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There are by no means any ensures within the inventory market. As a lot data as I’ve gained over time, and as a lot respect I’ve for my fellow technicians right here at StockCharts.com, there’s merely no solution to ever ensure that your forecast is the best one. I have been humbled loads of instances and maybe 2022 will likely be yet another so as to add to the checklist.
However I REALLY do not like this market.
I do not belief a single rally. After the S&P 500 rallied from 4222 on Monday, January twenty fourth to its excessive of 4595 on Wednesday, February 2nd, an unimaginable 8.83% achieve in simply 9 calendar days, Meta Platforms (FB) dropped its earnings bomb on U.S. equities. From Wednesday’s excessive of 4595 to this morning’s low at 4452, that represented a 3.11% drop in just a little greater than 24 hours. The NASDAQ’s drop was even higher at 4.51%. This whipsaw motion is totally insane proper now. In the event you’ve had nice experiences on the roulette wheel at a on line casino, then you may additionally be nice at forecasting inventory market efficiency on a day-to-day foundation. It is loopy and wild proper now, which is often the case when main points divide the bullish and bearish camps.
Bear market rallies usually fizzle at one of many key Fibonacci retracement ranges, whereas secular bull market rallies end in greater highs, simply breaking out above prior market highs. After our horrific January, the bulls have a ton of labor left to do. The very first step is to clear the important thing 61.8% Fib retracement stage. Here is the place the S&P 500 and NASDAQ stand proper now:
S&P 500:
NASDAQ:
Based mostly on the above, the S&P 500 has room to the upside to roughly 4600, or simply one other 1.5% or so. The NASDAQ, which has been hit more durable, has possibly one other 5% or so earlier than having to sort out that crucial Fib resistance.
In the event you’re unable to see that the NASDAQ has been underperforming based mostly on the above charts, this subsequent $COMPQ:$SPX relative chart makes it a lot simpler to see:
The NASDAQ has way more of a progress taste to it, and that is why it has been performing so poorly on a relative foundation. Development shares have been underneath super promoting stress – each absolute and relative – since their November excessive.
Along with the technical and sentiment warning indicators that I have been discussing, historical past is now telling us to GET OUT of the market. Since 1950, the “January Impact” has been unbelievably correct in predicting “stability of the yr” efficiency. That Wall Road adage, “as goes January, so goes the yr”, has a ton of advantage to it. I will be discussing that historic phenomenon tomorrow morning throughout a particular FREE presentation of “The January Impact”, which is able to begin at 10:00am ET.
For extra info and to register for the occasion, you possibly can both (a) CLICK HERE to join our EB Digest e-newsletter (100% free, no bank card required), or (b) use the room hyperlink beneath to affix me straight. In the event you resolve to affix utilizing the hyperlink, we’ll add you mechanically to our e-newsletter. It is essential to affix our EB Digest neighborhood as that may be sure that you obtain room directions sooner or later for all of our free occasions. Here is the hyperlink for tomorrow’s occasion:
https://earningsbeats.zoom.us/s/88693491836
(The room ought to open round 9:30am ET)
Glad buying and selling!
Tom
Tom Bowley is the Chief Market Strategist of EarningsBeats.com, an organization offering a analysis and academic platform for each funding professionals and particular person buyers. Tom writes a complete Each day Market Report (DMR), offering steering to EB.com members day-after-day that the inventory market is open. Tom has contributed technical experience right here at StockCharts.com since 2006 and has a elementary background in public accounting as properly, mixing a novel ability set to strategy the U.S. inventory market.
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