If SPY’s daily chart has been rising in a bear flag after testing the key December low, then we’d have to think about calling an end to the Q4-Q1 rally, handily, right at the end of Q1. I have been very open to it extending well into Q2, but we’ll let the charts decide.
It is FOMC week (always a fun time) and that is the caveat to making grand pronouncements like ‘bear market resuming!’ because it’s an event that always seems to stimulate the machines for a day or 3. But I say forewarned is forearmed. With respect to SPY/SPX…
Warning #1 would be a short-term breakdown from the little flag, which would also take out the daily SMA 200.
Warning #2 would be the bear market re-trigger, which is to take out the December low.
I realize that other items are still well intact, like Tech and Semi.* But lots of other sectors are really getting iffy. I am going to respect SPX/SPY and at least start adding in shorts on less favored areas (e.g. SPY and others) to hedge if the flag breaks down and/or the December low is taken out.
I do expect the potential for real speculative money to be made by those who would short the market in 2023 (though my general main focus is long the precious metals). I’d just rather have a clear point of technical resistance meets over-bullish sentiment. But either way it is still a bear market (IMO) and hence, we should watch this flag as a potential precursor to another test of the December low.
On the sunnier side, let’s see if SPY can take out the SMA 50 on the upside. That would go a long way toward extending the rally into Q2.
* But I was just noting to myself today that “hmm, neither NDX nor SOX have taken the obligatory dump after their Golden Crosses of the daily SMA 50 above the SMA 200.“
