals taking place to truly understand the likelihood of a market advance of decline. Despite the clear downtrend on the chart above, I'm VERY BULLISH and have been since June 2022.
If you had $100,000 invested at the end of 2021 and you shorted the S&P 500 (bought SH) when we turned bearish at EarningsBeats.com, that $100,000 would have grown to nearly $125,000. On June 17, 2022, we called a market bottom. Investing that $125,000 in the SPY at that time would have grown to roughly $137,000 as of Friday's close. That would be a total 37% gain in the last 15 months, while the S&P 500 still remains 16.7% below its close on December 31, 2021. That type of outperformance vs. the S&P 500 is life changing, when you further consider the compounding nature of investment returns.
I've spent the past several months explaining to our EarningsBeats.com members why I believe the stock market is heading a lot higher. There are a number of reasons from the positive divergence that appeared on the above weekly chart to extreme bearishness in the options world to serious accumulation by Wall Street. Throw in a very strong seasonal period that begins this week and you'll begin to understand why I'm looking short-term at a breakout in the QQQ. We've been threatening and it wouldn't take much buying from here to clear overhead resistance on the daily chart:"
http://d.stockcharts.com/img/articles/2023/03/26/986c8080-ed40-403b-9d3e-b695b899eb99.jpg
"Given the "under the surface" bullish signals, I'm simply waiting for the price action to confirm what I already believe is an uptrend that will result in all-time highs for our major indices later this year or early next. It will be spurred by growth stocks as the 10-year treasury yield ($TNX) continues to move lower.
I'll be featuring one industry group that will be a key leader during this next move higher. It's on the verge of its own breakout, one that will help to carry the NASDAQ much, much higher. If you'd like to receive this chart, simply CLICK HERE and sign up for our FREE EB Digest newsletter with your name and email address. There is no credit card required and you may unsubscribe at any time."
Happy trading!
Tom
THE OPTION STRATEGIST
FREE WEEKLY UPDATER
03/24/23
By Lawrence G. McMillan
https://www.optionstrategist.com/products/option-strategist-newsletter?mc_cid=7c89e76b47&mc_eid=4d62b38025
McMillan Option Mentoring
"As for the $SPX chart, it once again shows a lower high and lower low, since that February top. Moreover, the latest rally attempt, which began on March 13th, appears to merely be an oversold rally. It sprang from several rather severe oversold conditions, and it has now run into trouble at or just above the declining 20-day Moving Average a "classic" oversold rally.
There is currently resistance at 4040 (this week's high), but the stronger resistance is the entire area between 4080 and 4200 (the trading range from early February), which has already been tested once and held (in early March). Meanwhile, the broad support area from 3760 to 3850 (the range from late December 2022) is still in place. The most recent rally began from that area.
Equity-only put-call ratios surprisingly generated buy signals this week. The standard ratio (Figure 2) had moved to new highs on its chart, so it was in a very oversold state. Thus, a buy signal from that level is not too surprising. The weighted ratio, on the other hand, is still relatively low on its chart, but it rolled over enough that a buy signal occurred there as well.
Breadth has been terrible, and so both breadth oscillators remain on sell signals, and they remain in deeply oversold territory.
The signals and indicators surrounding volatility are general bullish at this time. There is a $VIX "spike peak" buy signal in place from March 14th and March 16th (overlapping signals). Moreover, with the mini-financial crisis seemingly past, $VIX itself is now back below its 200-day Moving Average, so that generates a new trend of $VIX buy signal.
Here's an interesting aside: I am one of the people surveyed in the CNBC Economic Survey. I think there are 30-some traders and economists surveyed. I am the only one who doesn't think inflation has already peaked! I find that very unusual. What this means, of course, is that if there are some bad inflation reports somewhere down the line, they could cause havoc, because everyone has already been acting on their beliefs that inflation has peaked.
As noted earlier, we are maintaining a "core" bearish position as long as the $SPX chart is in its current downtrend. In addition, we are trading confirmed signals around that "core.""
ONE TRILLION of bad loans? Really? No wonder the street is DESPERATE for lower rates. it has already been solved. Kind of illogical if you ask me. But you wont. the TRILLION dollar question: No one considers that the economy might spike even higher on inflation? Impossible all of a sudden? Gee, right before the Bank Crisis everyone was worried how high this sucker will go. NOW? I guess we got confirmation that inflation is dead.
Just cover your eyes when the governments own data comes out. Like the same logic on why a Pandemic this time around would have no consequences. If you can use that logic i guess todays will work.
Guaranteed 40/50% haircut all in 2023. The confirmation is EXACTLY how i called this would happen. EXACTLY! 40 years of Pavlovian response to disinflation is still here, and here to stay. To not even acknowledge MY prediction had come true is astonishing and then to pretend I have no clue what will happen is even more astonishing. Heck i could still be wrong but you have to admit I was ON THE RIGHT TRACK SO FAR. Coincidence. Pure and simple?
jxyzobrien..I hope I didn't run you off our board. That post about Trump was for one person.. Anyway I didn't mean it to be an insult but from your posts I assumed you were a great brother Republican...
Thanks RCKS..I sure love his low targets...But the bulls seem to show up at the right time to save it...
PPT and decades of immediate relief from any debacle has created a numbed society. Free money from pandemic created a huge excess of disposable income. That outcome was known, inflation. but due to supply and demand at the same time was also known. What was not is the stubborn entrenchment of inflation. if it is here to stay it will cause a depression. Obviously we rely on disinflation like an addict.
