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The battle for the soul of the stock market (SPY) looms in March. why is that? What are the main events? And who do bulls or bears like to win?40-year investment pro Steve Reitmeister answers all of that with his trading plans and top his picks. Read the full text below.
The stock has found the bottom of its current range at the 200-day moving average (3,940), but has made some attempts in the second half. Most notably Thursday, when the majority of the session was spent below 1 line. But then there was enough support and a big move up on Friday.
What does that mean?
The trade has stalled as the bulls and bears have been fairly evenly matched lately. A more meaningful question is when the range will be breached and what will be the catalyst.
Today, I will focus my time on answering these questions and preparing my portfolio so that I can trade the results to my advantage.
Market commentary
Let’s start with the 1-year chart of the S&P 500 (spy) to assess how important the 200-day moving average was in the framing activity.
Yes, most of the time we are in bear market territory and below this important long-term trend line. However, we can also see that it has been over 4 months since the low and has been above this important level for the past 2 months.
Those who believe more in the virtues of price action would say that the bulls have the upper hand at the moment.
But it’s easy to put a big hole in that theory by reviewing all the past glorious bear market rallyes before the market collapsed again. Most notably, a rise of over 20% in late 2008 formally called a new bull market, before a sharp decline in the first quarter of 2009.
For reference, find out how the same thing happened in late 2002, and brought a painful end to a three-year bear market in early 2003.
The point is, the battle for the soul of the market is still ahead. And that battle will very likely end in March as we hit these key dates with market-moving events.
3/10 government employment situationNote the wage inflation data that was too high in the February report that marked the beginning of the recent recession.
3/14 Consumer Price Index (CPI). The key is the monthly pacing to see if it’s going up like the February report or down like it’s been in the past few months.
3/15 Producer Price Index (PPI). Insiders know this is more important than CPI. Because the prices producers pay today will translate into the final products and services months from now. (His PPI now leads to his CPI in the future).
3/22 Fed meeting on interest rate decisions and economic forecasts. Most people expect a rate hike of 25 basis points. The real question is whether the Fed sounds any more or less hawkish than his early February meeting.
These events, and recent data that foreshadows what they can tell us, as well as recent statements by Fed officials, continue to compel my market outlook to remain bearish.
why?
It’s worth repeating, though, because of the equation I shared earlier:
Ongoing higher rate (5%+)
+
Higher rates will apply until at least the end of 2023
+
6-12 months delayed economic impact
+
already weak economic data
=
Fertile soil triggers recessions, prolonging bear markets and lowering lows.
No doubt this same reason explains why famed hedge fund manager David Einhorn has recently been on the record below.
David Einhorn says investors ‘should be bearish on equities and bullish on inflation’
Until the 3/10 government jobs report, I’ll pay zero attention to range-bound price action. Just pointless noise.
From that point on, these aforementioned catalysts become living grenades to be thrown into the market fray. increase.
Again, given the facts currently at hand, I’d bet the bears will stage a victory parade. . If you’re really bullish, I’d be happy to shed my bare coat and proudly wave a bullish flag.
Just one caveat. Bulls can read too much into the first few events and become unreasonably enthusiastic. This could come to a screeching halt as the Fed approaches the mic on his March 22nd.
Something akin to a recent speech revealing that interest rates will rise above 5% and stay there until the end of the year should cool most investors off ahead.
Be open to new facts so they can take advantage of themselves. Note that the scales are now still tilted in the bear’s favor.
what next?
my brand new2023 stock trading plan” cover:
- why 2023 “Jekyll & Hyde” stock year
- How the bear market will revive
- 9 deals the bears are back and profitable right now
- 2 More than 100% chance of trading when a new bull appears
- etc!
Good luck with your investment!
Steve Lightmeister…but everyone calls me Reity (pronounced “Righty”).
CEO of StockNews.com
Editor light meister total return & POWR value
SPY shares were unchanged in after-hours trading on Friday. Year-to-date, SPY is up 5.69% on him, while the benchmark S&P 500 index rose 10% over the same period.
About the Author: Steve Lightmeister
Steve is better known to StockNews audiences as “Reity”. Not only is he the company’s CEO, he shares 40 years of investment experience. Lightmeister Total Return PortfolioFind out more about Reity’s background, links to our latest articles, and more on stocks here.
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