Consider the Long-Term Chart
Updated
I'm not going to call if the bottom is in or "not so fast" but just want to point out that we may only be halfway through a significant long-term downturn. It's concerning to me that RSI has broken significantly below 50 for the first time since the market recovered from the lows in early 2009. It's also concerning that price looks like it wants to retest the 50-mo. EMA after seemingly finding support a couple months ago. There's still considerable downside risk to the 200-mo. EMA where it has found long-term support in the past and it also happens to currently line up with a double bottom with the covid panic low from early 2020. Will it go down to the 200-mo EMA now? I'm not sure, I'm just saying that it could and you need to be prepared for that. I do know that if it continues to drop it would be a blood bath down at those levels and also a great long-term buying opportunity in my opinion (it could find support above, at or below the 200-mo EMA and an interesting level would be the top from the tech bubble around 2000 which lines up with a period of sideways consolidation from 2015-2016.
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Price has pretty much retested the 50-mo. EMA (technically not quite but close enough). Support could end up holding at the 50-mo. EMA but retesting is not a good sign. Usually if it's going to head higher it doesn't spend much time around the 50-mo. EMA, support tends to hold very quickly and doesn't give another chance to get in. I think it's more likely at this point that it heads toward the 200-mo. EMA but time will tell.Note
This month's close is obviously not looking good, closing near the low from mid-June and considerably lower than the 50-mo. EMA (in June it rallied near the end of the month to close very close to the 50-mo. EMA). It hasn't quite broken the low from June yet, so at least it still has that going for it I guess.. 🤷♂️Note
S&P 500 is testing it's 50-mo. EMA after finding support just above it in June.And the Dow looks like it is breaking down.
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The Nasdaq Composite Index remains below its 50-mo. EMA while the Dow Jones Industrial Average had a strong reversal candle this month seemingly finding support from just below its 50-mo. EMA and the S&P 500 Index has also bounced from its 50-mo EMA. Not sure which will win out in the end, will the strength of value support things or the will the weakness in growth continue to drag things down.. OR will we actually see some divergence between these indexes for once (Nasdaq continues to fall and Dow rises, that would be pretty amazing!)? Time will tell as it always does, I'm just stating what I see as it happens, I'm not an insider and can't tell you which way it's going to go (don't know all the "news" stories that are going to be released coming up).Note
It appears that the Dow and S&P 500 have bottomed as both followed through with more gains this month. Nasdaq may have also bottomed and found support after retesting the 50-mo. EMA but it's not nearly as decisive as the Dow and S&P. It all really depends on the Fed. The market has been rallying for the past couple months now on the anticipation that there would be an easing in the pace of interest rate hikes. Confirmation of that today provided another rally. If inflation starts to pick up again, causing the Fed to hike rates more aggressively again, then markets will probably head lower.Note
Bad month to end the year for all of the major U.S. stock indexes. The Nasdaq is back below the 50-mo. EMA. The S&P 500 looks like it wants to retest the 50-mo. EMA (not a good sign). The Dow looks strongest of the 3 and pulled back somewhat from a strong 2-month move (after looking like it was about to absolutely break down on the monthly chart). So far 40 RSI is holding on the monthly chart of the Nasdaq. My guess is that will eventually break down and head into oversold territory sometime in 2023 which should coincide with a test of the 200-mo. EMA which would be a great place for long-term buying. Although it's likely that the next bull market won't be as strong as this last one was, perhaps it'll be similar to the one experienced after the tech 2000 tech bubble. Anyway, just me thinking out loud.Note
What a difference a month makes, the major U.S. stock indexes look like they've confirmed that the bottom is in, again.. I think it still all depends on inflation, if it starts to increase again prompting more aggressive moves from the Fed, things could reverse pretty quickly. I have some money set aside in case that happens but I wouldn't bet against the stock market long-term. It still seems odd how long the Nasdaq in particular stayed near its 50-mo. EMA (much longer than it normally does) and its RSI dropping below 50 for a while after finding support around 50 every time for over a decade. That still is a warning sign to me but like I said, I wouldn't bet against the market but would have some dollars ready in case it still does drop to the 200-mo. EMA.
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