Special Bulletin: May 10, 2023

Seriously Concerned, yet Properly Hopeful

What if your favorite sports team went 2-14 in their last 16 games? That would stink. It might even test your patience as a fan. You would no doubt be concerned, but based on your years of loyalty you’d probably remain hopeful. If you’re a “bull” and a stock market fan that is one way of explaining what has happened since our last post on April 18th.

Since that date, the S&P500 has actually lost ground, ever so slightly, compared with today’s close (4,154.87 vs. 4,137.64 for a -0.41% loss). We have a word for that in English; it’s called “flat.” And regarding the 2-14 streak, 2 is the number of days the market closed for the day above the (04/18) closing price. (Obviously, 14 closes were under that level.) That does stink.

Now, before you get too bearish and hide your NYSE hat, there are a couple of counterpoints. 

First, during that 16 trading day stretch, the market gained 7 times and lost 9 times, netting that small loss mentioned above. 

Second, and more importantly, the S&P500 never closed under its 50-day mav. In fact, during those 16 days, the S&P500 NEVER even dipped under that same important moving average (mav) at any time intraday! That can actually be interpreted as positive price action.

We get it. Some would define this period as boring. And we can see their point. But given all the looming issues (rate hikes, inflation, debt-ceiling debate, banking crisis, China threats, biased legacy media, etc,) for the stock market to have moved sideways is more stunning than boring in our opinion!

In aforementioned April 18th post, we wrote something that needs to be repeated. The observation we made then absolutely still applies today. We wrote, “The technical condition of the major stock indexes has improved in April. From a purely chart perspective, the Nasdaq and S&P 500 are “stacked” correctly (10-day mav > 21-day, > 50-day, > 200-day). That is bullish. The rub is that the daily cumulative volume has been lacking (weak demand) and the advance/decline lines are mediocre at best (actually sick on the Nasdaq). A significant portion of 2023’s index gains have come from just a handful of the giant stocks in tech and social media. The “generals have been leading the privates” – not good in war and usually not good when investing in stocks.”

We also shared, “Be on guard: a violent 2 to 3 day sharp, sell-off test of the S&P’s 50-day mav could happen at any moment.” It then proceeded to happen twice: first on April 25th & 26th, and then again May 2nd thru the 4th. This type of predictable violent action that doesn’t lead to lower prices immediately is often an intentional, institutional tactic known as a “shakeout.” Just enough volatility to send the public running for the sidelines while the pros step-in to support the market and increase their exposure. 

Our Current Market Outlook remains “Uptrend Under Pressure” with a yellow light. Our “Core Four” (see top of page) shows 3 yellow and 1 green light.

With all the threats looming in front of investors, it is an important time to be seriously concerned. Yet, properly hopeful that conditions will change for the better and that as investors we will have wisdom to recognize it and courage to participate in it. But remain on the alert!

And you will know that I am the Lord; those who hopefully wait for Me will not be put to shame. Isaiah 49:23b NASB 1995

Be on the alert, stand firm in the faith, act like men, be strong. Let all that you do be done in love. 1 Cor 16:13-14 NASB 1995

Game plan: The “surprise spring rally” is trying to grow like my lawn. The debt-ceiling debate has the ability to derail (mow it down) or launch (fertilize) the major stock indexes. Continue to watch if longer-term interest rates (see TBT) break their 6-month downtrend line for a negative market tell.

Note: You can learn more about The Triumphant Core Four risk management system by clicking here.

Have a Triumphant day! ®