I expect the same muted response and short term memory to once again kick in. UNLESS external evens are so bad it punctures thru. Next 5 weeks of data should clarify if the crisis itself has blunted inflation. MAY 3rd. Might be the MAYDAY signal. I expect the FED will have no affect going forward on the stock market by then IF inflation is still high and short term over reaction to bond yields and the dollar reverse right back up. the Banks are in dire situation. they desperately need the FED to stop hikes and announce a reversal soon. It might not be up to the FED on MAY 3rd.
I saw 2023 as the year of dramatic deep drops of 40 to 50% haircuts. I had no idea how the economic events would unfold other than understanding a generational process. I did mention that 40 years of disinflation was ingrained in everyone and expectation was for it to continue. To have a crisis over such a small Fed Funds rate tells you the desperation that this economy is in. An addict on disinflation and will always need it to survive. I think CHINA is the wild card. Human nature usually responds to a 2 year lockdown with relief and over spending. So far mixed economic results. They alone could spike commodities thru the roof.
My best GUESS is early MAY everything unravels.
"....so things continue to look "not particularly bullish."
"And bulls have done nothing to help their case, so that stands for now."
http://www.pretzelcharts.com/
"Last update noted, regarding the SPX chart:
In a perfect world for bears, though, SPX stops at or before the highlighted confluence
SPX stopped at the very bottom edge of the blue zone, and shy of the confluence, so things continue to look "not particularly bullish.""
"I want to call attention to one potential near-term path. The pattern isn't clear enough to call this a "hard prediction," more of a soft speculation... but the option is there, so I thought readers might want to see it:"
"NYA just missed its first zone and reversed. It is now coming up on the red trend line, which may or may not offer support"
"TLT is at a near-term crossroads:"
"Last update concluded:
[W]e do have five clear waves down (an impulse) in NYA, which means that unless that impulse is wave C of the noted expanded flat, it will be followed by another impulse down that is equal to or greater in length than the first. We cannot entirely rule out all bull options, but if this is the start of blue 3, that next impulse down will be a nested third wave and thus fairly brutal.
And bulls have done nothing to help their case, so that stands for now. Trade safe."
Shane s- bank liquidity issues
bonds became worthless when rates went up to fast
and some bad loans too
so the fed stepped in and gave the banks money for these bonds
and bad loans. Now when the bonds come back to par they will give
the money back to the fed.
So the banking issues were addressed by the FED.
and liquidity was restored.
Now if new issues arrive they will have to be dealt with
Shane studies the fed daily so i am confident in his analysis.
If my words cause such a reaction it absolutely means people are paying attention and not liking what i have to say.
I SHOUTED a Pandemic, with all the past know charts and current known facts on the virus, was going to hit hard and the response. GO AWAY! As if i was the insane one. I shouted last year disinflation is cyclical and the 40 year period is over! I made fun of the word transitory. I was told GO HOME. I shouted that 2023 will be devastating based on the accelerated rise in rates and that a DEBACLE would result from greed and a generations silly notion that disinflation was still here. I was told to GO HOME.
Now had i gone home or continued to post the only thing that stayed constant. I was RIGHT and made startling calls on the economy while everyone never saw it coming. If YOU refuse to accept what i have to say the easy thing to do is to ignore me. I mean how hard is that? Instead IT BOTHERS YOU!
So let me ask you, had I posted or never did I can guarantee you one thing, YOU ignored me anyway at your own peril. Just because i have been right on major reversals you still have the right to IGNORE ME! It's like me forcing you to see something you don't wish to see.
I am discussing a major Depression style outcome and you want me to what?????
If an asteroid was coming should you insist to keep quiet and let it be? EVERYTHING I WARNED ABOUT has come true. And yet you STILL refuse to listen?
Human nature is a constant and even with absolute exact past you can point to we refuse to LISTEN! I am fascinated by this. A 100 year old PANDEMIC was staring us in the face and WE IGNORED IT and anyone pointing it out was told to GO AWAY!
THESE ARE FACTS! Sorry facts and reality get in your way. By NOT hearing it you actually pretend it never happened?
DISCUSS THE OTHER ANNOYING POINTS THAT CAME TRUE and then we can discuss my bothering you with things that might come true. Was i LUCKY!
You like to hear yourself talk, period
Nobody is missing anything your writing unless they stopped paying attention to you, you put stuff everywhere you can.
And the better question is anyone paying attention to you?
Are you paying attention to how people feel about you?
Find another home
WHY? Are the two connected? Are the same people reading both?
So you suggest if there is a fire to only tell the person next to you and hope they relay the message? Not political, check. Not derogatory against anyone, check.
Relevant to the stock market. check.
GOT IT! YOU don't like to hear it. Only a trivial thing of a trillion dollar debacle. I guess I should have stuck to my sky is falling at start of Pandemic to one source.
Am i using up valuable resources? Can't read a half page because everyone is too important to bother with such nonsense? I am frankly baffled, and will always be baffled by the irrational behavior of most humans. All i know is i hope a person that can give me a heads up on bets and future path by plastering it all over so the chances i see it is greater. Is this not LOGICAL? if my words offend bypass it. I don't ask you to buy a book you despise, nor listen to what i have to say. Why would my small number of posts on a small volume blog be so damaging?
gdl
stop posting the same thing on this thread that you just posted on the CCI thread
Something is wrong when the Street reinterpreted Powell's speech today as POSITIVE. It seems they did hear him say rates will be stopped soon and even a reversal possible. Must have been under his breath. They all agree DISINFLATION is alive and well. So the dire mess we would be in because of bad bets by banks going forward will be relieved by a lower rate by the FED? They have on their books a Trillion dollars of property bets that have to be turned over before end of THIS YEAR! no wonder they are desperate.
