US Stock Market Near-Term Direction

[City Index]

US equities look to be at an important inflection point with focus on today’s US PCE Price Index, and Federal Reserve Chairman’s speech at the Jackson Hole Symposium.

The S&P500 stalled at a confluence of resistance around the 200-day MA last week, including a downtrend resistance coming from the all-time-highs. The index has shown signs of basing near 4100 this week, but direction from here will be key in determining whether this rebound is sustainable, or if was a bear market rally ahead of the next leg lower.

Traders currently appear to be split on expectations for a 50bps or 75bps interest rate hike at next month’s FOMC Meeting, and today’s events have the potential tip the scales in either direction.

A hot Core PCE print, along with a hawkish monetary policy outlook from Chair Powell could expose the market to another sharp decline. While further indications of peak inflation, and any sign of a pivot from the Fed may help $SPX’s establish a new leg higher, and retest its major resistance levels.

All trading carries risk, but it will be interesting to see how today’s price action unfolds, and whether it has any role in setting-up the index’s next move.

 

[City Index]

The S&P500 shed over 3% on Friday, with the index looking on track to retest 4000 this week, after Fed Chair Powell’s hawkish Jackson Hole speech dealt a heavy blow to risk sentiment.

The market could now be in for a choppy start to the week as bulls and bears are likely to fight it out for control around this massive psychological level.

There is potential for buyers to step-in and support the market after Friday’s sell-off. However, the prospect of sustained tight monetary policy and rising recession concerns, signalled by the deepening of the yield curve inversion, might weigh heavily on demand.

It’s therefore important to keep in mind that all trading carries risk, and a break below 4000 would likely expose SPX to a retest of the June lows as bears gain momentum.

 

[Almarok]

 

[Almarok]

 

[Almarok]

In this September 9 video Larry Williams predicts a low in early October and then some upward movement:





he also points out some similarity between the current Down Jones period and 1913:





and also with 1981 (the latter quite similar to the one Thomas N. Bulkowski had already published on his Site in December 2021):

 

[Almarok]

 

[City Index]

The S&P500 rallied back above its 200-week MA on Monday, a key level which it last traded below during the March 2020 crash. Although the fundamental backdrop remains bearish, this may open the possibility for some sort of near-term rebound from a technical perspective, and the lack of major US economic data or Fed events this week could help with this.

The index did pare some of its gains just below downtrend resistance and the psychological 3700 level heading into the close yesterday. Tech earnings pick up steam this week, as Netflix, Snap, and of course, Tesla are due to report. After the big banks did their part in lifting investment, another set of better-than-expected results could be the key in helping $SPX break the selling pressure around 3700, and attempt a leg higher.

However, disappointing results would likely fuel fears of more Q3 earnings misses from Big Tech, and giving their weighting in the S&P500, this may spark a retest of break below the key 3600 level, before putting this year’s lows back in sight.

All trading carries risk, but it will be extremely interesting to see how this develops over the coming days and the course of this earnings season.

 

[Almarok]

As I have written here on October 14:

S&P 500 - Dead Cat Bounce?

Is the S&P 500 shaping up for a Dead Cat Bounce?

www.trade2win.com

S&P 500 (sometimes the past...comes back...):

from the high of January 4, 2022 to to the low of October 13, 2022: = -27.5%

practically similar to the period: 1980-1982 (see table also inserted above in post #6), perhaps the October 13 low could be this year's low.

In this video from Oct. 12 (the day before the Oct. 13 low), Larry Williams points out the possibility of a possible Market upside until spring of next year:

 

[City Index]

From a technical standpoint, the S&P500 looks decently set-up for a big move following today’s FOMC Meeting.

Despite some disappointing earnings in recent days, especially from Big Tech, the broader market index has managed to rebound from the new low it hit in mid-October.

A lot of this has been thanks to increasing speculation that the Fed may consider slowing their tightening cycle by December, and with the move higher currently stalling right around the key 3900 level, the statement and comments made following the policy meeting could trigger a sharp move in either direction.

If the market hears what it has been hoping for, and sees a greater chance of the Fed slightly easing their foot off the gas next month, SPX could break higher and put a retest of its 200-day MA back in sight. However, another round of hawkish rhetoric may spark a strong rejection from this resistance, and put bears back in control.

All trading carries risk, but it will be interesting to see what the FOMC's outcome is today and how traders react.

 

[Almarok]

On 14 October I had reported here:

S&P 500 - Dead Cat Bounce?

Is the S&P 500 shaping up for a Dead Cat Bounce?

www.trade2win.com

this similarity: S&P 500 from the high of Jan. 4, 2022 to the low of Oct. 13:= -27.5%, practically similar to the period: 1980-1982 (see table I had inserted in post #6 above), so in my opinion the October 13 low is probably the annual low.

According to some statistics in the book: "The right stock at the right time" by Larry Williams: years ending with the number 2 are years in which a mininmo is often realized from which an upward movement will start;

in the fourth year of the 4-year cycle, a downtrend and thus a low is often formed, and 2022 is the fourth year of the 4-year cycle;

finally, 2023 will be the third year of the U.S. Presidential cycle (which is obviously 4 years), and the third year is usually upward because whoever is in Office prepares the election campaign for the following year (even Perry Kaufman in his book: "New Trading Systems and Methods," confirms this feature of the third year of the US presidential cycle).

Therefore, according to these statistics, an Upward Market should follow, probably until this spring.

 

[City Index]

The S&P500 has already handed back the majority of its post-CPI gains from earlier today in what is shaping up to be a volatile week as expected.

The initial rally on Wall Street faded as SPX currently seems unable to overcome a wall of selling coming that has developed at the previous high around 4100, and continues to hold the downtrend resistance stemming from last December's all-time-high on the index. However, the index is still higher on the day heading into the close, with bulls having stepped in to support the market above yesterday's close.

Attention will now be on Wednesday's FOMC decision. Although expectations are for the Fed to return to a 50bps rate hike this month, traders will be paying close attention to the central bank's outlook for the terminal rate to gauge when a pause in the tightening cycle can be expected.

All trading carries risk, especially with the central bank decisions over the next few days likely to keep volatility elevated before things cool down for the holidays.

Either way, it should be interesting to see if SPX can finally break this year's downtrend over the coming days, or if we see yet another leg lower begin to form.

 

[Almarok]

Here are the 2023 forecasts of the U.S. stock markets, based on the work of Edgar Lawrence Smith who said in the 1930s that the stock market followed a 10-year cycle, that is, each year tended to repeat the behavior corresponding to the annuality of the previous decade.
In other words, if you averaged all the years ending with 1 (2001, 1991, 1981 and so on), you would get a forecast for 2011. For 2012, one would make a similar average, using only 2002, 1992, 1982 and so on:

2023 Forecast

This is the yearly forecast updated for 2023. Written by internationally known author and trader Thomas Bulkowski.

thepatternsite.com

Of course, if the Market were to have such a trend, trading would definitely be easier.