Market Timing 07 (Nov 22 - Dec 25)

[winston]

The Odds Favor the Bulls Making Another Run Higher

by Jeff Clark

Investor sentiment is a contrary indicator. So, with just about everyone lining up on the bearish side of the ball, the odds favor the bulls making another run higher.

The market needs to rally enough to shake the bears out of their short positions and force reluctant bulls back into the market. Then, once everyone is positioned on the long side of the market again, the bear can take another swipe.

There are plenty of warning signs – like the fact that it’s only a handful of names that have been powering the market higher and high yield bonds are diverging from the action.

But, if we’re being completely objective and looking only at the chart pattern… the setup looks bullish for another run higher – perhaps to the 4300 resistance level.

Source: Jeff Clark Trader

https://dailytradealert.com/2023/06/03/ ... un-higher/

[behappyalways]

Charts of the Week

We had very strong data from the labor market, whether it was JOLTS, ADP Employment or non-farm payrolls.

We also saw stronger than expected CB Consumer Confidence. But we also observed unemployment rising and the household survey show a slew of job losses.

In the markets we saw the divergence between QQQ and TLT grow to some of the widest levels I’ve seen.

Is the correlation breaking down or are we going to snap back like a stretched rubber band? Time will tell. But tech does appear to be getting a bit stretched.

https://www.macrovisor.com/p/charts-of- ... tter&sd=pf

[winston]

Based on History, the Current Stock Rally Should Continue

by Brett Eversole

Looking at the COT , the pros were bearish to start the year. And they’ve doubled down as stocks have rallied.

If you want to be a successful investor, you’ve got to check your ego at the door. You’ve got to admit when you got an idea wrong – or at least, when you got the timing wrong. And you’ve got to cut your losses and move on.

Understanding this is how most investment professionals become pros in the first place. But even the big players aren’t immune to ego-driven mistakes, as we can see right now.

The easiest way to avoid the problem is to use stop losses on every investment you make. One simple option is a 25% trailing stop. If a stock falls 25% or more below its highest level since you’ve owned it, you sell.

Source: DailyWealth.com

https://dailytradealert.com/2023/06/06/ ... -continue/

[winston]

S&P 500 Nears Potential Top Out

By Avi Gilburt

I am not quite as confident that a bull market has begun.

With emotion now seemingly turning quite bullish, I am going to ask you to strongly consider how much risk you want to take as we look toward the next few months.

You see, in my primary perspective in the SPX, the market is likely going to complete a rally structure over the coming weeks.

Should the market begin a decline in an impulsive fashion after we complete this rally, we may be starting a decline that can point us down to the 2700-2900SPX region.

If the market is able to decline in a corrective fashion, then I would be looking up next to the 4500-4600SPX region, with the potential to even rally up to the 5000+ region over the coming year or two.

The S&P 500 has been rallying in a very corrective-looking fashion and strongly supports the potential that we will likely be topping in the coming weeks. Yet, there are some charts that suggest we can go much higher, such as the DOW and a few other charts.

Source: investing.com

https://www.investing.com/analysis/sp-5 ... s_headline

[winston]

A new bull market in stocks won't take off until 3 key factors improve, RBA says

by Jennifer Sor

The firm pointed to the importance of profits, liquidity, and sentiment when evaluating bull markets.

Stocks won't begin a bullish trajectory until at least one of those factors improves, the firm added.

"Ultimately, rallies need fundamentals in order to bloom into bull markets."

Even a mild recession could have the market tumbling 15%, according to JPMorgan strategists.

Source: Business Insider

https://finance.yahoo.com/news/bull-mar ... 03051.html

[winston]

Analysis-Fading risks, fear of missing out may fuel US stocks after near 20% rally

by Lewis Krauskopf

Signs of strength in the economy, relief over a deal to raise the U.S. debt ceiling and an interest rate hiking cycle that may be nearing its end have heartened investors.

Cash on the sidelines is plentiful: U.S. money market fund assets hit a new record of $5.8 trillion last month, while cash levels among global fund managers remain high relative to history.

"Further strength might beget further strength because of the FOMO factor".

Source: Reuters

https://finance.yahoo.com/news/analysis ... 37585.html

[winston]

5 Reasons to Get More Defensive Now

The potential for a correction appears to be on the rise.

