Your "bull market" thesis does not add up
Updated
Last summer, we explained how a recession in earnings would confirm the market’s progression into the second stage of the bear market (with the release of corporate earnings for 3Q22 and 4Q22). Furthermore, once major U.S. indices hit lows in October 2022, we warned that stocks and cryptocurrencies were experiencing merely another bear market rally, deceiving the majority of market participants into believing that the primary trend reversal (from bearish to bullish) was taking place. As a result, many popular profiles on TradingView were eager to forecast the bottom and parabolic rallies. Opinions of no pullbacks and “once in a lifetime opportunity to go long” emerged relatively quickly. However, these opinions were pushed forward mainly by people who failed to acknowledge the downtrend for over a year, predicting the market bottom every other week.
We warned about all these developments while highlighting changes in sentiment among investors. In fact, we explicitly said that market participants were looking for any type of excuse for the market to rally (looking for FED’s pivot first and then finding the excuse in the strong labor market). However, it is becoming increasingly apparent that the bull market thesis does not add up with the FED’s hawkish stance (and its commitment to keep raising interest rates).
That is no surprise to us since we recently noted that high hopes of market participants would lead to a repricing event, smashing investors’ optimism (once they find out there will be no reversal in monetary policy). Overall, market developments continue to unravel in line with our previous expectations, and therefore we have no reason to change our bearish stance on the U.S. market. Accordingly, we maintain the price target for SPX at $3 400.
Illustration 1.01
Illustration 1.01 displays the market's negative reaction to Jerome Powell’s hawkish remarks (during yesterday’s testimony to U.S. Congress) on the 1-minute chart.
Technical analysis
Daily time frame = Bearish
Weekly time frame = Neutral
Illustration 1.02
Illustration 1.02 shows the daily chart of SPX. On 28th February 2023, we warned that too many consecutive down days in SPX were making a good case for a rebound. However, we also said that we did not expect this to impact the primary bearish trend. Interestingly, the market followed suit, and SPX (temporarily) rallied above the 20-day SMA, which acts as a resistance. To further support our bearish thesis, we would like to see the price fall below Support 1.
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 warned about all these developments while highlighting changes in sentiment among investors. In fact, we explicitly said that market participants were looking for any type of excuse for the market to rally (looking for FED’s pivot first and then finding the excuse in the strong labor market). However, it is becoming increasingly apparent that the bull market thesis does not add up with the FED’s hawkish stance (and its commitment to keep raising interest rates).
That is no surprise to us since we recently noted that high hopes of market participants would lead to a repricing event, smashing investors’ optimism (once they find out there will be no reversal in monetary policy). Overall, market developments continue to unravel in line with our previous expectations, and therefore we have no reason to change our bearish stance on the U.S. market. Accordingly, we maintain the price target for SPX at $3 400.
Illustration 1.01
Illustration 1.01 displays the market's negative reaction to Jerome Powell’s hawkish remarks (during yesterday’s testimony to U.S. Congress) on the 1-minute chart.
Technical analysis
Daily time frame = Bearish
Weekly time frame = Neutral
Illustration 1.02
Illustration 1.02 shows the daily chart of SPX. On 28th February 2023, we warned that too many consecutive down days in SPX were making a good case for a rebound. However, we also said that we did not expect this to impact the primary bearish trend. Interestingly, the market followed suit, and SPX (temporarily) rallied above the 20-day SMA, which acts as a resistance. To further support our bearish thesis, we would like to see the price fall below Support 1.
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.
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