Monday, January 30, 2023
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Momentum vs. Value: Is the Inventory Market Rally Over? | Mish’s Market Minute

Final week was the reset of the January 6-month calendar vary. For the S&P 500, that vary sits at 3770-4000.23.

In our 2023 Outlook, the prediction we made for the yearly vary is far wider, or between 3200-4200. That’s primarily based on the place of two key month-to-month transferring averages. Trying on the 6-month vary, at the moment’s excessive was 402.64, however SPY closed at 400.52 Simply marginally above the vary and properly under the excessive of the day. Additionally, attention-grabbing to notice is the 50-week transferring common, which SPY has but to clear.

So, optimistic motion? Sure!

The sign to go full blown lengthy? Not so quick. What’s momentum telling us?

Earlier than we have a look at momentum, let’s look at a few different attention-grabbing areas of potential significance proper now, forward of a number of earnings, the PCE quantity and a Federal Reserve blackout interval.

First off there are the junk bonds and the two ETFs we watch, HYG and JNK. Each are essential to the market breadth, and each closed pink and are underperforming SPY.  That makes the exuberance proper now suspect.

Observe the underside of the chart. The blue line sits properly underneath the pink line–that means underperformance.

Our Actual Movement Indicator helps to evaluate rising, slowing, or altering momentum in any and each tradeable monetary instrument. As famous by the chart, in high-yield-grade bonds, momentum trades sideways after a promote sign (imply reversion) final week.

Circling again to the SPY, momentum displays the resistance auspiciously proper close to the calendar vary. Slightly below the dotted line (Bollinger Band) we want extra momentum to be satisfied this rally can proceed.

One market that we’re holding a detailed eye on is small caps.

The Russell 2000 is the chief of the Financial Fashionable Household. The 6-month January vary excessive is 187.84. IWM closed under that stage. Momentum tells us that after final week’s imply reversion, Monday’s retest of the Bollinger Band is value being attentive to.

Placing all of it collectively:

  • SPY rallies to resistance, exhibits “meh” momentum, however marginally clears the calendar vary high–neutral to bullish
  • HYG underperforms the SPY and rallies into momentum resistance–neutral to barely bearish (additionally buying and selling properly underneath its 6-month calendar vary excessive).
  • IWM closes underneath the calendar vary excessive and momentum exams resistance–neutral to barely bullish.

Backside Line

Bulls have to see more–more momentum, greater costs, and high-yield bonds comfortable.

Bears have to see more–SPY and IWM falling from right here, momentum declining, and excessive yields bonds persevering with south.

Yep, it is that shut.

Data gathered from: 


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  • S&P 500 (SPY): SPY has crossed the 200-DMA and is now barely above it, however continues to be a really slender value vary under to 50-DMA. Held pivotal help and now what was resistance is help on the 200-DMA. Resistance is 405 overhead.
  • Russell 2000 (IWM): Crammed the hole and continued to carry the 200-DMA and overhead resistance at 189.
  • Dow (DIA): Again underneath the 50-DMA nonetheless as industrials lose floor to tech, however holding help at 335 and seeking to cross the 50-DMA at 336.07.
  • Nasdaq (QQQ): Crossed the 50-DMA on Friday to shut above. First stage of resistance is on the 200-DMA and shutting barely under it.
  • Regional Banks (KRE): Near crossing 60.72 (50-DMA). First stage of help is 58 and resistance is 50-DMA.
  • Semiconductors (SMH): Nonetheless holding key help simply on the 50-WMA and 200-WMA. 221 help and 228 resistance.
  • Transportation (IYT): Nonetheless holding 225 key help right here now holding first stage of help holding 227.
  • Biotechnology (IBB): Nonetheless greatest sector, with 132 key help nonetheless holding and holding first stage of help at 134, now with 137 resistance.
  • Retail (XRT): Holding pivotal help at 63. Resistance at 66.

Mish Schneider

MarketGauge.com

Director of Buying and selling Analysis and Training

Mish Schneider

In regards to the creator:
Mish Schneider serves as Director of Buying and selling Training at MarketGauge.com. For almost 20 years, MarketGauge.com has offered monetary info and schooling to hundreds of people, in addition to to massive monetary establishments and publications corresponding to Barron’s, Constancy, ILX Methods, Thomson Reuters and Financial institution of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of many high 50 monetary individuals to observe on Twitter. In 2018, Mish was the winner of the High Inventory Choose of the yr for RealVision.

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