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Sunday, January 29, 2023


Technical Tuesday – Markets Pause at Our Strong Bounce Lines

Well, here we are

As expected, we got to our strong bounce lines on yesterday's pre-market rally but then we went nowhere and now we'll have to wait and see if we go somewhere for the rest of the week.  After getting properly spanked by Wall Street for his latest China tweets, the President has been more conciliatory – other than his continued attacks on the Fed, where he is now demanding a 1% rate cut.  That too may backfire as it will be impossible for Powell to please the market with even a 0.5% rate cut and expectations are now over 85% that the Fed will cut at the next meeting.  

As you can see from our S&P 500 chart (SPY), we're at the Strong Bounce Line – which is the same line we've been using all month, predicting both the bottom and the top of the correction.  As you can see, the 50-day moving average is just above at 2,945 and the S&P is at 2,920 this morning and MUST HOLD that bounce line at 2,910, which I think it should do into the Fed.  Our other indexes are also right around their strong bounce lines:

  • Dow 25,000 is the mid-point and bounce lines are 25,550 (weak) and 26,100 (strong)
  • S&P 2,850 is the mid-point and bounce lines are 2,880 (weak) and 2,910 (strong)
  • Nasdaq 7,200 is the mid-point and bounce lines are 7,360 (weak) and 7,520 (strong)
  • Russell 1,440 is the mid-point and bounce lines are 1,472 (weak) and 1,504 (strong) 

The Dow (26,135) and the Russell (1,509) are too close to call green but both are also over their lines which means we are on the way to recovery if these lines can hold up and recovery is still 3% up from here so there's a lot of money to be made on the rebound if we play it right (and if it comes).  

While we expected the strong bounce, we're still pretty skeptical it goes farther than this as we only got the strong bounce through a lot of intervention by the Fed, the Administration and even other Central Banksters – all talking things up into and over the weekend.  None of that changed the actual underlying Fundamentals of a weakening economy that led to the sell-off – it just masked it and, for how long is the question?

"Oh, your friends with their fancy persuasion

Don't admit that it's part of a scheme

Then I can't help but have my suspicions

'Cause I ain't quite as dumb as I seem

And you said you was never intending

To break up our scene in this way

But there ain't any use in pretending

It could happen to us any day." – Ace



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