SPX is up 4.5% since the start of 2023 and 14.5% since its lows in October 2022. As a result, we are noticing an increase in calls for recovery and the beginning of a bull market. However, we are skeptical about these calls. With 2022 full-year results from U.S. banks, we now know their net profit decreased dramatically from the previous year; in the case of Morgan Stanley and Goldman Sachs, we saw this trend also in net revenue. Now, we expect companies in other sectors to follow suit and show corporate underperformance in 2022 (versus 2021). We expect that to confirm our thesis about the economy progressing deeper into recession; due to that, we have strong doubts about the sustainability of the current rally. Accordingly, our price target for 2023 stays at $3400.
Change in net income for particular U.S. banks - 2022 vs. 2021. Bank of America = -14% YoY JP Morgan Chase = -22% YoY Morgan Stanley = -26% YoY Citigroup = -32% YoY Wells Fargo = -38% YoY
Illustration 1.01 Illustration 1.01 displays the daily chart of SPX and sloping resistance. Currently, SPX trades slightly below the resistance. The breakout above the resistance will be bullish in the short term. We would look for a retest of the $4100 level in such a case.
Technical analysis Daily time frame = Bullish Weekly time frame = Slightly bullish
Illustration 1.02 Illustration 1.02 shows the daily chart of SPX and alternative resistance levels. A breakout above Resistance 1 will further bolster a bullish case for the index.
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.
@travis18haney, That would be a ride! Thanks for sharing.
SquishTrade
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Very good insights to respond to the increasing number of bullish forecasts last week and this week. The "breadth thrusts" were the arguments that seemed to catch the most attention. Good to see rational analysis of these issues. Thanks!
Tradersweekly
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@SquishTrade, Yes, market participants were becoming overly bullish, dismissing the prospect of recession while economic data points to a significant slowdown. The market is not pricing in earnings recession which appears to be in progress (considering earnings reports so far). Perhaps, we are due to see a wild markets in the next two weeks with more reports and FOMC. Thank you very much for the comment, SquishTrade.
GMR-Capital
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Agreeing with you Thank you for the great work.
Tradersweekly
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@GMR-Capital, Thank you very much for sharing your work with all of us.
DBAKIEV
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Btd fomo gnomes will push it higher. Fomo because these people used to btd and hope big that fed will pivot soon, as it has done before. Just another bear market rally
Tradersweekly
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@DBAKIEV, These rallies are definitely interesting to watch.