What I’m saying is, since 1950, January has proven to be a very reliable predictor of US stock market movements from February to December. It’s going to be a very strong year. Another historical fact suggests that higher prices are ahead of us. I also recently mentioned that of his 13 bear markets since 1950, not counting the 2022 cyclical bear market, six ended in his October calendar month. bottom. If October 2022 turns out to be the ultimate low, it will be 7 out of 14, or 50% of all bear markets. This is another compelling piece of evidence that the bear market low is IN.
But if we step away from past trends and simply look at the S&P 500 chart, it’s the downtrend line from early 2022 that has almost every tech eye on it.
The downtrend line is currently crossing at around 4000, depending on how the trend line is drawn. In my view, it is the first critical level that needs to be cleared to confirm the end of the bear market downtrend. But check out the subtle differences we’ll see in January 2023. After the last three death crosses and his bearish PPO centerline cross, selling accelerated and new lows were quickly reached. We are seeing something completely different this time. PPO has broken above the centerline resistance in a bullish fashion. We also saw a bullish ‘golden cross’ just weeks after the death cross signaled a drop. what’s happening? Well, I can tell you what I think is going on. We are gearing up for a solid year. Many have waited months for price action to see what is happening beneath the surface. Yes, it’s time to let go of the bear mentality that was appropriate for the first six months of 2022 and focus on long positions. I don’t think I could have been more clear:
Did it finally drop slightly in October? Yes it did. That said, we are still pretty happy with the signals suggesting we short the S&P 500 earlier this year and move into a long position in mid-June 2022. From October 30th to October 14th. Since my bottom call, the S&P 500 has closed 143 trading days higher. I think we’ve been on the right side of the market since June and 2023 will prove that the October 2022 low was the ultimate bear market low. Waiting for will lead to lower returns, but I think time will tell. I said.
Another important technical factor that indicates the worst has passed is that we are seeing buying with bad news. The October low saw a massive reversal candle after his CPI inflation report in September, which was much worse than expected. There was heavy buying throughout the day after lowering the gap. check it out:
Another very positive development is that the sun is suddenly shining in 2023 after a brutal fourth quarter for many growth stocks. This is a very significant shift in market characteristics as many of these growth stocks have large market cap valuations and can move benchmark indices such as the S&P 500 much more easily. Check out the sharp improvement in growth stocks in 2023.
The November/December TNX sell-off didn’t have the same bullish impact on large-cap growth stocks (IWF) as the June/July sell-off. However, Growth vs. Value (IWF:IWD) is up solid for his 2023, and he’s clearly benefiting from TNX’s decline. I’ve highlighted in red the months of negative relative momentum experienced by growth stocks. Things are certainly improving, but we don’t see any significant confirmation of new strength in the long run.The Bulls still have work to do.
However, the resilience of major individual stocks to bad fundamental news is encouraging. Take Salesforce.com (CRM) as an example. Downtrend throughout 2022, Dow Jones constituent stocks have performed worst this year. But then CRM got a big pushback after announcing his 8,000 layoffs, or 10% of his workforce.
The green arrow highlights the success of the 20-day EMA test on the day the layoffs were announced, allowing us to see the subsequent rise. CRM is now trying to break above the recent downtrend channel and clear a key relative strength resistance against its software peer ($DJUSSW).
Last week, at our quarterly Sneak Preview: Third Quarter Earnings event, we featured Netflix (NFLX) as one of my favorite companies heading into earnings season. NFLX He loves January and January 2023 is no different. Check out this seasonality chart.
For the last 20 years, NFLX has averaged Earn 15.7 in January. This is amazing and why NFLX is our favorite seasonal stock for January 2023, telling EB.com members to start the month. These bullish thoughts have been proven correct as NFLX is currently up around 17% this month. Quarterly results were reported on Thursday and were strong as expected.
Tomorrow, at 4:30 PM ET, we’ll be hosting our “Q4 Earnings” event, where we’ll show you 10 of our favorite companies to report earnings in the next two to three weeks as earnings season is in full swing. He also reveals 10 companies he wants to avoid monetization entirely. We also discuss dozens of other companies reporting quarterly results. I use key technical indicators to evaluate companies prior to their quarterly earnings reports and they have proven to be very effective in predicting reported results. If you’d like to participate, click here to sign up for a 30-day free trial. You can try all services for free for one month. See you tomorrow!
Happy trading!
Tom
Tom Bowley is Chief Market Strategist at EarningsBeats.com. EarningsBeats.com is a research and educational platform for both investment professionals and individual investors. Tom produces Comprehensive Daily He Market Reports (DMRs) to keep EB.com members informed when the stock market is open each day. Tom has been providing his technical expertise here at StockCharts.com since 2006 and combines his unique set of skills to approach the US stock market, providing a basic understanding of public accounting. I also have a background.learn more