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The Goldilocks Rally, led by Tech/Growth stocks, motors on

[edit] No sooner was this posted than Q1 GDP was revised upward from 1.2% to 2%. It’s stuff like that that can disrupt if not change the trends below due to inflation expectations and the attendant Fed fears. At the market open, it’s still fully intact, however.

I have had to push my favored time frame, originally projected from Q4, 2022 to or through Q1, 2023 out to Q2. Now, with the Goldilocks rally continuing apace, it’s on the verge of Q3. And it is still displaying the “Goldilocks” persona, which by my definition is Tech/Growth (and in this case in more erratic fashion, Semi) led, as inflation expectations moderate. Yes, the inflation-to-disinflation progression has been lumpy, but it is in progress and it is a process.

The next part of the logical progression is uncomfortable disinflation otherwise known as a deflation scare. In NFTRH we have begun reviewing the potential and possible elements for a resumed inflation situation resuming sooner rather than later, but as yet the original plan remains favored. Disinflationary Goldilocks to disinflationary, shall we say, discomfort (at best).

I am starting to think that the bear market rally may persist into Q4, which would make sense with one of our original rationale (of several) for the rally to begin with. That was the post-election cycle after the mid-terms last November. Here is the historical projection originally included in a post from last November, which discussed the reasons for a coming rally.

Of course, the overwhelming majority of the data are from bull market periods and if this is the bear market rally I think it is, the US stock market is no guarantee to perform well a year out from the election. But on average, that is exactly what it has done, and if it were to persist a year, into November, voila… Q4.

Moving on, here is a chart showing both Tech and Growth maintaining the intermediate trend of the (blue) daily SMA 50 vs. the broad SPX and a Value stock index, respectively. It’s an internal view into the US stock market and as stated, it’s intact as of this morning.

My favored plan is for this to end when speculation is terminated, either through upside exhaustion or a violent reversal. But I’ve got time and do not plan on fighting the market. The next target for SPX is the unlikely 4800. Will it get here? I don’t know. Do I care? Not really.

Unlike some other bears (which I am by definition of my view that this is a bear rally) I am not displaying emotion or trying to impose my will on this mess. Why? Because it’s doing exactly as projected! Just on a longer time frame. The market is there and it is what it is. It’s up to us to manage it. Internal views like the above help in that management. It’s pretty simple.

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