Technically Speaking – January

February 3, 2022

Technically Speaking:

Long Term Resistance:  SP500 4625 – 4650.  Then 4700 – 4750

Long Term Support: SP500 4400 – 4350.  Then 4300 – 4250

Markets fell hard for most of January after the S&P 500 failed to break out to new highs. We then had a series of lower highs and lower lows. This pattern continued until we hit support on the S&P 500 of 4200. The very oversold condition received good earnings from MSFT and the combination of the good earnings and being deeply oversold allowed for a quick bounce back. The FED raising interest rates, inconsistent job growth and high inflation has created a fragile environment. The oversold bounce brought us quickly back to resistance before disappointing earnings from Meta (Facebook) caused another sell off. Going forward the FED and ECB will be tapering their buy programs, which means they will be buying fewer bonds until they are no longer buying any and this creates an environment of no stimulus, and no back stop from the FED. This may be the END of a straight up market. Volatility will increase and a normal back and forth market will exist. The trend will not be your friend at times and technical analysis will once again be an active part of investing. Risk/Reward will be relevant. The volatility will allow investors to increase risk by buying at support levels and reducing risk by selling or hedging at resistance levels. Always keep your core portfolio allocated to your risk tolerance, use market declines to buy quality stocks and market rallies to take some profits. DON’T BE GREEDY. Be patient and prepare for success.

 

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