Technically Speaking – October

November 3, 2023

Technically Speaking:

Long Term Resistance: SP500 4462 then 4500

Long Term Support: SP500 4285 then 4150

The markets struggled thru October as investors dealt with the uncertainty of rising interest rates and the invasion of Israel by Hamas.  Late in October we saw a bottom form, as earnings were better than expected and interest stopped moving higher. As we move into the November through January timeframe, we should see a rally off the lows in October. The SP500 can move back to at least 4400 or perhaps even 4500-4550 over this historically strong period for stocks.  Once that happens, I believe the risk will become greater than the reward. The markets should rally if we see that the Fed is done raising interest rates. That will initially create a short covering rally that could then bring the FOMO (Fear Of Missing Out) crowd into the mix.  I still believe a delayed reaction to the Fed high interest rate policy is possible next year. We always use a risk/reward strategy and as I said at the end of October the risk/reward scale was leaning towards reward and I would stay invested. We moved to reduce our hedges to participate more heavily in the upside we expect and have put more cash into the work for new clients.  If we get the rally to the upper end of the resistance levels, we will revisit those defensive positions. It is amazing how quickly the investor psychology changes with a few news items. In conclusion, it is primarily about interest rates and the higher rates go the more it costs to service our bloated debt, which eventually hurts the economy. The administration continues to spend trillions and has done nothing to curb spending or address the debt.  So, while I expect a rally, I would remain cautious and continue to look for opportunities. Look to mitigate risk at the upper resistance levels and if the markets fall back to 4100 -4200 look to add to risk.