Last week, our journey was, to put it mildly, a roller coaster designed by an economist with a wicked sense of humor. We experienced everything from the stomach-dropping dips to the exhilarating highs that could give any thrill-seeker a run for their money. So, what’s in store for us next week? What market outlook can we expect? Buckle up, as we dive into an analysis sprinkled with a dash of humor to keep things light.

 

 

Markets making new all time highs

 
Last week, the market was like that indecisive friend who can’t decide what to order at a restaurant. We started off on a note of optimism, but then came the CPI report, dropping like a bombshell with a side dish of stronger-than-expected inflation numbers. Just when we thought the inflation trend was our friend, easing into a more comfortable zone, it decided to show its true colors. The market reacted like a drama queen at a surprise party, selling off in a fit of panic. But that selling may have not been justified as we all know that we are dealing with a 2020-2021 inflicted inflation. No new news here. It is like panicking about an airplane falling off the sky after it already fell.

But here’s where it gets interesting. The very next day, the dip buyers emerged from their hiding spots, swooping in like superheroes to buy the sell-off. It was a classic case of financial déjà vu, with investors playing a high-stakes game of “Red Light, Green Light,” market edition. Were you the dip buyer too or did you sell your mother, house, wife and kids out of sheer fear too?

 

The market outlook was grim after the selloff but remains very overbought

 

If it wasn’t for the buyers, the markets would ease their marching upwards and we would finally see a decent correction. Honestly, it is needed already as these highs, no matter how pleasantful to our portfolios they are, this rally is more and more unsustainable.

 

 

The Friday Fiasco

 

Fast forward to Friday, and we received a manufacturing prices report that did the financial equivalent of yelling “Boo!” in a quiet room. Despite the easing inflation trend, investors, spooked by the unexpected numbers, initiated a sell-off sequel. The market dipped, leaving us hanging on the edge of our seats, wondering if Monday would bring another round of dip-buying heroes or if we’d be left in the lurch.

The spread between the market’s price and its 50 day MA started finally narrowing. Is it a first sign of slowing down? The gauge dipped lower only a tiny bit. It still shows that we are way overbought. And so, I wish for a consolidation, a sideways move. that way all my gains will be consolidated without any drawdown. But if we see a 5% or even 10% correction, so be it. We just need to protect what we have so far.

 

Bullish or Bearish: What’s Next?

 

As we stand at the crossroads, the big question looms: Are we bullish or bearish for the upcoming week? The market’s mood swings last week have left many investors scratching their heads, wondering if we’re witnessing the beginning of a topping pattern or if a recession is peeking around the corner.

 

 

The market is still bullish and overbought as shown on the chart above. The changes we see happened after Friday’s selloff and thus not conclusive enough to say whether we are heading up or down.

What do we see?

The price is in strong uptrend.
The moving averages are in uptrend, the 3 day MA recovered and turned up even after Friday.
IMACD is overbought and bullish, but showing signs of easing.
ADL trend is rising and bullish.
IMACD_OP is bearish and declining.
Coppock curve is declining and bearish.

If history and last week’s patterns are anything to go by, we might see a repeat performance of the dip-buying brigade stepping in. The market has shown resilience, bouncing back with the tenacity of a cat with nine lives. Yet, caution remains the word of the day, as the specter of inflation continues to cast a long shadow over our decisions.

 

The Crystal Ball Says…

 

Predicting the market’s next move is akin to forecasting the weather in a land where seasons change at the drop of a hat. However, armed with our analysis and a sprinkle of optimism, we can make some educated guesses. The market’s reaction to last week’s reports suggests that while investors are jittery, there’s still a strong appetite for risk, especially if prices dip to attractive levels.

We may very well see a continuation of the “buy the dip” strategy, especially if no further unsettling news hits the airwaves. Yet, it’s crucial to remember that the market is a complex beast, influenced by a myriad of factors from global events to corporate earnings and government policies.

 

Wrapping It Up with a Bow (and a Laugh)

 

In conclusion, next week promises to be another chapter in our ongoing saga of market adventures. Whether we’ll be riding high on bullish winds or bracing for bearish storms remains to be seen. But one thing’s for certain: the market will keep us on our toes, ready to leap at opportunities or dodge potential pitfalls.

 

 

As we gear up for another week, let’s keep our wits about us, our humor handy, and our investments savvy. After all, navigating the stock market is a bit like attending a masquerade ball – you never quite know who’s going to show up, but you can definitely plan to enjoy the dance.

Till next time, keep those portfolios diversified and those spirits high. Here’s to hoping for a week of pleasant surprises and profitable opportunities. Happy trading, everyone!