Don’t trust the media. Don’t trust sell side research.

 

The headline: S&P 500 RISES 8.9% FOR BIGGEST MONTHLY GAIN SINCE JULY 2022. Dow Jumps 500 pints to new 2023 high.

The Reality (Headline SHOULD say): S&P 500 still below its summer 2023 high and way below January 2022 high of 4818

Headlines used to focus on the SPX when tech was strong. However, since (as I warned you would happen) the tech sector has had lame performance, the media has turned to the more diversified Dow to spin the vibe. They need headline bait, and the they are tied into Wallstreet’s sell side to pump whatever they can pump.

True, the Dow Industrials are eking out a yearly high (less tech concentration). Yet, it is still below its 2022 highs from almost two years ago!

The SPX, with its huge tech focus, is not at 2023 highs, and is substantially below the January 2022 highs.

 

Thoughts to ponder

I believe there is probable “buyer exhaustion” going on here. This, based on technical indicators on the chart below.

Note as well that the first two weeks of December can be a little soft from a seasonal perspective. From there, we often see a rally into early January (Santa rally), followed by choppy markets before the next major period of outperformance begins in March. I’ve annotated the EquityClock graph with these observations:

 

 

Conclusion

My experience suggests that we should always choose to ignore the headlines, lest  they influence us in our market analysis. There’s little doubt that the market is overbought.  The rally has likely reached an exhaustion phase. This lines up with a seasonal tendency for a brief period of weakness in the first part of December. I’m looking to add to positions if that happens, although I am well aware that the early months of winter, while not seasonally weak, can be less predictable.

I hold out that SPX 4800 is likely to be seen before next spring. Once that level is tested, it is to be seen if price can break materially past 4800. My bet is not. But that’s just a guess. My guess should be taken with the same grain of salt as the media headlines! We must adhere to our trading rules – as explained in my Online TA course. Which, as you saw in last weeks blog, is on sale this month.

Happy trading!

 





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