40 Bar Cycle Chart - S&P 500 SPY SPX - Updated 011423

14 janv. 2023

Leading up to the December Inflation CPI Report that was released this last week (Thursday), markets (at a macro level) have been rallying into this last Friday — which also was coincidently the start of earnings season as banks such as J.P. Morgan (JPM), Bank of America (BAC), Citi (C), Wells Fargo (WFC), BlackRock (BLK), & others.

Now that the Inflation (CPI) Report is out of the way & earnings season is full steam ahead, markets look to the next big event(s) which include the Federal Reserve February Interest Rate Decision coming our way on February 1st, 2023.

That said, here's what is happening in the charts with the S&P 500 SPY SPX ES1! as it relates to our "40-Bar Cycle" 📊:

📉 *CHART NOTES* 📈

• As I mentioned above, we did break out of the sloppy trading/consolidation range that the S&P 500 SPY SPX ES1! was kept in throughout the holidays, & into the new year. Now that we've broken out of that & reached back above the 50-Day Simple Moving Average (SMA50 = Red Line) on the daily chart, SPY is sitting just below the 200-Day Simple Moving Average (SMA200 = Green Line). Also note that we did close above the SMA200 ($397.21) to finish up the week at ($398.50) on SPY. Now that we are above this key level (on a daily close), question is will we re-test this level & drift higher into the February Federal Reserve Meeting? OR, are markets setting up for a further (or short-term) pull-back using the timing & levels included in the "40-Bar Cycle" 📊 ?
• Keep in mind too that we did get a positive MACD crossover (buy signal) on the daily chart, as featured below. However, looking at the charts (including 4-hour MACD) I would conclude that this is likely an invalid buy signal — based in-part on other factors including January Options Expiration (OpEx) next week, 'VIX Compression', & also Federal Reserve 'Net Liquidity', which is still "risk-off" on a macro level as the Federal Reserve looks to keep a lid on asset prices, & of course Inflation (CPI).
  

Chart #1-2: SPY Consolidation Breakout (Daily, w/ & w/o Falling Wedge Pattern)





Chart #3: SPY Consolidation Breakout (4-Hour)



Chart #4: SPY Consolidation Breakout (1-Hour)



Chart #5: SPY 40-Bar Cycle (Daily, note that we are now clearly above the 50SMA [red line] are converging on major resistance of the 2022 downtrend [Falling Wedge Pattern] & the 200SMA [green line]).




Chart #6: SPY 40-Bar Cycle (4-Hour, note the 50SMA [red line] did not cross below the 200SMA)



Chart #7: SPY 40-Bar Cycle (1-Hour, note the 50SMA [red line] vs. 200SMA [green line] buy-signal & upward regression channel)



What are your predictions for the rest of January 23'?

• *Camp A: We are short-term overbought & a pull-back is in order, before we re-test & break out of this $380-390-400 range on the back of better than expected earnings, less than hawkish Federal Reserve, & more "resilient" macro data.
  
  *Camp B: We may continue to short-term rally, however market liquidity is still too strong & the Federal Reserve is likely to continue with .25% — in addition to maintaining their hawkish tone so that excess market liquidity does not run away from them with higher asset prices. Macro data will continue to be mixed, if not trend-downward, & earnings will start to come in softer than people expect as forward outlooks raise the red flags for investors.

Let me know your prediction in the comments below! 👇🏼