The Stock Market Continues to Battle Through Resistance: Market Commentary from Cabana’s CEO – February 12, 2023

1 year ago

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The stock market continues to battle through resistance and hold gains realized since the beginning of the year. This is no small feat in my opinion given all that investors are dealing with. Questions abound at every turn and there are as many seemingly reasonable opinions as there are talking heads.  

Are we in a recession? Are we going to have a recession? Will inflation continue to fall? Will the Fed pause or reverse its rate hike campaign? Have markets discounted the expected drop in earnings that is on the horizon? Was the October low the bottom of this bear market or do we have lower to go? Are we out of the bear market and at the precipice of a new bull cycle?  

It just goes on and on and the net result is elevated volatility. The broad stock indices are experiencing swings of 1-2% on a daily basis. While this has made “investing” feel a lot more like “trading”, the fact remains that through it all stocks have made significant technical progress.  

I am a big believer in the collective wisdom of markets and that charts don’t lie. The S&P 500 is now back above its 50- and 200-day moving averages and the 50-day is above the 200-day as evidenced by the golden cross we pointed out last week. Not to mention, it is holding… at least for now. In my view, we needed to clear 4000 (SPX) and then 4100 for a trend change to be possible. We have done just that coincident with the above-mentioned technical improvements. Say what you want but risk assets are moving up. I do not rule anything out given the remarkably difficult year we have just had, and another reversal lower may occur but for now things look better.  

As of this writing, we are seeing some consolidation and a retest of the breakout at 4100 leading up to this Tuesday’s CPI report. That alone may pull the covers back on a lot of the noise in both directions. A lower January inflation number would support the notion that the trend lower in prices remains intact, and that would be a very good thing. A higher number…….not so good. 

At Cabana, CARA signaled a reallocation last week and we are now in our Transitional Bullish Scene. We remain outside of target drawdown so the Safety Valve is in effect should markets deteriorate. 


January 17, 2024

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