Our Current Market Outlook remains “Market in a Correction” with a red light. The Fed’s interest rate hikes continue to be a serious headwind for growth and tomorrow’s Fed announcement will be a market mover. The general stock market faces higher than normal risks. The next week will be VERY telling about institutional demand as we head into the end of this quarter and approach the November Mid-term election. Remember that the economy is still facing a difficult environment and stock returns will be “data dependent.”
There is so much going on right now in the stock, bond and commodities markets. Significant cross currents with technical and fundamental forces converging, better…colliding, all at this moment in time. For a stock market technician it doesn’t get any better than this! What an exciting time!
The hour between 2 – 3pm tomorrow will be historic. The Fed’s announcement and subsequent press conference will set sail an armada of responses to truly be reckoned with. Massive, even unfathomable, amounts of capital (trillions upon trillions) will be set in motion by the world’s most brilliant financially-oriented minds. The wake of their decisions will cause many simultaneous tsunami’s to hit the shores of all asset classes for weeks to come.
Is it really that dramatic? Yes. The “moment” has arrived. Both sides (the bulls vs. the bears) are tired, worn-down, yet hopeful that their thesis will prevail. The sheer energy wound-up in those that are fearful and prepared to “sell everything” versus the others that are desiring to “bet the farm” is colossal and breathtaking (not to mention the rest of us in between). The losers will have to throw it their towels or be absolutely runover.
The truth is we don’t know which way it will go. Not only do we not know what decision the Fed will announce, but also more importantly we don’t know how the market participants will react to it. The drama is intense and the near-term importance is profound. Exciting indeed!
What we do know is that opportunity will knock and responses on the part of investors will be required in order to position (or reposition) properly.
Our Current Market Outlook is currently “Market in a Correction” with a red light. At the moment, our “Core Four” (see top of page) is the same as it was in our last post with 1 green and 3 red lights. While we don’t know what is coming in the future, obviously the current direction is still down. The next week will be VERY telling about institutional demand as we head into the end of this quarter and approach the November Mid-term elections.
On a technical basis, the gap down “negative double-cross” (or NDC) dive by both the Nasdaq and the S&P500 (below their respective 50-day AND 21-day mav’s) on the 13th, which caused our signal to be downgraded to a Red condition that morning, proved to be spot-on. That morning we wrote, “It is important to note that historically when a NDC comes so quickly after a positive double cross (PDC) stock market weakness tends to grow.”
So where does that leave us now? At the moment of truth. We believe investors currently face a few different outcome scenarios. An investor would be wise to keep that in mind, and in response, develop a different plan of action for each scenario. Sort of an “if the market does this… then I will do that…” approach. Remember: “If you fail to plan, then plan to fail.”
Two primary and conflicting technical chart patterns for the major indexes loom large on this the eve of the Fed’s announcement. One distinctly negative; and the other hopefully positive. Interestingly, neither one is completed yet. Of course not! Hence, the moment of truth.
We recently also wrote about a potential positive pattern we called a “higher low” (or HL) in that same 09/13 post. The first hoped-for HL was negated by a price undercut during last week’s negative price action. However, since the market has not yet moved lower than the lows set on June 16th & 17th (the original low), a new HL is attempting to form again. If it can hold through this week that would be “huge.”
The potential negative pattern is what we define as an upside-down cup with handle. That pattern (seen on both the Nasdaq and S&P 500 currently) suggests the market is “heavy” and the trend is down and trying to head to a “Lower Low” which would negate the positive pattern and start the base building (support) process all over again, but likely at lower levels.
There are so many “inside baseball” (so to speak) technical attributes going on right now but neither space in this post nor limited time will allow for them to be expressed. Perhaps in a follow-up blog, or a future book.
In closing, I will add that each one of us faces a “moment of Truth” in our own lives. The moment we die and find ourselves face to face with the Creator God. Jesus said, “I am the way, and the truth, and the life; no one comes to the Father but through Me.” Is it really that important? Yes! The “Truth” has arrived. Have you planned for that? Click this link to prepare. https://triumphantpm.com/our-truth
Game plan: Watch for end of quarter window-dressing during the next 10 days. Keep losses small on any position you are still holding by respecting your STOPs! Monitor the 50-day moving averages of the S&P 500 and the Nasdaq to see if the market can rally back over them by the end of this week. If the June lows do fall, look out below! Reminder: September & October are often not friendly to investors.
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.
©2022 Triumphant Portfolio Management, LLC.