Longest streak of consecutive down days since September 2022
Since October 2022, we kept reiterating that the primary downtrend had not ended and that we were merely seeing another bear market rally. Furthermore, we were monitoring the market’s sentiment, which changed from “FED’s pivot” hopes (in October 2022) to a “soft landing” narrative (in December 2022/January 2023). However, in line with our expectations, weak corporate earnings and outlook downgrades combined with hawkish FED started to test the bullish thesis about the market recovery.
SPX closed down six days in a row, representing the longest streak of consecutive down days since September 2022. That can make a case for a short-term rebound in the price of SPX. Although, we do not expect it to impact the primary downtrend. We anticipate higher interest rates to slow down the U.S. economy and worsening economic data to spook the market participants. In addition to that, we see a high risk of a strong selloff if inflation accelerates again, just like in some European countries.
For example, the preliminary data showed that inflation increased to 6.1% (YoY) in February 2023 from 5.9% (YoY) in January 2023. In addition to that, core inflation accelerated to 7.7% (YoY) in February 2023, up from 7.5% (YoY) in January 2023. The same applies to France, which saw two consecutive months of accelerating inflation.
Since the FED faces the same threat, we do not expect it to change its course of monetary policy. Quite contrarily, some FED members are already vocal about the FOMC reverting back to 50 basis point rate hikes (which we do not see as very likely at this point). Despite that, we believe the U.S. economy is not out of the woods and has many obstacles ahead. Accordingly, we maintain a bearish view of the market beyond the short term.
Illustration 1.01
Illustration 1.01 shows the daily chart of SPX. Interestingly, SPX experienced six consecutive down days, the longest streak since September 2022.
Technical analysis
Daily time frame = Bearish (very weak trend)
Weekly time frame = Neutral
Illustration 1.02
Illustration 1.02 displays the daily chart of SPX. Interestingly, SPX seems to be forming a narrow range between Support 1 and Resistance 1.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
SPX closed down six days in a row, representing the longest streak of consecutive down days since September 2022. That can make a case for a short-term rebound in the price of SPX. Although, we do not expect it to impact the primary downtrend. We anticipate higher interest rates to slow down the U.S. economy and worsening economic data to spook the market participants. In addition to that, we see a high risk of a strong selloff if inflation accelerates again, just like in some European countries.
For example, the preliminary data showed that inflation increased to 6.1% (YoY) in February 2023 from 5.9% (YoY) in January 2023. In addition to that, core inflation accelerated to 7.7% (YoY) in February 2023, up from 7.5% (YoY) in January 2023. The same applies to France, which saw two consecutive months of accelerating inflation.
Since the FED faces the same threat, we do not expect it to change its course of monetary policy. Quite contrarily, some FED members are already vocal about the FOMC reverting back to 50 basis point rate hikes (which we do not see as very likely at this point). Despite that, we believe the U.S. economy is not out of the woods and has many obstacles ahead. Accordingly, we maintain a bearish view of the market beyond the short term.
Illustration 1.01
Technical analysis
Daily time frame = Bearish (very weak trend)
Weekly time frame = Neutral
Illustration 1.02
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Trade active:
The 20-day SMA acts as a resistance.
