No man's land?
Updated
Over the past few months, many people continued to argue that the bull market has begun and much more upside awaits us. However, since SPX’s lows in mid-October 2022, the market remained relatively choppy for the entire period. In fact, the SPX’s current level is the same as that between mid-November 2022 to mid-December 2022, putting the valuation where it was about four months ago. Throughout the relevant period, it seems the market always found resistance between $4 000 and $4 200, which for the most part, coincided with the release of some bearish data, causing a temporary drop that got quickly absorbed by the market.
We already outlined in previous articles how this could be a result of a beaten-up market looking for any excuse to rally after a terrible performance in 2022. Right now, SPX is again in this magical area that has acted as a strong resistance until now. Therefore, we will pay attention to SPX’s behavior within this zone, with a focus on today’s release of economic data in the U.S. that includes initial jobless claims, continuing jobless claims, GDP sales, GDP Price Index, GDP growth rate, PCE prices, Core PCE prices, real consumer spending, and corporate profits.
We will also pay close attention to technical indicators like RSI, MACD, and Stochastic on the daily chart. If MACD breaks above the mid-point, it will be bullish for the short term. Likewise, if RSI and Stochastic rise further, it will also be bullish. In particular, with the RSI, we will also observe its ability to peak (if the market heads higher). In bear markets, it is more common for it to peak below 70 points (or trend sideways below this level before breaking down).
In general, we would say there is a lot of uncertainty among investors, which will likely translate to more choppiness for the market in the short and medium term (until more economic data reflects severe economic problems on various fronts and something snaps). With that said, our outlook beyond the short-term and medium-term fluctuations does not change; we still expect the recession to progress further and eventually start manifesting in a weak stock market, dragging it to new lows.
Illustration 1.01
Illustration 1.01 displays the daily chart of SPX and ES1! with RSI below them. It can be easily spotted how RSI managed to break above 70 points only once during 2022. The SPX is approximately up 15% from its October 2022 low while being down about the same margin from its peak in January 2022.
Technical analysis gauge
Daily time frame = Slightly bullish (Weak trend)
Weekly time frame = Neutral
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
We already outlined in previous articles how this could be a result of a beaten-up market looking for any excuse to rally after a terrible performance in 2022. Right now, SPX is again in this magical area that has acted as a strong resistance until now. Therefore, we will pay attention to SPX’s behavior within this zone, with a focus on today’s release of economic data in the U.S. that includes initial jobless claims, continuing jobless claims, GDP sales, GDP Price Index, GDP growth rate, PCE prices, Core PCE prices, real consumer spending, and corporate profits.
We will also pay close attention to technical indicators like RSI, MACD, and Stochastic on the daily chart. If MACD breaks above the mid-point, it will be bullish for the short term. Likewise, if RSI and Stochastic rise further, it will also be bullish. In particular, with the RSI, we will also observe its ability to peak (if the market heads higher). In bear markets, it is more common for it to peak below 70 points (or trend sideways below this level before breaking down).
In general, we would say there is a lot of uncertainty among investors, which will likely translate to more choppiness for the market in the short and medium term (until more economic data reflects severe economic problems on various fronts and something snaps). With that said, our outlook beyond the short-term and medium-term fluctuations does not change; we still expect the recession to progress further and eventually start manifesting in a weak stock market, dragging it to new lows.
Illustration 1.01
Illustration 1.01 displays the daily chart of SPX and ES1! with RSI below them. It can be easily spotted how RSI managed to break above 70 points only once during 2022. The SPX is approximately up 15% from its October 2022 low while being down about the same margin from its peak in January 2022.
Technical analysis gauge
Daily time frame = Slightly bullish (Weak trend)
Weekly time frame = Neutral
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Trade active
Declining volume accompanies the rise in SPX, raising our concern over the sustainability of the current rally. We will pay close attention to volume-price developments in the following days. 
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