The Rally ISN'T Over.

TBI
2023-02-12

The stock market rally that has taken retail bears by surprise is NOT over yet. Here's why I think that is the case:

Consider SPY's daily chart. As you can see, since we made a short-term capitulation style bottom at 348, we have been trading in a rising wedge pattern that is reminiscent of previous bear markets. We have seen higher highs and higher lows in the pattern. It is interesting to note that since the start of this year, we have been trading in a secondary ascending channel within the broader wedge pattern. Bullish divergence has continued to form after Friday's trading session. While we made higher lows on the daily, the 14-day RSI indicator was making lower lows. This suggests that rally continuation is inbound. 

By the end of this week, I am expecting the market to choose a side - it either closes at 3950 (or lower) or 4150 (or higher). This is based on the range of the rising wedge that we have. 

Moreover, I note that many stocks are still in the midst of their inverse head and shoulder patterns (i.e. NVDA, SHOP, Chinese Stocks etc.) which lead me to think that there is some upside to go before a wider market pullback. Some stocks haven't even hit their 225DMA (i.e. TSLA). 

Furthermore, recently, the Federal Reserve has revised the CPI figures for the past year. It was found that CPI figures for the first half of the year were overreported while CPI figures for the second half of the year were underreported. This leads me to think that in the event that CPI does come in hotter than expected, the monthly and YOY change won't be as much as feared. Any downside is likely to find support at 3950, which would still form a higher low in tandem with the rising wedge pattern. However, if we break and hold below the wedge, then the bullish thesis might be invalidated.

The Federal Reserve doesn't act as fast as people think, and I don't think one month of higher CPIwill really push the needle or force the Fed to radically alter their monetary policy. 

With that, I wish everyone all the best for the upcoming week of trading - it will be an interesting week for sure!

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@MillionaireTiger  @TigerWire  @CaptainTiger  @TigerStars  

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Comments

  • Asphen
    2023-02-13
    Asphen
    the under-reporting figure as a shock to most. -0.1 to 0.4 or 0.5 will be seen as alarming even though YoY is lowering.
  • TBI
    2023-02-13
    TBI
    you're too bearish. declining volume on red days and green days you see increased volume on higher lows.
  • KYHBKO
    2023-02-14
    KYHBKO
    if we look at the volume,  it is showing decline. one interpretation is that the current run is losing momentum. thus, I do think that there is down trend coming up soon. 
    • KYHBKOReplyTBI: 
      thanks for sharing.  it is interesting to hear your views and about MM.
    • TBIReplyKYHBKO: 
      seems like MMs wanted to gap fill 415 and then head lower. Ill share my thesis later again but it seems like near term we might be headed to 400. overall I do think we might still go to 420 and higher but not before a leg down.
    • KYHBKOReplyTBI: 
      good sharing. tonight's CPI figure will have her part to play.  let's monitor.
    • TBI: 
      even if there is a downtrend likely to be contained at 3950... likely they are still looking for the gap fill at 420s before they let this market reverse. in an extreme scenario it is possible market double tops at 4700 before heading lower
  • Bulltrader
    2023-02-13
    Bulltrader
    u look at volumn. it is disappear and weakend. if break 3850 is over. need to see RSI
  • zerolih
    2023-02-13
    zerolih
    so eventually a pull back will happen?
    • TBI: 
      probably still buy the dip mode, be careful and stay hedged.
  • wingcheong
    2023-02-13
    wingcheong
    Absolutely right. Like [smile]
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