Happy New Year! And good riddance to 2022. Our prayer for you and yours is that you are in good health; emotionally, physically, spiritually, financially and relationally; and that you are remaining optimistic about the future! Proverbs 24:14 says, “Know that wisdom is thus for your soul; if you find it, then there will be a future, and your hope will not be cut off.” There will be opportunities again to make money and build wealth, but of greater importance is the feeding of your soul and the building up of your faith endurance.
As King Solomon (the wealthiest man in the history of the world- sorry Elon) famously stated,
“A wise man will hear and increase in learning,
And a man of understanding will acquire wise counsel,
To understand a proverb and a figure,
The words of the wise and their riddles.
The fear of the Lord is the beginning of knowledge;
Fools despise wisdom and instruction.” Proverbs 1:5-7 NASB 1995 (My bolded emphasis added.)
As this post’s title states, it is “do or dive” time for the stock market. The market has positioned itself into a snug technical set-up that should lead to a sharp move (in either direction) in short order. And tomorrow’s employment data will likely act as a significant catalyst.
The S&P 500 has retraced 50% of its exactly 2 month move off the October lows. That is textbook technical action. In the process, and on an optimistic basis, that retracement has set up the strong likelihood that the late December pullback lows are forming (have formed) an important “higher low” pattern that shows institutional support at a progressively higher price level than October. However, on a pessimistic basis, the sideways price action of the past 2 weeks, not to mention the S&P 500’s inability to close and stay over its 50-day mav, is technically known as a “plank” (or diving board) and often leads to a sharp decline. Both of these views are correct!
How can that be you ask? Because the market is undecided and will take its cue from the Fed and inflation data. Friday’s will be a biggie.
Should investors then expect that a weak employment reading is good for stocks and that a strong jobs number will be bad for stocks? Maybe. Some analysts are saying it won’t matter and that either way stocks are headed lower. They argue that reduced employment reading signal recession ahead and that that is bad for the economy and therefore stocks. But remember this: The market has the final say. Stay acutely focused on the price and volume action of the leading indexes and emerging leading stocks in the days ahead. Don’t guess. And above all, don’t panic.
Our Current Market Outlook remains “Market in Correction” with a red light. Currently our “Core Four” (see top of page) still has 1 yellow and 3 red lights.
Two weeks ago we wrote, “It is still possible for the stock market to create a “higher low” chart pattern in the days/weeks ahead and attempt to mount a new rally from there, but for now conditions have changed and preservation is paramount.” That outlook has not changed (hence the “plank” pattern).
Game plan: Continue to employ defensive risk management tactics- but remain hopeful. Watch to see if Friday’s news is received well by market participants and if the major indexes can move up sharply through their 50-day mav’s.
Happy new year again, and welcome 2023! Praise Jesus for another year!
Note: You can learn more about The Triumphant Core Four risk management system by clicking here.
Have a Triumphant day! ®
The information in this article is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. Not to be used as legal or tax advice. ©2023 Triumphant Portfolio Management, LLC.
Where Are Woodward and Bernstein When We Need Them? This article was written by Newt