Market Outlook at the Start of a New Quarter
Things look super bearish in the equity markets. Will we go green for at least one quarter this year? There are some important technical support levels on the horizon so there could be some relief possibly in the next quarter. But I doubt any relief will happen unless there is some sort of improvements with either inflation, the Russian war, the Euro energy crisis, or if the Fed relaxes its quantitative tightening temporarily.
Here is a short video illustrating the technical picture for S&P 500 Futures for the start of the new quarter.Here is the link to the video: Market Outlook for the New Quarter
When I just glance at the long term chart with weekly candles it looks bad. A quick glance seems to show strong momentum to the downside as the chart has formed the 3-Black-Crows candlestick formation with each week having substantially increasing volume as the price drops. There is officially a new 52-week low in SPY Futures. The major sub-indicators show a little more room for downside before they reach extreme oversold conditions. Futures price is about to drop below the 200-week moving average. What can I say things look bearish. Over the past 12 years all of these circumstances have only occurred during a major crash or taper tantrum.
There is really no reason to feel bullish right now. The Federal Reserve is intentionally killing growth and inflation is too high at the same time. The energy crisis in Europe has many investors pricing in a recession. The Russian War is providing plenty of uncertainty to global investors.
Personally I've been waiting for the relief moment in this very sharp downtrend. But every short-term resistance is holding strong and the slope of the short-term trend continues to angle steeper and steeper to the downside. The only near-term relief that could possibly develop is the 200-week moving average. The future's price of SPY is already at the 200-week moving average. The equity price has a little more downside before reaching the 200-week moving average. Many investors could consider this a strong support level. The price of SPY has bounced off of this moving average in the past 12 years during a couple taper tantrums. But during the stock market crashes of the Pandemic, the dot.com bubble, and the Financial Crisis the price of SPY quickly crashed below this support level. With the downward momentum being this strong I would not place any bullish bets at this 200-week moving average. There might be some relief for the very short-term but there is nothing telling us that the market should bounce here yet. Aside from the general oversold conditions in the market and the 200-week moving average there is really no reason to be bullish in the markets right now.
Historically when SPY Futures reached the 200-week moving average then it was some of the best long-term buying opportunity during this past 12 year bull run. But this downtrend is looking a bit different. Most dips in the SPY over this past bull run wer very swift and they reached extreme oversold conditions much faster than the recent bear market that we are in. And the rebound was very swift as well which provided amazing options gains. The current bear market downtrend is transpiring much slower. It almost looks like the beginnings of the long-term bear markets that followed the Y2K/dot.com meltdown and the financial collapse in 2008. These bear markets each lasted a few years. If the current bear market follow the Fed's interest rate forecast then this bear market might look the same.
I should mention the 12 year bull market price channel that the S&P 500 Index has been traveling within. This is the current long-term trend. If the price follows this very long-term trend then there could very well be much more downside before catching a rebound. Also note the mid-bar or mid level of this price channel. The S&P 500's Index price has rarely dipped below this level unless associated with a market meltdown. Coincidentally the 200-week moving average correlates with the position of this price channel's mid-bar very often. It will be very interesting to see what happens in the markets during these very interesting times that we are in.
Another very important development is the fact that we are still in this 12-year bull run. Technically speaking the market is still bullish over the very long-term timeframe. And the market is reaching very strong long-term technical support levels. Many analyst are calling for the S&P 500 to reach the 3400 price point before even considering a rebound. That would correspond with a textbook technical bounce off of the previous high of an uptrend. It would also correspond with a textbook fibonacci rebound just near the 50% fibonacci level. If there is any relief or bullishness in the equity markets then it should happen around these areas. But in this very bearish market I would need some strong technical confirmations before I place any bets on a rebound.
So will the market get at least one green quarter this year?
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$TENCENT(00700.HK$ $SSE Composite Index(000001.SH$ $CSI 300 Index(000300.SH$ $CSI 300 Index(000300.SH$ $FTSE Singapore Straits Time Index(.STI.SG$ $NIO-SW(09866.HK$ $NIO Inc. USD OV(NIO.SG$ $NIO Inc(NIO.US$ $BILIBILI-W(09626.HK$ $Bilibili(BILI.US$ $Baidu(BIDU.US$ $BIDU-SW(09888.HK$ $XPeng(XPEV.US$ $Li Auto(LI.US$ $BYD COMPANY(01211.HK$ $BYD Company Limited(002594.SZ$ $S&P/ASX 200(.XJO.AU$ $FTSE Singapore Straits Time Index(.STI.SG$
$TENCENT(00700.HK$ $SSE Composite Index(000001.SH$ $CSI 300 Index(000300.SH$ $CSI 300 Index(000300.SH$ $FTSE Singapore Straits Time Index(.STI.SG$ $NIO-SW(09866.HK$ $NIO Inc. USD OV(NIO.SG$ $NIO Inc(NIO.US$ $BILIBILI-W(09626.HK$ $Bilibili(BILI.US$ $Baidu(BIDU.US$ $BIDU-SW(09888.HK$ $XPeng(XPEV.US$ $Li Auto(LI.US$ $BYD COMPANY(01211.HK$ $BYD Company Limited(002594.SZ$ $S&P/ASX 200(.XJO.AU$ $FTSE Singapore Straits Time Index(.STI.SG$
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anchovy3 : Thanks for this in depth analysis. Have to agree with you that we have a ways to go before this turns around.
SpyderCallOP anchovy3: there is one school of thought that believes that the fed rates control the stock market. when you look back at every time the fed tightened or when the fed even talked about tightening. each time the market dropped. when they actually tightened or when they just talked about tightening the market dropped. and when the fed mentioned easing the market ripped. every time
meruson : because Santa Claus is coming to town?
SpyderCallOP meruson: I hope santa brings in a green quarter
meruson SpyderCallOP: that's the spirit. bon courage !
Giovanni Ayala : Relations between producing countries
Dragon God SpyderCallOP: that's a fact most should know this
承蒙时光善待 SpyderCallOP: Green coins? I like Bitcoin, silver gray
Red__Bull : My bull turnaround timeline is getting further into the future for a sustainable recovery in GDP, inflation and markets. 3 major rate heights, no significant change in inflation. Congress (both sides) are still continuing on their massive spending spree, most of it is not near terms growth oriented (i.e. Ukraine, green projects, student loan relief.) In fact, student loan relief may increase consumer demand (and therefore inflationary price competition) as households have more discretionary $ in their budget. Increased supply looks like the only thing that will curb inflation and that doesn't seem to be improving. No offense intended to anyone re: Congress' initiatives. I'm looking at this from an economic perspective, not political. Feedback welcome, critique welcome.
Red__Bull : My bull turnaround timeline is getting further into the future for a sustainable recovery in GDP, inflation and markets. 3 major rate heights, no significant change in inflation. Congress (both sides) are still continuing on their massive spending spree, most of it is not near terms growth oriented (i.e. Ukraine, green projects, student loan relief.) In fact, student loan relief may increase consumer demand (and therefore inflationary price competition) as households have more discretionary $ in their budget. Increased supply looks like the only thing that will curb inflation and that doesn't seem to be improving. No offense intended to anyone re: Congress' initiatives. I'm looking at this from an economic perspective, not political. Feedback welcome, critique welcome.
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