Technically Speaking – February

March 2, 2023

Technically Speaking:

Long Term Resistance:  SP500 4150 – 4200

Long Term Support:  SP500  3900- 3850

The market took a breather in February after a nice rally in January. The SP500 topped out just under 4200 giving us the Long-Term Resistance that must be broken in order to go higher. We mitigated risk at that level looking for a move down. The move down continues, and I believe has more to go. We could ultimately see the SP500 in the 3300 – 3500 range, where I would be an aggressive buyer. As I write this we are oversold and can see a bounce, like we have numerous times during the decline. The markets will always have aggressive bounces during bear markets, but then they run out of steam. The media and market pundits find reasons that the bounce is the start of a new bull market, and it will happen at some point, but our economic landscape must change. The rallies are based on inflation abating and the FED stopping their interest rate increases, something we don’t expect for some time. Inflation is NOT abating as rapidly as the Fed would like and they will continue raising interest rates until it does. Will they tighten too much and take too long to pivot, I believe so. We will have somewhere between a soft landing and a hard landing; it all depends on the Fed’s actions.

We must realize the markets will bottom before the Fed changes their position. Valuations and earnings are still important, and the earnings outlook is likely to get worse before the Fed stops. However, we can be wrong, and timing is never perfect, so keep your core holdings and mitigate risk when the markets look vulnerable. That way if the Fed stops raising rates and the markets take off your invested funds will make money. Be patient, don’t chase the markets on the rallies, but buy when opportunity is presented. Late 2023 to early 2024 is when I believe we will have a better buying opportunity. Just like we didn’t want to fight the Fed as they were stimulating the economy, we don’t want to fight the Fed as they take the air out of the economy.