Bank Turmoil Ramps Up Pressure for $900 Billion of ... Bloomberg
1 day ago — Given higher rates and an uncertain outlook, the number of commercial property deals dropped 51% in February from a year earlier to $26.9 ...
Should have waited for the real market at 3PM!
Bullish when we had a one day banking Crisis of epic proportions, when the Powell speech didn't give them the no rate hikes again speech? When the earnings picture is down right DISMALL and will have to, accept another quarter of really bad news. lets not forget that the quarter after this one is ALSO expected to be negative. What can go wrong?
Lets be clear. Everyone, i mean every single analysts, investor, economist sees one thing going forward and they are all in agreement. Never saw so much agreement. ALL say recession job losses and rate reduction is going to be here this year. this as we added 800K in 2 months, unemployment continues to get taken even lower, JOLTS at historic highs for a year now, Spike in January inflation and now February inflation looks no better. Housing anyone? I thought that was dead? not according to yesterdays existing home sales. Tomorrow we have new home sales. Wanna bet it also is higher than expected.
BTW the street wants reversal in rate hikes and history has shown EVERY TIME it was bad for stocks. Masocistic bunch.
I HOPE and PRAY we trudge higher from here because the DOW is looking like it is about to CRASH!
The Bears Are On Life Support And Hoping For A Fed Miracle
Tom Bowley | March 22, 2023 at 01:59 PM
http://stockcharts.com/articles/tradingplaces/2023/03/the-bears-are-on-life-support-203.html
"The end is at hand. Bears, just surrender now. Since the mid-June low (where I called the S&P 500 bottom), we've seen the fed funds rate jump from 1.00% to 4.75%. Of course, all we've heard since then is what?
Don't Fight The Fed
Well, since that first 75 basis point hike on June 16th, the S&P 500 is UP, not down. We've had four 75-basis point hikes, two 50-basis point hikes, and two 25-basis point hikes. In my opinion, all of it was built into stock prices at the June 2022 low. How else do you explain the significant rate hikes over the past year and an S&P 500 that is 10% higher than it was when the first 75-basis point rate hike was announced? Stop listening to CNBC and the media clowns and pay attention to those who actually do research - like EarningsBeats.com. 2022-2023 isn't the only period where we've seen a number of rate hikes coincide with stock market strength. Do you remember early 2016 when the market bottomed and then soared? That occurred during a period when the Federal Reserve raised rates 9 times:"
http://d.stockcharts.com/img/articles/2023/03/22/bcbdd84c-3f01-492c-ad2a-7bec7d7cc141.jpg
"This chart shows the "Effective" fed funds rate, which coincides with the direction of fed funds. Good thing we "fought the Fed" during that HUGE market rally. Ohhh! And what about the 2004-2006 period when the Fed raised rates at 17 consecutive meetings!?!?!?!?!?"
http://d.stockcharts.com/img/articles/2023/03/22/4e0d1fa4-46b7-4364-bbcf-4541b77b30aa.jpg
"Whatever you do, don't fight the Fed! (sarcasm)
I've actually had plenty of folks come up to me and ask how the stock market can go up when the Federal Reserve is so hawkish - that the stock market has NEVER gone up when the Fed is hiking rates. My response? Do some research and STOP listening to the media. Many authors writing articles have never done an ounce of research, but those headlines drive lots of interested viewers! Quite honestly, that's all that matters for most authors. Drive that viewership!
Market Rotation
Let me tell you what's been happening "under the surface" of the stock market. Actually, before I do, let me show you why I told everyone that a cyclical bear market was a real threat as we entered 2022 at all-time highs. A huge part of it was sentiment (and I'll get to that in a minute), but another big part was market rotation into defensive areas. As the S&P 500 printed its all-time high in January 2022, Wall Street was repositioning in those defensive areas. Lots of Monday morning quarterbacks will tell you how they pointed out the bear market. The problem is that most of them pointed out the bear market after it happened. What good does that do? I fired warning shots in December 2021. On the last day of that December, I wrote an article, "It Could Be A Very Rough Start To 2022". That was just one day before the all-time high was set. I've had dozens and dozens of emails and feedback from EarningsBeats.com members, indicating how much money they saved by exiting stocks at the beginning of 2022. And it was as simple as following a few key charts. Here was one of them:"
http://d.stockcharts.com/img/articles/2023/03/22/12ade5de-dc8f-4a9e-a3ea-d8a52f83b89d.jpg
"That red-dotted vertical line represented a MAJOR warning signal for stocks as the bulls' last gasp came after significant bearish market rotation took place. Let's see, should we follow the intermarket relationships or tune into CNBC? Those who used the former and avoided the latter did quite well in 2022.
But now the bulls are getting excited. Why? Because the intermarket relationships no longer favor the bears. Money is rotating quite bullishly into growth areas. Here's the same chart as the one above, but this time for the past six months:"
http://d.stockcharts.com/img/articles/2023/03/22/96a6919c-ac1d-4616-84d7-0f2bae4edad9.jpg
"The growth ratios I follow are all soaring. Wall Street is repositioning into growth and this has been occurring throughout 2023. Ask yourself why. For everyone that's now screaming "inverted yield curve" and "recession", why would money rotate so heavily into growth stocks. It doesn't make sense, and that's why you need to pay attention to it.