By GUY ORTMANN

Notable apparent rotation out of the mega-caps into the mid-and small-cap issues Wednesday.

Indexes Close Mixed Due to Rotation

Some Data Suggest Getting More Defensive

While the charts and breadth look good, there are several issues noted above that suggest to us that a more defensive posture is now appropriate as the potential for a correction appears to be on the rise.

Source: The Street

https://realmoney.thestreet.com/markets ... m_content=

[winston]

Stocks Could Jump 15% Over the Next Year

by Brett Eversole

The S&P 500 had a positive 12-month return at the end of April. That alone isn’t special… Rather, it’s the fact that this was the first positive return in a year.

Stocks consistently showed a negative trailing 12-month return from the end of April 2022 through March 2023. But that turned positive in April and May of this year.

It’s darn rare to see a year or more of losses based on this measure. Similar streaks have only happened eight other times since 1950.

Here’s what matters, though… Once this kind of streak ends, the trend is up.

Stocks have been losing money since 2022. But the losing streak recently ended. That’s just one more reason we want to stay bullish and own stocks right now.

Source: DailyWealth.com

https://dailytradealert.com/2023/06/09/ ... next-year/

[behappyalways]

Charts of the Week

1. Largest volume in IWM calls (Russell 2000) ever recently, and a day after that the surge in small caps continued, only to be unwound on Thursday and today.

2. Largest call volume in SPX ever, as 0DTE options traders have become meaningful market participants, accounting for nearly half of all SPX options trading volume.

3. The CBOE put/call ratio also ended the week last week at the lowest level we had seen since early March of 2020.

4. Global liquidity has been ample over 2023. We’ve certainly seen markets rejoice as balance sheets of the Bank of Japan, Bank of China, and even the Fed have expanded.

5. As we see a large amount of US Treasury issuance and other factors, such as tightening credit conditions, we’re likely to also see liquidity fall by about $1 trillion, according to BofA.

6. Tech saw the largest monthly inflows during May since February of 2021, another area worth reflecting on as that was around the time we saw a lot of smaller cap names peak, and market breadth began to narrow further and further throughout 2021.

7. This time there isn’t much roo
m for breadth to narrow further.

8. Last week, we also saw the largest inflow in to tech stocks ever, on top of one of the largest monthly outflows.

9. We can see that the year-to-date returns have been somewhat constrained. If we look at the “magnificent 7” of META, AMZN, AAPL, MSFT, GOOGL, TSLA, and NVDA, then the return on that basket is 54% year-to-date! But the broader market only returned 12% in comparison, and if we net out those companies, the remaining 493 S&P 500 components would only return a paltry 2%.

10. 2023 has been the third best year ever for buy-the-dip strategies. 2021 was the best year on record. 2022 was not a good year for this strategy.

11. Next week we have $296B of Treasury issuance coming in, which is significant and may begin to have a drag impact on market liquidity dynamics.

12. The National Association of Active Investment Managers (NAAIM) survey rose to over 90, which is the highest level we’ve seen since early 2022.

13. With regards to inflation, global supply-chain pressures are continuing to ease.

14. Export data from China, Korea, Taiwan, and elsewhere, that we’re seeing a very sluggish global economy.

15. The Deutsche Bank recession probability indicator has risen to near 100% over the next 12 months, meaning that the indicator says there’s near certainty that sometime over the next year we will be in a recession.

Source: Macrovisor

https://www.macrovisor.com/p/charts-of- ... tter&sd=pf

[winston]

U.S. Stock Market's Weak Rally Appears Unsustainable

By Michael Kramer

Markets view the latest economic data as supportive of ongoing rate hikes, mostly due to the tight labor market, strong wage growth and sticky inflation readings.

The rally in the market remains weak, and the breadth remains narrow and unsupportive of a long-term sustainable rally.

The advance-decline line for the entire stock market has been steadily declining since February, marking a very large divergence from the stock market’s direction.

Over the last 12 weeks, the rally has been contained to 3 sectors, Technology, Communications, and Discretionaries. All three are heavily weighted to just 2 to 3 names that outweigh the sector and drive the returns.

Over the last 12 weeks, the rally has been contained to 3 sectors, Technology, Communications, and Discretionaries. All three are heavily weighted to just 2 to 3 names that outweigh the sector and drive the returns.

Source: investing.com

https://www.investing.com/analysis/us-s ... s_headline