The year 2022 ended lower and in a recession-fear mode, but we have already started seeing some analysts turning bullish, saying we have seen the lows. Have we? Or are we heading lower in 2023? The economy is still strong and resilient to fallout. The labor market is seeing some layoffs, but unemployment is still extremely low. I believe we are seeing a return to the median or a return to normalcy. Before, businesses were overinvesting, oversupplying, and over-employing. Now they are correcting their mistakes, and that brings a decline cycle. We may see some slowdown, and that is normal. After a hot boom, there will be slow growth or even contraction, but that doesn’t mean a recession. Unfortunately, the new breed of investors does not understand it and panics. And this market is emotions driven.
On Monday, the markets were closed for the holidays. And the futures opened with a gap up, but that quickly sold off, and we are seeing a candle called a shooting star (on the chart above as well as the one below). Of course, it means nothing at this moment. The market can still open and rally tomorrow.
But the odds of it happening are low. The trend forecast indicates selling to continue tomorrow. Last week didn’t work much, and the market behaved exactly opposite from what I expected. We had a large selloff in the morning with a sharp reversal in the afternoon. That was difficult to trade, and so we stayed on the sidelines. Tomorrow it may be similar, and we may stay aside and wait for some trend to display the direction of this market.
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