But market rotation isn't even the most bullish signal.
Sentiment
The equity-only put-call ratio ($CPCE) is my "go to" chart when I want to understand how retail traders feel about stocks. And when the 253-day (1 year) moving average of the CPCE begins to turn - and it doesn't happen often - you need to take note. Extreme readings, either to the upside or downside, can mark major stock market bottoms and tops, respectively. Here's how this chart looked on Saturday, January 8, 2022, at our 2022 MarketVision event:"
http://d.stockcharts.com/img/articles/2023/03/22/c1b213e3-fc36-460d-951a-825dca71ebf2.jpg
"The red arrows mark reversals in long-term downtrends. These are reversals off EXTREMELY bullish readings and sentiment indicators are contrarian indicators. They essentially tell you to "batten down the hatches" and grow much more defensive, or even think about shorting the stock market. The opposite is true when this 253-day moving average reaches a stop and begins to roll over. On the chart above, it doesn't appear as though we're quite ready to roll over, but I've used a User-Defined Index at StockCharts to track what I consider to be a much more reasonable CPCE. There were several outrageously-high daily readings in November and December of 2022, due to unusual hedging activities of institutions. They skewed the readings on the CPCE and needed some adjustment to more accurately reflect the true psyche of the retail trader. After making those adjustments, here's how my "adjusted" CPCE chart now looks:"
http://d.stockcharts.com/img/articles/2023/03/22/fd792b16-f98c-4257-8063-a695c7b57a64.jpg
The long-term 253-day moving average is just beginning to roll over and if you look above at the earlier CPCE chart, you'll see that when this rolls over, the S&P 500 begins to soar.
"If the stock market was chess, and I was on the bull side, then I've been calling "Check" for a few months now. I'm calling "Check" one last time. We're about to witness "CheckMATE". It's time to ditch your bearish thoughts. Stocks are about to scream higher. The Fed is our wild card short-term, but once the effects of this meeting dies down, stocks will soar.
If you'd like REAL research and facts and what truly drives the stock market, you need to join us at EarningsBeats.com. I'm never short on conviction. Even if you disagree with my views, I'll provide you interesting insight to make better investment decisions. If you think knowing that a bear market was coming before it ever arrived would have helped you in 2022, then I believe following us at EarningsBeats.com in 2023 during a massive rally will prove quite beneficial as well. CLICK HERE to get your FREE 30-day trial started!"
Happy trading!
Tom
SPX stops at or before the highlighted confluence. 4100 SPX
http://www.pretzelcharts.com/
"So here's something I don't get to say very often: The "passable impulse down" I mentioned last update was a bust, and SPX cleared the noted invalidation level (3965).
Price is still hugging the near-term channel I drew on March 17 -- for now, anyway, but bears probably need that to be a diagonal (approximated by the red and blue lines below) so it doesn't threaten a breakout. If it does break out, it may head toward the confluence shown on the third chart."
"Nothing like a near-term miss to get one thinking, so the NYA chart does mention the bull option (in passing -- for now, I'm not focusing on it):"
"SPX is in similar shoes to NYA. In a perfect world for bears, though, SPX stops at or before the highlighted confluence:"
"In conclusion, we do have five clear waves down (an impulse) in NYA, which means that unless that impulse is wave C of the noted expanded flat, it will be followed by another impulse down that is equal to or greater in length than the first. We cannot entirely rule out all bull options, but if this is the start of blue 3, that next impulse down will be a nested third wave and thus fairly brutal. Today is, of course, a Fed day, so watch your back out there, and trade safe."
Lawrence McMillan's weekly commentary
https://www.optionstrategist.com/blog/2023/03/weekly-stock-market-commentary-3172023?utm_source=Email+Updater&utm_campaign=25bae1c324-Weekly_Blog_Roundup10_1_2014&utm_medium=email&utm_term=0_2f928c56ef-25bae1c324-401767717&mc_cid=25bae1c324&mc_eid=4d62b38025
Home ›S&P 500 ›Weekly Stock Market Commentary 3/17/2023
Weekly Stock Market Commentary 3/17/2023
Posted on March 17, 2023 - 11:51am
By Lawrence G. McMillan
Stocks broke down early this past week, but found support in the same area as the late-December trading range. Specifically, $SPX broke down below 3930 and traded down into the 3760-3850 support area (the trading range from the end of last December). It found support there and bounced. There is still overhead resistance all the way through the zone from 4080 to 4200
At the lows, oversold conditions arose, and some are still in place, while others have morphed into buy signals. The current rally is merely back to the declining 20-day Moving Average of $SPX just a normal oversold rally.
Equity-only put-call ratios remain on sell signals. The weighted ratio (Figure 3) is just starting to move strongly up its chart, so that signal appears to have a ways to run. The standard ratio (Figure 2) is already in oversold territory near the top of its chart.
Breadth was extremely poor as $SPX traded down from March 6th through the 13th. That pushed the breadth oscillators, which were already on sell signals, down into deeply oversold territory. They remain in that state, since the two days of positive breadth since then has not been enough to drag them back onto buy signals.
