THE BOTTOM LINE
The S&P-500 and NASDAQ finished 2022 down almost 20% and 33.1%, respectively. Given the condition of many supply and demand based indicators as of the end of trading in 2022, then the odds remain favorable toward a continuation of the bear market, which began on January 5th, 2022 at S&P-500 4818. For the time being we will continue to treat the bear market as an ongoing correction of the last leg up in the Great Bull market, which began at S&P-500 2190 on March 23, 2020.
However, a close below S&P-500 2190 would imply that a very large “degree” bear market had been in existence since the all-time high at S&P-500 4818, which would imply that the bear market was likely correcting the rally from at least the S&P-500 low at 666 on March 9, 2009, or perhaps even lower. The existence of such a large “degree” bear market would have very serious implications for chaos socially, economically, financially, politically, and geopolitically.
AWAKENING IN 2023
Here is a quote from last week’s update, which is still valid: “Another countertrend rally did develop and so far, it has been complex and slow moving. Given that this time of year often experiences low volume, then this complex upward correction may linger after the decline from S&P-500 4100.96, the December 13th high, was rejected approaching Fibonacci support at the 3800 level. However, if S&P-500 4100.96 is not violated on a closing basis by any rally, then the odds remain favorable that the bear market has reasserted itself at the December 13th S&P-500 4100. 96 countertrend rally high”.
The countertrend rally remained complex during the holidays on low volume and so far, continues to be rejected at the S&P-500 3800 double Fibonacci support level. However, next week Wall Street will return from the holidays and volume is expected to increase substantially, which is likely to drive volatility and the velocity of the price higher. Given the way a cohort of supply and demand indicators finished the month of December, then I’d expect another rally attempt failure followed by an assault on the S&P-500 3800 support level in the early days of 2023.
If the December 13th countertrend rally high at S&P-500 4100.96 is not breached on a closing basis, and then support at 3800 is breached on a closing basis, then the odds would increase that the October 13th low to date for the bear market at S&P-500 3490 would very likely be assaulted not long after. A breach on a closing basis of the October 13th low to date for the bear market at S&P-500 3490 would very likely give way to an acceleration lower in the price in an environment, where the S&P-500 finished 2022 down almost 20%, and the NASDAQ down 33.1%.
TATY — A REPRESENTATIVE OF A FAMILY OF STRATEGIC SUPPLY AND DEMAND INDICATORS
TATY is shown above in yellow with the S&P-500 overlaid in red and blue candle chart format. TATY finished the week at 134 after being rejected again at the red zone surrounding the 140 level. TATY appears poised to roll over lower and if it does as the price attempts to rally, then that situation would likely be a harbinger of another rally attempt failure. Any price rally not being led higher by TATY would be highly suspect at this point in the bear market. A break of the magenta up trend line in the lower panel Premium/Discount indicator would almost certainly foreshadow another assault attempt on the S&P-500 3800 support level.
SAMMY — A REPRESENTATIVE OF A FAMILY OF TACTICAL SUPPLY AND DEMAND INDICATORS
SAMMY is shown above in yellow with the S&P-500 eMini futures contract overlaid in red and green candle chart format. The resurgence in strength in SAMMY suggests there is likely enough demand to drive the price higher in a lingering rally attempt. However, there was some fade in SAMMY this past week, which implies any further rally is likely to fail. Any such rally failure would likely lead immediately to another assault on the S&P-500 3800 support level.
STERLING — A REPRESENTATIVE OF A NEW FAMILY OF SHORT TO INTERMEDIATE TERM TRADING INDICATORS UNDERGOING TESTING
STERLING is shown above in the upper panel with the S&P-500 eMini futures contract in the lower panel. As the price was meandering in a range for the last ten trading days of December, STERLING was building a positive divergence to the rangebound price. This very positive divergence, shown as an up sloping dashed green line, may be a harbinger of a rally attempt as the players return to Wall Street from the holidays. However, if any rally attempt fails below S&P-500 4100.96, then the odds favor a resumption of the bear market in the first few days, or weeks of 2023.
Screenshots-1116 (above) and 1117 (Below) are the S&P-500 eMini and cash index, respectively, and are shown here for your additional information and perspective. Both charts show important resistance levels by horizontal dashed lines.
Screenshot-1118 (below) has been shown several times before and has been updated through Friday’s close for your information. Please note the dual horizontal Fibonacci support lines at the 3800 level, which continues to be tested, but has rejected the attempts in the price to break lower. A breach of this support on a closing basis would likely result in an assault on the October 13th low at S&P-500 3490 sooner rather than later. The dashed white lines represent one way the bear market resolve from here, but there are other valid paths, so the one shown is not intended to be definitive.
