The Weekend Review of the Markets: Indices Have Approached Their 50-Day Moving Averages

Well, after a strong rally, the S&P 500 and the Nasdaq 100 have finally entered at least a pullback, with the SPX nearing its 50-day SMA, and the NDX poking through its. But in doing that, they have both done so with slowing momentum, which has created a contraction in price that presents itself to us in the form of large bullish wedges:


As classical chart patterns (as opposed to Elliott wave structures per se), I think I am going to give them the benefit of the doubt for the time being. A few reasons for that relate to how we’ve hemmed and hawed our way to these 50-day moving averages.

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One last thing I can point out is an inverse that I projected as a possibility early on Friday, and so far, that still looks possible from here.

So far it looks like it’s retested the neckline from above late in the session. And if that retest is successful here, we may move to 4500 next (at a minimum), which is the measured move of the inverse:


Ok, we’ll see what happens. I hope everyone has a fine weekend. I look forward to seeing you next week. I think there is a lot of room for optimism for the bears here. We’ll see what they can pull off in the coming days and weeks ahead.

My intention here of course is not to be bearish just because (though I will admit I am often bearish by nature), but the thought here is still an attempt to be rational: the thesis laid out on June 30th remains the basic thought behind the bias, even still today. And I have seen nothing to discourage me from that view yet. Sure, especially some big tech names went absolutely bonkers, driving the indices up more than I thought would have been reasonable. But that’s all still a part of that very same thesis: the market needed to get everyone bullish before a big decline could take place. And I think we’ve seen that. A good capitulation, a change of heart—even among some folks who previously accepted a bearish thesis. The market will need to twist as many of them as it can to the bullish side of things (and it’s done its job well here in that regard), that’s my thinking here. We reached what could have been a really emotional area of the market, at least from what I can tell. It sure pissed me off haha. And that’s a good sign—I think—that we may have entered something new now.

Lag effects are coming and are probably here and I think that will be priced in, and if the weakness we are beginning to see in some names [cough] [Apple] is a sign of what’s coming, so be it. If the fastest hiking cycle in history causes a recession, that’s going to be priced in, and that part won’t look like 2022. It will look like something new (and worse), I think.

So let’s see what happens.

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