For the first time in quite a while, $VIX has responded to a market selloff by exploding to the upside. As a result, a new "spike peak" buy signal has been established.
The increase in $VIX, though, did stop out the previous trend of $VIX buy signal, since $VIX closed above its 200-day Moving Average, which is at 24.00 and declining. At the current time, there is no trend of $VIX signal in either direction.
So, there are plenty of cross-currents right now. The $SPX chart is still bearish, in my opinion, as it is below resistance and below its declining 20-day Moving Average. On the other hand, we are seeing buy signals from certain trusted indicators so those can't be ignored. The one interesting bearish development that could occur would be for the 20-day MA of $VIX to cross above the 200-day MA. That's what happened last September and led to a sharp decline into the October lows. As usual, we will be trading these other confirmed signals around our "core" position.
"The key level for bears to hold for that potential first wave down to remain on the table is 3965."
http://www.pretzelcharts.com/
"Last update called attention to the fact that SPX had reached the upper boundary of its near-term red channel and mentioned that we might have three waves up off the 3808 low. SPX dropped lower from there, and has now formed a passable impulse down, potentially for all or part of wave i down. The key level for bears to hold for that potential first wave down to remain on the table is 3965."
"Big picture, nothing has changed, and blue (3) remains the leader unless/until the market tells us otherwise."
"Finally, a quick update of the gold chart, which we haven't looked at in quite some time. Gold has formed three waves down (the inverse implication of the near-term SPX chart -- three waves can mark a completed countertrend correction):"
"In conclusion, not much to add to the past few updates, except a reminder that if blue (3) is indeed underway, this market should start to get ugly over the next few weeks. Trade safe."
https://www.investing.com/news/stock-market-news/svb-uk-handed-out-over-15-million-pounds-in-bonuses-days-after-hsbc-rescue--sky-news-3033851
https://www.cnn.com/2023/03/18/politics/donald-trump-manhattan-da-arrest-protests/index.html
Business as usual. TRUMP is the banking crisis manifested 100 fold. he also JUST got reinstated on Facebook and YouTube. Coincidence? he already is calling voters to arms on his own silly site.
Recap: Stock Market nears all time highs after short term rates went from zero to 6% in a little over a year. Second Largest (so far) Bank failure in US History. First ex-president to be indicted and expectation is for at least 3 more separate indictments to come.
So what are the ODDS of the Human Race surviving against a Stock Market surviving? Unfortunately they both have the same odds. NG. Wait till the Trade Wars really get heated up! This will make the roaring 20's pale in comparison. I stated over 12 months ago that 2023 will see 40 to 50% haircut from it's highs. We are NOW assured of it! like determining a Pandemic is started in China and concluding Wall Street already factored in the result and was favorable to a bullish market. I remember this as a fact as I bet the crash and it went nowhere. No logic, no chart, no exact scenario in the past convinced investors that an OBVIOUS result will happen.
We are nearing a huge crash and huge spike moves denying the reality of the situation. i know with certainty this year will be bad. How bad? Really bad. There is NO scenario going forward that can support a good ending. NONE! Easy Money is GONE! Disinflation rise in assets and low costs is GONE! Paying the PIPER!
Surely you jest ...
Now for the weird thing that just came upon me ...
I just did a search on Morgan Stanley then, of course, I looked at the results that came up.
The very first thing that showed up at the top of the results page:
"Results for Livermore, CA 94550 · Choose area"
Then below that was a list of things that related to Morgan Stanley.
That is totally weird. That town is where I bought my first house well over 50 years ago, and that house was initially (temporarily) financed through the builder's bank, then eventually through my wife's bank (whatever that was, I have no clue). Soon after that we moved to Minnesota. All of that happened within about two years (a very long time ago).
Seems to be a SET UP! IF we drop before the announcement that quarter point should help rally this sucker. I expect a down market right before the announcement. How down? Maybe 3720 area.
If on the other hand we actually hold today in a shallow drop (3930?) Monday and Tuesday might be yet another move higher.
Near the close today should be the TELL. On daily chart we have a distinct 3 wave move off of 3/13 low (3850). An overlap down, below 3920, should indicate this is only a 3 wave move. If we manage to hold above that than Monday could be a nice rally.
In other words, what the F? Can't tell when the next decent reversal happens yet. Maybe it becomes clear by close today.
"...the bad news is that there suddenly seem to be a lot of banks that need propping up,"
http://www.pretzelcharts.com/
"Since last update, the rumor began to float that several large banks (including JP Morgan, Morgan Stanley, Morgan Freeman, Morgan Morgan & Morgan, and The Bank Without a Morgan) might team up and, just when they were needed the most, prop up the Federal Reserve. This led to a significant bounce, and SPX rallied 100 points on the thought that maybe we wouldn't have to listen to Powell say "tools" ever again.
Of course, the bad news is that there suddenly seem to be a lot of banks that need propping up, but let's not talk about... hey look, a squirrel!
Chart-wise, the near-term suggests we might have three waves up off the 3808 low, but it could support one more wave beyond yesterday's high and remain a three. It might be easier to watch the red channel than to try to nail down the exact near-term count. If the current rally is a simple C-wave up from 3838, then it already tagged the upper red boundary, but is also allowed to overthrow it a bit if it wants."
"Big picture, not much to add to the past few updates. Red 2 is not invalidated yet, so we can't entirely ignore it as an option, and it stays on the chart for now:"
"In conclusion, not much else to add to the past few updates. Trade safe."
