A New Bull Market?
The first trading week of 2023 is in the books and it finished with a bang. The Nasdaq and the S&P 500 both staged big follow through days on Friday, with the S&P 500 gaining just over 2.25% while the Nasdaq gained 2.56%.
The S&P 500 remains the stronger of the two indexes and is now back above its 21 exponential moving average, turning the market section of the Stop Light indicator to green. Fridays strong showing also pushed the S&P back above the anchored VWAP from the October lows, indicating that buyers are back in control from that point.
We also saw the 50% Fibonacci retracement level from the low in October to the high in December has held steady and only closed below it once, before quickly bouncing back the next day. During that same time, price consolidated and we were due to break one way or the other. With Friday's positive action, the S&P 500 not only solidified buyer support at the 50% retracement level, but also moved above the 38.2% retracement.
While there are still the 50 day and 200 day moving averages overhead that could act as resistance, the overall action on the S&P 500 looks promising for a tradeable rally.
Before we dive into the dollar, interest rates and the Vix make sure you are subscribed so that you don’t miss any future updates!
Turning to the dollar, interest rates, and the VIX, the dollar has declined about 10% from its highs and is in a clear downtrend. On Thursday, the 50 day moving average crossed below the 200 day moving average, a bullish sign for continued strength in equities.
Interest rates have been consolidating, but saw a breakdown on Friday, with the 2 year closing near the lows and the 10 year's 50 day moving average acting as clear resistance. The VIX also had another rejection at the downward sloping 50 day line, which again bodes well for equity bulls.
Taking all of these factors into consideration, it seems that a tradeable rally is likely, given the constructive action of the indexes and the weakness in the dollar, interest rates, and the VIX. As such, it makes sense to look for long set ups in the market. I highlight which stocks I’ll be watching in the video below.
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The content presented is for informational and educational purposes only. Nothing contained in this newsletter should be construed as financial advice or a recommendation to buy or sell any security. Please do your own due diligence or contact a licensed financial advisor as participating in the financial markets involves risk.