The US stock market remains choppy slop. Since October, the SPX oscillates between 3800 and 4200 a 400-point range. The chart indicators are lining out sideways. Ditto the moving averages with the 150-day and 200-day MA's flatter than a newlywed's souffle.
Price is at 3992 testing the 50-day MA at 3998 choosing to bounce or die. S&P futures are negative so it must like the idea of dying. Why are the markets choppy slop this year?
The US hit its debt ceiling in January and can still pay its debts using other measures into June. Most agree that the start of Q3 (July) is when the sh*t hits the fan. The debt ceiling drama will likely be decided in the June-August time frame. The first few days of August 2011 were ugly as a similar drama played out. Will it be another early August redux (stocks collapse)?
The corrupt lawmakers will wait to the last minute to talk so things will heat up in June and accelerate markedly in July. Is this the reason for the choppy sloppy action this year? Markets are directionless staggering sideways like a drunk in Times Square on Saturday night.
The case can be made with the blue lines that the stock market may simply chop inside that sideways symmetrical triangle pattern until the verdict on the debt ceiling is provided. There are always trading opportunities so the buys and sells may occur going forward as price hits the top and bottom rails of the triangle making its way to the big crescendo when the poor excuse for humans in Washington, DC, make a decision on the debt limit.
The vertical side of the triangle, should it develop and play out, is about 800 points (thick blue line), so the upside breakout targets 4800 and higher while the collapse out the bottom of the triangle would target 3200 and lower. There is lots of excitement ahead.
Keystone uses three key metrics to assess the cyclical bull and bear markets. The NYA 40-week MA cross remains bullish the first metric to flip to a cyclical bull a few weeks ago. The SPX 12-month MA cross is the most important metric and it is at 3962. The SPX price is at 3992 (exactly in the middle of the 3800-4200 range) only 30 points above and S&P futures are negative. It looks like a test of the critical 12-month MA at 3962 is on tap today where price will bounce or die. It will have serious implications on the stock market going forward.
The third metric for assessing the market cyclicality is the slope of the SPX 150-day MA. The chart shows the cyclical bull market continuing in 2021 into the top as 2022 began. The slope of the 150-day MA (pink) then went negative marking the start of the cyclical bear market. The NYA 40-wk MA cross and SPX 12-mth MA cross were in full negative agreement and the cyclical bear market thrived in 2022.
2023 is a more jumbled story. The bulls are trying to wrestle back control but the bloody battle continues. If you go to a shorter time frame for the chart above you will see the 150-day MA sloping back down again identifying a cyclical bear market but this and the 12-mth metric are in flux. The benny of the doubt has to be given to the cyclical bear market until clearly proven otherwise. All three metrics must agree and be firmly committed one way or the other to make the cyclical call.
The US stock market is trying to extricate itself from the cyclical bear market but it is not yet successful. The drama continues. Watch the SPX 3962 bull/bear line in the sand. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added Friday Morning, 3/10/23, at 7:25 AM EST: The US stock market collapses. The SPX plummets -1.9% to 3918 losing the 12-mth MA at 3957-3960 and 10-mth MA at 3921. Back tests are likely needed going forward. More choppy slop is likely with the US Monthly Jobs Report dropping in an hour and inflation data next week. The 2-year yield received the negative divergence spankdown in quick order losing 20 bips in a flash an unbelievable move. The 2-year yield is at 4.82%. The 10-year is at 3.85%. The 2-10 spread is at -97 bips becoming less inverted after the -110 basis point drop. A new hook pattern forms and heads higher for the 2-10 spread ushering in the US recession going forward, unless the yield curve becomes more inverted and drops below -110 bips which is already rare multi-decade lows.
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