Turning on a dime ...
I liked what NCLH was doing during the day today, so I squeezed in Buy/Write trades (this week's expiration) in both my accounts before EOD trading today. That brought in cash; then wash/rinse and sell more Calls early next week.
Waiting for GODOT!
Yes I read a lot of the SC guru's stuff over the weekend...Sur a lot of stuff to try and keep up with..I'm too old and tired to stay up to date on all the guru's..So I depend on people like you to help keep going..Thank you for your Ewave stuff and all other stuff.
I see so many wedge patterns on 1 to 5 hour charts, 5 wave or 3 wave completed, and continued news on a bank contagion finding ways to make it a POSITIVE? Hey if a nuclear bomb wipes out 9/10th of the population we can have zero rates forever! Overlap at 3950 which I suspect will not be able to close at or above.
Best guess is a drop to 3750-3720 area before the Fed Announcement! It would till be very controlled and predictable. As for today, this would be the third day on the upside. all but one finished the upside before resuming a deeper drop.
NEVER saw a recovery and continued bullish move on more banks in trouble and more bailouts. Markets and people will believe anything as long as it is positive. The SPIN ZONE!
Have to bet by close. Itching to bet.
With that logic a Pandemic in China is a known factor and the street concluded it can handle it in a bull market. that was the consensus. So bad news is good news? Bank run means less lending and lower yields? the silly notion that this so called transitory inflation is due to supply constraints? really? how about the SURGE of 800K in 2 months with JOBS. How about the 10.5 MILLION want ads unfilled. how about the third consecutive month of housing demand, permits surged in February. Economics 101 - what is the top factors that causes inflation. Time is up!
We see what we want. A car salesman never ever tells you to come back when deals are better. BTW a PUASE? This when the ECB raised by 50 basis points AFTER the bank debacle?
the world is delusional and refuse to use common sense and a little bit of analytical projection. What the bank crisis just did is guarantee a disaster dead ahead. Inflation either gets stopped or stalled by the FED or it is run-a-way time and yields will jump regardless of the FED. Pay me now or later.
No one even bothered to understand the absurdity of a banking crisis at these levels? OUCH! never had this before, a first! You do know historically the fed Funds is at the AVERAGE RATE now. No, not even close to where it can go.
Now for a Bullish take, pending FED pausing.
Technology Resets PPO, Now Rolling; Fed Should Pause
Tom Bowley | March 16, 2023 at 12:34 PM
http://stockcharts.com/articles/tradingplaces/2023/03/technology-resets-ppo-now-roll-832.html
"I remain extremely bullish stocks the balance of 2023 and into 204, but I've been a little short-term cautious the overall market since mid-February, but bullish signals are beginning to emerge once again. The most important sector, in my opinion, is technology (XLK). This sector reeks of aggressiveness and rapid growth. It generally needs a strong or strengthening economy, however, to trigger the group. A favorable interest rate environment helps as well. It was just one month ago that the XLK had fired a technical warning shot as a negative divergence appeared on its daily chart. That typically takes 1-3 weeks to iron out with potential 50-day SMA and PPO centerline tests awaiting. We've now seen both of these and it's 4 weeks later. Check out the chart currently:"
http://d.stockcharts.com/img/articles/2023/03/16/1ca95928-1b24-41a9-a1e6-33383c8bb3ea.jpg
"The recent bank crisis is doing the Fed a big favor. The Fed has been raising rates trying to control inflation. However, this inflation was induced primarily by inadequate supply/supply chain issues. Raising rates does little to increase supply. Instead, the Fed's game plan has been to try to kill demand. In the process, we're seeing a bit of collateral damage in the banking group. As banks falter, their ability and willingness to lend diminishes. If banks limit lending, even temporarily, economic growth will slow or stall. This short-term crisis will help the Fed achieve its goals. In my opinion, it's time for the Fed to pause and the bond market agrees. Long-term treasury investors take a number of things into account before deciding whether to buy or sell. One key factor is inflationary expectations. The rapidly-falling 10-year treasury yield ($TNX) is not only suggesting that inflation problems and worries have eased considerably, but these lower rates are now beginning to fuel the growth story.
Do you think we're heading for a nasty economic meltdown? Then please explain why Wall Street is driving growth stocks to the moon right now?"
http://d.stockcharts.com/img/articles/2023/03/16/c6c4e2aa-4851-4b21-9257-d781f8c1aea3.jpg
"As the media has a blast with yet another negative news story and panic sends more retail traders to the sidelines, Wall Street has been buying growth stocks hand over fist! You don't position into growth ahead of an economic storm. Folks, I listen to the charts, not the lips, when I analyze the stock market. Let the naysayers say what they want, this market is poised to move higher.
In tomorrow's EB Digest, our FREE newsletter, I'll provide one of my favorite technology stocks, one that I expect to soar heading into its next earnings report. To subscribe, simply CLICK HERE to enter your name and email address. There's no credit card required and you may unsubscribe at any time."
Happy trading!
Tom
Skipping over all political statements,
I'm more interested in Pretzel Logic's view of the market:
Therefore, as of yesterday, March 15, PL's opinion:
"Since last update, SPX captured its 3820-45 target (from March 8), exceeded it by about 10 points, then bounced. That's potentially 3 waves up off the 3808 low (to 3937), so bears can take it back below 3808 from here if they want.
