Would You like a feature Interview?
All Interviews are 100% FREE of Charge
There is an established theory that the stock market (SPY) is like a helium balloon. Discover what the stock does it now and in the coming months. Read the full story below….
Last week’s article was by far the most popular article I’ve written in years. Here it is again:
Unfortunately, everything that was said then is still true today. In other words, the only trend is the NO trend. And that holds true even after a few solid days on the plus row.
We are happy to add some important updates to help you plan your future trading. That’s what awaits us in this week’s commentary below…
Market commentary
Let’s start with a useful analogy that frames today’s discussion. And it’s about understanding that the stock market is a lot like a helium balloon.
This means that in its natural state it floats high unless pushed down by a stronger negative force.
Please read it again as it will penetrate.
Going back to the big picture, 85-90% of investment history is surrounded by bullish terms that are more likely to go up than down, so it’s easy to see that the upside is true. However, this situation is also true in the case of a bear market with negative events removed.
Think about the beginning of the year… how the market rose day by day in January. Perhaps that’s because there really wasn’t anything negative to keep the stock down.
February is next, as the Fed’s hawkish rhetoric increases and begins to dominate some of the early frenzy. Next is the concern of a potential banking crisis, with the stock going lower and lower with each wave of negative headlines.
That left us with the stock to return all its gains in 2023 by mid-March at a closing price of 3,855 shares. Surprisingly, the S&P 500 rose +6.6% from there (spy) to where we stand today.
Is it because of something positive?
No…just no more negatives to keep the stock down. That’s all it took them to float high again.
Let’s look ahead and get started. Because if you can clearly see the negatives or positives, you can understand where the balloon (stock market) is going next.
I have spent time researching economic forecasts from various sources. Sixty percent of them want a recession to form and a bear market to deepen in 2023.
Most of the remaining 40% are not looking for massive economic growth. They see it more in the stagnant growth category.
My friend’s stagnation isn’t necessarily bullish. Not bearish either. This would most likely equate to the continuation of activity seen so far in 2023.
I wanted to share two forecasts that I found most interesting. in Q4, we expect the situation to improve by -0.6% in the fourth quarter (See full forecast here).
Yes, they are seeing lower inflation, which is what the Fed wanted to achieve. Unfortunately, employment is also cracked and will not improve until mid-2024.
How accurate do you think this is?
It’s close enough, because it’s very difficult to perfectly calibrate economic forecasts. Point is, this is likely to be a fairly mild recession, severe enough for stocks to fall 15-20% from here. And yes, future recessions will be even more dire…More stocks will go down.
Here I would like to draw your attention to some of the extreme views that the famous Jeremy Grantham talks about explosions.everything is a bubble“This could lead to a 50% drop from peak to trough in the S&P 500 (SPY). (read about it here).
But remember, Jeremy Grantham is a permanent bear. And like a stopwatch, he’s only right twice in his day…The rest of the time went astonishingly wrong. So while these prospects may be interesting to read, please take them with a grain of salt.
In the short term, we expect the stock to remain in the same trading range seen throughout the year, at a low of 3,855 and a high of 4,200. Almost any movement within that range has proven to be meaningless noise rather than predicting what will happen next.
When more people are convinced that the fear of a recession is exaggerated, we will break it down.
This shows that focusing on fundamentals is still important. Keep an eye out for next week’s list of major economic reports:
4/3 ISM Manufacturing
4/5 ISM Service
4/7 Government employment (focus on wage inflation)
After that, the focus will be on the first quarter earnings season.
Will April present enough clues that we’ll somehow break up?
Probably not, unless another bank failure occurs. That could create a Jenga moment when risk-taking goes out the window and stock prices fall.
At this point, we believe the chance of a deepening recession and bear market is around 70%. This explains why we continue to manage our newsletter portfolio for greater bearish potential.
what next?
see my new presentation Revision: 2023 Stock Market Outlook
It covers important issues such as…
- Start now with the 5 Warning Signs of a Bear Return!
- Banking crisis worries another nail in the coffin
- How far will stock prices fall?
- 7 timely trades to profit on the way down
- Plans to bottom out for the next bull market
- 2 Trades with over 100% upside potential when new bulls appear
- etc!
If these ideas bother you, click below to access this important presentation now.
Revision: Stock Market Outlook 2023 >
Good luck with your investment!
Steve Lightmeister…but everyone calls me Reity (pronounced “Righty”).
CEO, StockNews.com, and Editor, Lightmeister Total Return
spy stock. Year-to-date, SPY is up 7.46% on him, while the benchmark S&P 500 index gained 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.
post When will the stock market balloon pop open again? first appeared StockNews.com