Here is a quote from last week’s BOTTOM LINE, which remains valid: “A leg up in the bear market rally, or perhaps the entire countertrend rally ended after being rejected when TATY, our strategic supply and demand indicator, entered the red zone and then rolled over into a decline.  Historically the red zone is “where bear rallies go to die” and at least for the latest leg up that has continued to be the case. Unfortunately, the return of the bear cannot yet be confirmed, because a cohort of other supply and demand indicators like SAMMY and STERLING ended the week positively diverging with the declining price. A close below S&P-500 3764, the December 22nd low, and the disappearance of positive divergences would likely be required to confirm the expiration of the overlapping and time-consuming bear rally, a likely bull imposter like all bear rallies but a really good one given all the “happy talk” and “animal spirits” evident in much of the financial media.

The return of the bear still cannot be confirmed, because all the conditions set forth in this quote from last week still have not been met. Furthermore, not only did the positive divergences not disappear they have grown stronger with TATY and SAMMY ending the week at their highest levels since December 2021, which implies the October low may have ended the bear market in a “stealth” rather than classic capitulation fashion.

Continued improvement in our proprietary supply and demand indicators confirmed by Lowry Research measures of supply and demand and analysis will be required to confirm the unlikely emergence of a new bull market off the October low in an environment of the lowest unemployment in 50, or 70 years depending upon the source, sharply rising interest rates in a newly emerging rising interest rate cycle, expensive stock valuations, and rising geopolitical risks in Europe and the South China Sea. I cannot remember any precedent for a new bull market arising out of these kinds of political and economic conditions, but perhaps trillions of dollars in stimulus compliments of global central bankers during Covid can result in the seemingly impossible?

Until this conundrum is resolved, we will continue to lean heavily on an asset allocation favoring rolling 3- and 6-month T-bills so our clients can continue to enjoy liquidity and a nearly five percent yield virtually risk free on their wealth. This comfortable strategy is providing a return only marginally below the one hundred plus year average return for equities, which are considered a significantly higher risk asset class.



Here is a quote from last week’s weekly update: “This week the price was rejected after TATY had entered the red zone and the price subsequently began a multi-day decline. However, the decline so far has lacked the kinds of negative internal measurements normally associated with the resumption of a bear decline following the expiration of a bear rally. This leaves open the possibility that the bear rally may still have some unfinished business, especially given the unexpected development of positive divergences in some important supply and demand indicators during Friday’s continuing price decline”.

The bears were no doubt feeling better earlier this past week, when the stock market appeared poised to break back below the S&P-500 200-day moving average, a key support level closely watched by both stock market fundamentalists and technicians. However, those pesky positive divergences in some of our important proprietary supply and demand indicators, mentioned in the highlighted quote from last week’s update, did what they almost always do and began to pull the price higher leaving the 200-day moving average without a breach on a closing basis. By Friday’s close TATY and SAMMY had powered to their highest weekly closes since the end of 2021! This evidence of resurging strength increases the probability substantially of an assault attempt on overhead resistance surrounding the S&P-500 4300 level.

Any further strengthening in our proprietary supply and demand indicators confirmed by increasing strength in Lowry Research indicators and analysis, would increase the probability that a “stealth” bear market bottom may have formed at the October low. This would be an unhappy and perhaps unprecedented outcome given that I’m not aware of any new bull market beginning from a base of historically low employment, a new and sharply rising interest rate cycle, expensive stock valuations and major geopolitical risks, both in Europe and potentially the South China Sea. However, one cannot underestimate the power of trillions of dollars in global stimulus courtesy of central bankers during Covid to float asset prices higher and also to contribute significantly to inflation, which tends to be a stubborn and difficult process to reverse.

We shall be watching our indicators carefully for signs of exhaustion and the development of negative divergencies in a cohort of our supply and demand indicators as the price likely works its way toward overhead resistance surrounding the S&P-500 4300 level.



TATY is shown above in yellow with the S&P-500 overlaid in red and blue candle chart format. TATY finished the week at 145 marginally above the red zone surrounding the 140 level.

This is the highest close for TATY since December of 2021. If the bear market ended at the October low, then TATY will continue to rally and eventually begin to form tops in, or near the blue zone surrounding the 160 level and bottoms in, or near the red zone surrounding the 140 level. TATY did NOT manage to enter the caution zone surrounding the 115-125 level prior to rallying into the red zone, so the conditions for a “BIG CHILL” warning have not been met, even if TATY is rejected in or near the red zone, which is a complication with unknown consequences.



SAMMY is shown above in yellow with the S&P-500 eMini futures contract overlaid in red and green candle chart format. SAMMY tipped off investors last week by developing a positive divergence (dashed up sloping green line) to the still declining price that a price rally may follow the indicator higher and this week the price did exactly that. SAMMY has been consistently stronger than it was at the January 5, 2022 all-time high, which suggests the October low may have been a “stealth” bottom to the bear market. It is unlikely that the rally will end before a cohort of supply and demand indicators begin to negatively diverge with the rising price. The growing strength in TATY and SAMMY increase the probabilities substantially that overhead chart resistance surrounding the S&P-500 4300.00 level may be assaulted in the days, possibly weeks ahead.



STERLING is shown in the top panel above with the S&P-500 eMini shown in the lower panel. STERLING flashed a big positive divergence (green up sloping dashed line) and this past week the declining price reversed and started to follow STERLING persistently higher. However, investors will observe that unlike TATY and SAMMY the rally in STERLING has not been as powerful as in TATY and SAMMY. This lagging strength in STERLING vis-a-vis TATY AND SAMMY may set up a situation where STERLING catches up in strength relative to TATY and SAMMY, or TATY AND SAMMY begin to fade as the price approaches overhead resistance surrounding the S&P-500 4300 level. At major turns I prefer to see multiple supply and demand indicators fading the price trend. So, these usually highly accurate indicators have a looming test ahead, if the price approaches S&P-500 4300 as I now expect.

Screenshot (1162)
Screenshot (1163)

Screenshots-1162, 1163 (both above) and 1164 (below) have all been shown before and are updated through Friday’s close for your additional information and perspective. The dashed red horizontal lines on Screenshots-1162 and 1163 show the important chart resistance surrounding the 4300 level on the S&P-500 eMini futures and cash index. Screenshot-1164 is a big picture perspective on the bear market to date and the crudely drawn dashed white lines show one path the bear market may take, if the bear market did not end in a “stealth” bottom in October. However, there are other paths which may also be valid, so the drawing is for illustrative purposes only and not intended to be definitive.

Screenshot (1164)



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