Given where we are in the big picture, this market is very possibly hanging by a thread, so countertrend trading (i.e.- bullish trades) should be kept on a very tight leash unless and until there are more bull signals. The most bearish case is that we've already entered Blue 3 -- and frankly, there's nothing currently in the charts to suggest otherwise. That can, of course, always change tomorrow, but this is what's in front of us right now."
http://www.pretzelcharts.com/
My position? I don't like to trade bear markets as one of their characteristics is that they are always too volatile and it's too easy to make the wrong trade (AKA getting myself caught in the bear trap), therefore I am 100% cash and sitting on my hands until a new bull market is confirmed (and I don't care how long that takes).
Why? Because It's Really Important
http://www.pretzelcharts.com/
"Before I start, I'd like to clarify something about Monday's update: When I said that SVB's collapse can be laid at the feet of the Fed, I didn't mean to imply (by omission) that SVB management is entirely blameless. Of course SVB's missteps also played a role. I felt that was self-evident, so my point was that when the Fed fills a room with gasoline, you don't solely blame the guy who struck the match when the whole place goes up in flames.
You blame them both. Because both parties acted irresponsibly. And, in this case (and most cases that are still to come) you can't have one party blow up without the other party setting the stage.
Before we forget... the stage, as set by our leaders, was:
The Fed kept rates too low for too long, which created numerous asset bubbles
The Fed pumped $8 trillion of QE into the market, which created numerous asset bubbles
The Fed and Federal Government flooded the economy with stimulus, thereby diluting the value of existing dollars and contributing to inflation
Both the Fed and the government failed to even foresee the looming inflation (remember "it's just transitory"?)
They failed to foresee it because they operate from a flawed philosophy (Keynesianism)
They then had to abruptly stop the free money party and reverse course.
Five years ago, I warned about all this. Warned that the Fed was distorting the market and sending false signals to the economy, which would naturally drive businesses into unsustainable excesses (often through no fault of their own), which in turn meant that when the Fed finally stopped, collapses would be inevitable. Five years ago, I argued that. As I wrote then:
And through all that, we've learned this: The problems never seem to come while the Fed is running the pumps; the problems come afterwards. Everything booms when the cheap money is flowing -- but this "false boom" is, in fact, exactly what plants the seeds for the future bust. It seems to be an endless cycle of the current Keynesian economic policies.
So no, it wasn't "deregulation" (as some are now claiming) that set the stage -- otherwise, how could I have seen it coming before that deregulation even happened? The stage is much more complex than that. In fact, the complexity of the environment is exactly what makes simplistic one-word narratives ("deregulation!" etc.) so appealing for our leaders to deploy against a population that doesn't have the time to dig deeper.
For Monday's piece, I chose to focus on the role of the Fed/gov't instead of SVB because (in theory, anyway) we're supposed to be able to course-correct our own government. (Though many of us feel this is an increasingly futile effort.)
I wanted to clarify that -- but please bear with me a moment longer, because I believe this is important.
Last update predicted:
So ultimately, [SVB] is yet another collapse that can be laid at the doorstep of the core Keynesian philosophy (top-down central "management" of the economy) that has long captivated and motivated the leaders of our institutions. As the trouble snowballs, you'd better believe they will not want to take the blame for any of it -- so the history-rewrites and propaganda will start any minute, if they haven't already.
That prediction has, unfortunately, since come to pass. Because luckily for America, the Fed and the government have never ever made mistakes or mismanaged the economy, and thus not one single problem has ever been their fault. Quite the opposite, as it turns out! The fault, we're always told, is actually that those entities were given too little control.
Kind of a win-win for the powers that be, when you think about it. Even when they monumentally screw things up, they simply point the finger elsewhere and claim it's because what they really needed was even more power to screw things up.
You may be under the impression that I'm beating a dead horse here -- I am not. I was around before, during, and after the 2008 crash. In 2008, I diagnosed the problems before the crash happened (as did many others), then carefully observed those problems catastrophically unwind in real-time... and then watched the Fed and our government tap-dance right out of taking any significant blame for the bubbles and problems they themselves created.
And this is exactly why we're doing it all over again.
Because no real accountability ever occurred, since most of the public remained blissfully unaware, and hence no lessons were ever learned, and no core changes were ever made. And that was only possible because the general public was effectively duped into believing it was 100% the fault of everyone BUT the Fed/gov't. So, when the 2008 crash was all over, we passed banking laws that addressed the symptoms but completely ignored the disease.
I'm going to try to do my part to help keep people from falling for it again this time around. If we want to have any hope of rebuilding on solid ground, then we'd damn well better learn the real, and painful, lessons this time. Not the false "lessons" they spoon-feed us.
Speaking of, let's quickly glance at a few "charts," to see how Monday's prediction of "immediate blame-shifting propaganda incoming" fared:"
"And that's just a smattering of the propaganda that's been rolled out since I published on Monday. I could have posted a dozen more.
So why did I say this was "important"?
Well, given that we seem to be going down this road for the second time in only 15 years, as I see it: We cannot afford to fall for the false narratives again, or this path will be repeated forever.
Of course, that's assuming we even make it back this time. And I'm not 100% certain we will.
Trade safe."
I have a setup for the next 4 trading days BUT it needs to follow a script that is very defined over close today and tomorrow.
3720 is the target I see now on March 21. IF that were to occur I am expecting a HUGE spike up of some 400 SPX points in days.
Have no idea if it violates the EW rules but this scenario is looming large right now.
