Special Bulletin: February 15, 2022

A Major Move is Near

The charts of the stock market’s major indexes are giving a visual look of a coiled spring. The recent price and volume violence has settled down, for now at least, but appears to be gearing up for a significant move- and a new wave of price and volume violence.

We would love to sit here and tell you we know which way it is going to go… but we don’t. The next big move will be determined by the decisions made by massively large institutional investors in response to a news catalyst yet to be released. Once that news item breaks, the stampede of institutional elephants will begin. (Aka: “the footprints of money.”) Keep in mind they could surprise many commentators/investors and stampede back in.

Will the news be a Fed decision to jack rates up more quickly (even in between meetings) and in a more forceful manner (0.50%… or more) than investors were expecting? Or could it be a surprise move by Russia (good or bad resolution)?

We don’t know. Only God knows. Either way, based on the math of the market, the current trend has caused our risk management signal to deteriorate again.

As of today’s close, (SPX @ 4,471.07), our Current Market Outlook was downgraded to “Market in a Correction” with a red light. The “Core Four” shows 2 red and 2 yellow lights with today’s action (see top of page) with the VIX casting the tie-breaking vote for the bears by trading well over its 50-day mav.

The big test we mentioned last week is ongoing. The S&P500 remains below its own 50-day mav and a battle between the bulls and bears continues. A question mark moment is still upon us.

The stock market’s short-term trend is now down, while its very long-term trend is still up. This is a market in conflict with itself and inflation is the major culprit, NOT Putin.

Pay close attention to the release of the Fed minutes on the 16th. That has the ability to be a market mover, and if interpreted negatively, could be the “push” the bears were waiting for to take prices down in the next wave. But keep an open mind, as Yogi Berra used to say, “it ain’t over until it’s over” as the demand for equities based on the firmness of the economy may be enough to push prices back up to the important test of the 50-day mav’s first. 

What to do now? Wait for the Fed. Freshen up your watchlist. Don’t be sacred by volatility. Remain calm and prepare to act boldly when opportunities present themselves. The US 10-year Treasury notes test of the 2% level is in process and so far the stock market has handled it well. 

Have a Triumphant day! ®