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Inventory Patrons Beware!


As soon as once more it appears like bulls are able to take cost for good because the S&P 500 (SPY) is on the verge of a key breakout. And that’s the reason I say “Inventory Patrons Beware!”. That’s as a result of that is seemingly one other false begin for bulls who don’t perceive the massive image that factors to way more bearish draw back for shares within the weeks and months forward. Learn on beneath for the complete story.



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The bull vs. bear tug of conflict is at one other crucial juncture as they battle over 4,000. The 2 earlier skirmishes have been received by the bears.

I’m referring to the massive rallies that ran out of steam in mid August and early December. The hawkish Fed was the primary catalyst every time to swing issues again to the draw back.

Will that be the case as soon as once more after the February 1st Fed announcement?

That’s the matter that almost all deserves our consideration at the moment, and would be the focus of this week’s Reitmeister Whole Return commentary.

Market Commentary

The boiled down model of immediately’s commentary can simply be labeled: Inventory Patrons Beware!

That’s as a result of worth motion is saying one factor…however fundamentals are saying one other with the ultimate verdict seemingly coming after the two/1 Fed announcement.

Now let’s return to the beginning line by evaluating this image of the place we stand now with a doable breakout above the long-term pattern line. Often known as the 200 day transferring common for the S&P 500 (SPY) in pink beneath.

Sure, it seems that we’ve a get away forming at the moment. Nonetheless, see how related occasions occurred again in late March and late November earlier than the bears took cost as soon as once more.

Chartists may also be aware that that is nonetheless fairly bearish. First, as a result of we’re formally in a bear market. We would want to cross above 4,189 to state {that a} bull market was in place.

Second, we’ve a collection of decrease highs which is a damaging pattern till it’s formally reversed.

To be clear, this could possibly be the forming of the brand new bull market. And you need to by no means absolutely ignore the knowledge of the gang because it seems in worth motion.

But viewing this with out the context of the basic panorama is a bit hole. So, let’s change in that path the place we’ve one other crossroads. That being traders who’re solely targeted on the state of inflation (and sure future Fed actions) vs. those that see a recession forming.

This battle was on the middle of my final commentary: Investors: Please OPEN Your Eyes. The principle theme is that, sure, inflation is coming down quicker than anticipated. However earlier than you cheer that excellent news it’s BECAUSE there’s a recession forming which is generally the basis explanation for bear markets.

That recessionary forecast solely grew darker this week beginning Monday with a worse than anticipated -1% studying for Main Financial Indicators. Try this quote from Ataman Ozyildrim, Senior Director, Economics on the Convention Board (who creates this indicator):

“The US LEI fell sharply once more in December—persevering with to sign recession for the US economic system within the close to time period. There was widespread weak spot amongst main indicators in December, indicating deteriorating circumstances for labor markets, manufacturing, housing building, and monetary markets within the months forward. Total financial exercise is prone to flip damaging within the coming quarters earlier than choosing up once more within the last quarter of 2023.”

Subsequent as much as bat was the S&P Composite PMI Flash report on Tuesday coming in at 46.6. This was a good handedly unhealthy exhibiting as Providers at 46.6 was on par with the nasty 46.8 exhibiting for Manufacturing. (Bear in mind beneath 50 = contractionary surroundings).

These poor financial readings make it laborious to be bullish at the moment. Even worse is that we’re working head lengthy into the following Fed announcement on 2/1 the place they’re prone to repeat their “excessive charges for a very long time” mantra.

Bulls maintain leaping the gun anticipating a Fed pivot solely to get smacked down once more. Such was the case in mid-August when the 18% summer time rally ended with the famed Jackson Gap speech from Powell had us making new lows within the weeks forward. Then the October/November rally ran out of steam when Powell poured chilly water on bullish aspirations with the upper for longer fee expectations.

To be clear, the Fed little question sees the identical indicators of moderating inflation. And but simply as clearly, there might be no change of their stance given how the upper for longer mantra was repeated ALL MONTH LONG at almost each Fed speech in January together with related sound bites from Powell.

These guys are singing from the identical tune sheet on function. That’s a part of their mission to offer readability to all market contributors. And thus to anticipate them to desert the upper for longer mantra as quickly as the two/1 announcement is borderline insane.

Sure, they seemingly will downshift to quarter level hikes. That appears applicable at the moment. However that’s tremendously totally different than ending fee hikes or going decrease in time to stave off the formation of the recession at hand.

To boil it down, bulls might keep accountable for worth motion going into the two/1 Fed announcement. This might have shares trying like they’re breaking out with some traders getting drawn in by severe FOMO.

Nonetheless, going again to the primary theme of this text, I might say strongly; STOCK BUYER BEWARE!

Merely to get bullish now coming into that 2/1 announcement given the details in hand appears fairly dangerous.  Bears nonetheless have the higher hand til confirmed in any other case.

If by some wonderful stretch of the creativeness that the usually gradual and regular Fed officers do a 180 diploma turnabout to grow to be undeniably dovish on 2/1, then actually be a part of the bull social gathering that afternoon.

Lengthy story quick, the danger to the draw back is larger than the danger to the upside which is why I stay entrenched in my bearish portfolio and suggest the identical for others.

What To Do Subsequent?

Uncover my particular portfolio with 10 easy trades that can assist you generate good points because the market descends additional into bear market territory.

This plan has been working wonders because it went into place mid August producing a strong achieve for traders because the market tumbled.

And now’s nice time to load again as we cope with yet one more bear market rally earlier than shares hit even decrease lows within the weeks and months forward.

When you’ve got been profitable navigating the funding waters this previous yr, then please be at liberty to disregard.

Nonetheless, if the bearish argument shared above does make you curious as to what occurs subsequent…then do think about getting my up to date “Bear Market Recreation Plan” that features specifics on the ten distinctive positions in my well timed and worthwhile portfolio.

Click Here to Learn More >

Wishing you a world of funding success!


Steve Reitmeister…however everybody calls me Reity (pronounced “Righty”)
CEO, StockNews.com and Editor, Reitmeister Total Return

 


SPY shares rose $0.81 (+0.20%) in after-hours buying and selling Tuesday. Yr-to-date, SPY has gained 4.65%, versus a % rise within the benchmark S&P 500 index throughout the identical interval.


In regards to the Creator: Steve Reitmeister

Steve is best recognized to the StockNews viewers as “Reity”. Not solely is he the CEO of the agency, however he additionally shares his 40 years of funding expertise within the Reitmeister Total Return portfolio. Be taught extra about Reity’s background, together with hyperlinks to his most up-to-date articles and inventory picks.

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