"....this is market is very possibly hanging by a thread, so countertrend trading (i.e.- bullish trades) should be kept on a very tight leash unless and until there are more bull signals."
http://www.pretzelcharts.com/
"Since last update, SPX captured its 3820-45 target (from March 8), exceeded it by about 10 points, then bounced. That's potentially 3 waves up off the 3808 low (to 3937), so bears can take it back below 3808 from here if they want.
Given where we are in the big picture, this is market is very possibly hanging by a thread, so countertrend trading (i.e.- bullish trades) should be kept on a very tight leash unless and until there are more bull signals. The most bearish case is that we've already entered Blue 2 -- and frankly, there's nothing currently in the charts to suggest otherwise. That can, of course, always change tomorrow, but this is what's in front of us right now."
"Probably the front-runner for the "bull" options (not long-term bullish) would be the expanded flat discussed on March 1:"
"One can at least envision a world where the Fed announces at its upcoming meeting it's going to pause rate hikes and the market gets excited, leading to the option above.
NYA has continued to track SPX:"
"And finally, we haven't update BKX in a while, but it has confirmed my long-term bearish outlook and finally officially captured its 90 target from way back on May 1, 2022 (bottommost annotation). Also, I'm getting flashbacks to the 2008 bear, where BKX often led the way down:"
"In conclusion, we can come up with a scenario where BKX completes the blue 5 potential and SPX runs the expanded flat (2nd chart), but those are best-case bull scenarios, and the worst-case bear scenario is a third wave waterfall lower that erases 1400-1500 points from SPX's current levels. In both cases, the long-term outlook remains bearish, as it has for over a year now. Trade safe.
(Incidentally, I published another piece earlier this morning: Why? Because It's Really Important)"
https://www.reuters.com/article/us-usa-trump-fed/trump-to-nominate-quarles-to-be-feds-top-banking-regulator-idUSKBN19V2U5
YUP the regulators. Didn't MOODY's the most dysfunctional entity on the planet JUST announce a negative report on many banks with DOWNGRADES? What timing. Like having a fire truck come to a home already in ashes.
The really worse part is the CEO and many officers of SVB cashed in millions before the collapse, was on the San Francisco Fed Reserve Board.
Now for the really scariest part of them all. I warned using Common Sense when i stated weeks ago that the mindset of all is ingrained in the last 40 years of disinflation. it still is! proof is in the current assumption by everyone that inflation will not be a problem past this summer. I mean EVERYONE agrees to this? WHY? What do they know?
So with that mindset this problem goes away soon. Not a single analyst or scholar has projected no way a 6% Fed Funds rate will ever hit again. If they are wrong compound the current situation 100 fold.
And most see a BULL MARKET lasting another decade or more. The news on all fronts are so incredible and scary in politics and economy over these last debacles we become immune to it and declare the FED is our savior till it goes wrong and we use them as scapegoats.
I will repeat my many claims for 2023. it will go down 40 to 50% this year alone.
Banks this and that ...
I'm a retired electronics engineer that focused on wireless communication technology (because I'm curious about things invisible), but I took a couple elective college courses in economics and banking while in college and developed the belief that there are more than enough regulations and regulators and computers that know everything, and have all the data they need, such that if current regulations are followed then that would guarantee a robust banking system that could not fail.
With that in mind, when a bank fails I would blame the regulators and not the bank itself. So I'm thinking that a good number of regulators (government employees) are spending too much time going to parties. I know for a fact that all bank activities during each working day are transmitted to its assigned regional federal bank overnight. So there is no excuse for regulators not having sufficient data to complete any of their assignments.
While I was still working as an electronics engineer a technician and I had to go to Washington DC to talk to some standards group about wireless communications standards and regulations. During the evening we went to some of the local bars. That's were we found a good number of our public officials getting drunk as a skunk. That state of mind probably interferes with their regulating, and that might be where they cook up some of their excuses.
clarify misconceptions. ONE the FED is not waiting to reverse course and is NOT late to do so. in fact it is BEHIND the CURVE on inflation. TWO the Bank debacle was predictable and I predicted it weeks ago. it was a result of two factor, one being that 40 years of disinflation created a mindset for future investing, and two the rules and regulations that would have prevented this was disbanded in 2018, the height of TRUMPISM. It's called a repeat of the roaring 20's from new Paradigm to total collapse in the blink of an eye historically.
How do i know these things? Based on historical patterns and glaring truths. JOBS market on FIRE! Inflation pressure not letting up. 40 years of disinflation and expecting a continued new paradigm where disinflation lasts forever? Environment of extremes in greed and complacency. From housing debacle to Crypto to Bank failures. Stripping RULES and Regulation in place since the last great depression is because we are now back to the same place we were 100 years ago. My proof? look no further than a pandemic that was seen, had a past history, past charts and known scientific certainty on it's deadliness. How long did the market hold up? I mean in a BULLISH mode. Hello, anyone home.
Now we rally from really bad news. WHY? because human nature finds excuses to view all things, no matter how bleak in positive light. TWO opposing reasons to rally on two asset classes and they both do so together? Stocks and Crypto. Now you know that BIAS, extreme bias, is always used to justify an optimistic outcome. THATS THE ADVANTAGE individuals have at these times. Understanding the irrational behavior and reacting ahead of the behemoth slow witted stock market.
Pretzel :
(1) Pretzel presents both a Bull and Bear case.
(2) Pretzel gives both Triggers and Targets
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