This week looks like there may be a little short-term relief from the bears. No guarantees, of course, but the technical set-up suggests there could be a small recovery rally on the SPX as it looks to recover towards the 4170/4207 range. This would be a move of more than four percent – certainly welcome after all the selling of the past month.
It’s too early to tell if this is the base of the move downward (aka buy the dip). In fact, just because the technical setup suggests there may be a brief recovery from here does not mean it will materialize. It simply means the patterns underpinning things suggest it. Markets can still do what they’ll do. And there are plenty of variables that are difficult to factor into this thing.
If there is a good sign out there, it’s that a lot of folks are beginning to suggest the end of the world – or some variant along those lines: S&P 500 falling to 3000 or something like that. Sure, anything’s possible – but is it probable?
When sentiment starts to get to extremes that’s usually a good sign the markets are looking for at least a short-term turnaround. Fundamentally, things actually look better from a pricing perspective than they have in a awhile. PE ratios are much closer to ‘normal’ than we’ve seen in a long time. The real question is, will we see a pull back in earnings or a shift in other variables that will make it even harder on stocks?
It’s possible. But for now, when looking at all the different asset classes out there, stocks look interesting (IMO). Commodities may inflate, but they tend to get hurt in recessions. Real estate already has the headwinds of higher rates. And bonds are contending with higher rates too. That doesn’t leave too many options (outside of cash or derivatives, which both have their dangers as well).
So we’ll continue to watch things unfold. For the week, first-level SPX support looks to be around the 4000 mark. More specifically, the lows last week of 3930/3858 are going to be critical. We break through those, there is probably more pain in store. We hold those support levels, and the 4200-ish bounce looks a lot more probable.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by BigFoot), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from BigFoot. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the BigFoot’s current written disclosure statement discussing our advisory services and fees is available for review upon request.