Buy the Dip: Venus Retrograde, New Bull Market Incoming!
The S&P 500 failed to hold its downward trend in December and January (see my previous setup linked below). We closed our December short trade at a moderate profit and waited for further information.
A breakout has occurred, and the S&P 500 looks to be backtesting the neck line of a giant inverse head and shoulder originating in June 2022. A retest of 3975 without substantial momentum would serve as an entry point to this trade (or related trades if you prefer to buy individual stocks based on the movement of the S&P 500, something I personally like to do).
There are several major points supporting a bullish thesis going forward. Given the wide zone, I am going to use LEAPs rather than futures to avoid liquidation. Here are my buy points:
A. 4085 (golden cross retest): achieved today.
B. 3975 (neckline test)
C. 3650 (lower trend bracket test)
D. 3800: mid-point between B and C
1. For those who only subscribe to trend-following systems, many traditional systems have turned bullish in the past week. The media covered the golden cross widely last week. A lesser known, but robust and decidedly less noisy system: the moving regression channel has now confirmed a bullish uptrend since October. A test of the middle trend line (also 3975) would be a bullish entry point. Also, the zone between 3975 and 3650 would be a solid place to add non-leveraged individual stocks.
Personally: I'm adding individual stocks en masse between 4080 and 3650. I'm adding LEAPs at 4080 and also as low as 3650. This is a long, multi-year trade. These options should expire in mid 2024 or later. Ideally, you'd roll them to early 2025 next Winter anticipating Biden's reelection, as 2024 is an election year, and Presidents usually win reelection (and the market does very well when they do).
2. For those who subscribe to financial astrology, Venus Retrograde is frequently a turning point in the price of assets. It represents revaluation and change in direction. In recent years, it has been a robust signal during bear markets and a less robust signal during bull markets (the 2015 and 2018 corrections never led to a sustained bear market, for example, although one might argue that the two 18% declines in 2015 as well as December 2018 and March 2020 during the same intra-VenusR period fit the pattern well enough). Venus Retrograde in March 2009 and May 2020 both occurred during the last two bear markets and signaled the beginning of a new bull cycle. Even the 1929 crash occurred along with a Venus Retrograde (there was an attempt at recovery 18 months later that subsequently failed). Thus, July 2023 is a strong candidate for the beginning of a new bull market.
3. Inflation (m/m) since July 2022 has run at a 1.8% annualized rate. This means the Y/Y CPI % could be around 2% or lower as of July 2023 if the trend continues. With inflation possibly moving below the Fed's target once July numbers are released in August 2023, we could anticipate dovish statements or even talk of rate cuts, which would send markets much higher.
While there are some good reasons to be bullish from July, we know the market is efficient and often front-runs good news, and the uptrend since October has already been confirmed, just as the 2020 reversal occurred previously in late March 2020. With 5 months remaining, we should be looking for a favorable long entries between now and then. Dips below 4000 and especially below 3800 should be bought.
A breakout has occurred, and the S&P 500 looks to be backtesting the neck line of a giant inverse head and shoulder originating in June 2022. A retest of 3975 without substantial momentum would serve as an entry point to this trade (or related trades if you prefer to buy individual stocks based on the movement of the S&P 500, something I personally like to do).
There are several major points supporting a bullish thesis going forward. Given the wide zone, I am going to use LEAPs rather than futures to avoid liquidation. Here are my buy points:
A. 4085 (golden cross retest): achieved today.
B. 3975 (neckline test)
C. 3650 (lower trend bracket test)
D. 3800: mid-point between B and C
1. For those who only subscribe to trend-following systems, many traditional systems have turned bullish in the past week. The media covered the golden cross widely last week. A lesser known, but robust and decidedly less noisy system: the moving regression channel has now confirmed a bullish uptrend since October. A test of the middle trend line (also 3975) would be a bullish entry point. Also, the zone between 3975 and 3650 would be a solid place to add non-leveraged individual stocks.
Personally: I'm adding individual stocks en masse between 4080 and 3650. I'm adding LEAPs at 4080 and also as low as 3650. This is a long, multi-year trade. These options should expire in mid 2024 or later. Ideally, you'd roll them to early 2025 next Winter anticipating Biden's reelection, as 2024 is an election year, and Presidents usually win reelection (and the market does very well when they do).
2. For those who subscribe to financial astrology, Venus Retrograde is frequently a turning point in the price of assets. It represents revaluation and change in direction. In recent years, it has been a robust signal during bear markets and a less robust signal during bull markets (the 2015 and 2018 corrections never led to a sustained bear market, for example, although one might argue that the two 18% declines in 2015 as well as December 2018 and March 2020 during the same intra-VenusR period fit the pattern well enough). Venus Retrograde in March 2009 and May 2020 both occurred during the last two bear markets and signaled the beginning of a new bull cycle. Even the 1929 crash occurred along with a Venus Retrograde (there was an attempt at recovery 18 months later that subsequently failed). Thus, July 2023 is a strong candidate for the beginning of a new bull market.
3. Inflation (m/m) since July 2022 has run at a 1.8% annualized rate. This means the Y/Y CPI % could be around 2% or lower as of July 2023 if the trend continues. With inflation possibly moving below the Fed's target once July numbers are released in August 2023, we could anticipate dovish statements or even talk of rate cuts, which would send markets much higher.
While there are some good reasons to be bullish from July, we know the market is efficient and often front-runs good news, and the uptrend since October has already been confirmed, just as the 2020 reversal occurred previously in late March 2020. With 5 months remaining, we should be looking for a favorable long entries between now and then. Dips below 4000 and especially below 3800 should be bought.
Trade closed manually:
The basis for the trade (VR) has actually reversed. We entered VR in a bull market, so representing reversals, it is probably time to close that trade. Finally, we are near all time highs without enough of a fundamental change in the economy. So closing most of this trade.
