Phases & Cycles: Market Outlook – November 14, 2022
The last Market Comment titled “A Fork in The Road”, indicated the two possible outcomes at that time: a continuation of the uptrend that commenced in the middle of October, or a turn-around to revisit the June-October lows.
Looking at the SPX chart below, nothing major has occurred since then despite the positive Advance/Decline and Upside/ Downside numbers. As the chart indicates, the SPX continued to move above its 50-day Moving Average (50dMA). However, the 200-day Moving Average (200dMA) and the downtrend line continued to decline as they have done since early January.
The down-up-down pattern (A-B-C) visible on the chart is a typical correction pattern. The “double bottom”, which is formed by the SPX finding support twice at about 3600 (letter A and letter C), is a typical pattern that usually leads to the beginning of a new up-leg. However, this is not infallible, sometimes the market decides to have another down leg. In the current case, this would create another down-leg towards 3500 which is the ½ correction of the move from the 2020 low to the 2022 January high.
However, there are numerous positive signals. The percentage of stocks above their 10-week Moving Averages rose from 12.3 (midOctober) to 53.2 (Nov. 8th); those above their 30wMA rose from 11.3 to 28.8 (courtesy of Investors Intelligence). The AAII’s (American Association of Individual Investors) report shows that the “bulls” increased from 23.9 to 30.6 and the ‘bears” declined from 54.8 to 32.9. In addition, last Wednesday was a “selling climax” day: Declining Volume was 10-times as much as Advancing Volume, and last Thursday was a “buying Climax”, as the numbers reversed.
Add to this, last Thursday’s two potentially bullish news: that inflation could rise at a lower rate than expected and that the Republicans didn’t gain both houses. That day the DOW gained over 1,200 points, the SPX rose over 200, the NASD 750 and the VIX decline by 2.54 points to 23.53.
Does this mean that the decline is over, that the market will rise from here? NO, but it might! All we need is to see SPX above 4,100.
TORONTO’s TSX index clearly mimics New York’s activity. The “magic” number to get over the 200dMA is 20,200.
Capitalight Research . 130 King Street West, Exchange Tower Suite 1940, Toronto, Ontario M5X 2A2
subscriptions@capitalightresearch.com . Capitalightresearch.com
The contents of this report may NOT be copied, reproduced or distributed without the explicit written consent of Capitalight Research Inc. ©2022, Capitalight Research Inc. All rights reserved
The opinions and projections contained herein are those of Capitalight Research Inc., its principals, associates and employees (collectively “the researchers”) and are subject to change without notice. The information contained herein has been obtained from sources that we believe to be reliable but cannot guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that “the researchers” are to be under no responsibility or liability whatsoever in respect thereof. “The researchers” may, from time to time, buy, own or sell securities mentioned herein. “Capitalight Research Inc” is a division IC Capitalight Corp.
The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This newsletter was written, designed and produced by Phases & Cycles Inc. for the benefit of Larry Gaucher who is a Senior Wealth Advisor for iA Private Wealth and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.
iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.