Questions for uncleharley

[Karen]

(1) What is your take on this article?

www.barrons.com/articles/stock-market-rally-7a1cfe26?mod=Searchresults

(2)  IS there any significance to S&P 4,560?

That means, at some point, those bearish on the market will have to “capitulate” and ditch their pessimistic views and opt to buy stocks. That point seems to be approaching: Evercore strategists wrote that roughly the 4560 level for the S&P 500 is where bears will become more bullish. The index is currently a touch above 4500. The 4560 level would be up just over 27% from the October low.

That gain would mirror something seen in the past. During the financial crisis, the S&P 500 rose just over 27% from a low point—only to fall back down to that low as it priced in the recession that was to come. So if the index hits 4560 and holds steady and doesn’t show much sign of cracking, bears will likely assume the market has moved on from recession fears—even if a mild one is on the way in the near-term.


Thanks in advance!

[uncleharley]

I really do not want to subscribe to Barrons so I can read their article so I will just run with your summary. The article is probably very articulate and well presented. It would be nice if they also mentioned that the area between the S&Ps current level and 2022s high is filled with data points that may at some point in the near future be significant. No, the market is not unstoppable! It never has been and never will be. The next point for celebration will be when/if the S&P sets a new high above 4818. Meanwhile I am watching price, volume, momentum, & market breadth for clues about the near future. Right now Captain Price is consolidating for the day on average trading volume. Upward momentum looks good & I do not have a reading on market breadth. Fwiw, the price is consolidating just above a significant data point from last April, which is comforting.

OOPS! I almost forgot your question. No, I see no more significance to 4560 than I see to a number of other data points between here and a new high.

[anitya]

uncleharley ,

Not an individual stock question.

Does intra day relative prices of ETFs or indices play a role in trading (entries or exits) these or one should pay attention only to closing prices and as such trade near the market close?

I ask this because the relative prices of these presumably diversified widgets are also all over the place throughout the day.

[Karen]

uncleharley , thank you for your reply.  Sorry, I was thinking you subscribed to Barron's.  Here's the entire article.


The stock market’s rally seems to have defied gravity, leaving bears waiting for something to cause a drop. At some point, they’ll have to give in and buy stocks.

The S&P 500 is up about 25% from its bear market low hit in early October. While it might be reasonable for the market to have rallied a little bit from that point, the extent of the rally has caught many off guard. Driving the gains has been the hope the Federal Reserve should end its interest rate hikes soon, as inflation continues to cool. The idea is when rates stabilize, the economy and corporate profits will do the same. But there’s near-term risk to earnings as the impact of higher interest rates happens on a delay.

Meanwhile, the market is now expensive, with the S&P 500 trading at just over 19 times forward earnings per share estimates. That’s up from about 15 times at the start of the rally—compared with how high interest rates are, it’s a historically high multiple.

That’s why any number of events could have caused the market to pull back, such as the jump in Treasury yields that happened in the first week of July. In another example of something that typically would put the market under pressure, the federal-funds futures market still expects the Fed to raise rates one or two more times before it’s finished. A future possible drag on the market could be lackluster corporate outlooks during second-quarter earnings season.

And yet, stocks have broadly powered higher, choosing to look past such headwinds. The market seems to be laser-focused on the eventual dip in interest rates and the boost that will give to profits.

That means, at some point, those bearish on the market will have to “capitulate” and ditch their pessimistic views and opt to buy stocks. That point seems to be approaching: Evercore strategists wrote that roughly the 4560 level for the S&P 500 is where bears will become more bullish. The index is currently a touch above 4500. The 4560 level would be up just over 27% from the October low.

That gain would mirror something seen in the past. During the financial crisis, the S&P 500 rose just over 27% from a low point—only to fall back down to that low as it priced in the recession that was to come. So if the index hits 4560 and holds steady and doesn’t show much sign of cracking, bears will likely assume the market has moved on from recession fears—even if a mild one is on the way in the near-term.

At that point, if bears can’t beat the market, maybe they’ll join it.

[uncleharley]

Jul 14, 2023 20:09:33 GMT anitya said:

uncleharley ,

Not an individual stock question.

Does intra day relative prices of ETFs or indices play a role in trading (entries or exits) these or one should pay attention only to closing prices and as such trade near the market close?

I ask this because the relative prices of these presumably diversified widgets are also all over the place throughout the day.

If you aspire to be a day trader, you should learn to use the intraday charts.  If you have no intention of being a very short-term trader, I would suggest your efforts in some other direction would be more productive. 

[uncleharley]

Jul 15, 2023 13:56:06 GMT Karen said:

uncleharley , thank you for your reply.  Sorry, I was thinking you subscribed to Barron's.  Here's the entire article.


The stock market’s rally seems to have defied gravity, leaving bears waiting for something to cause a drop. At some point, they’ll have to give in and buy stocks.

The S&P 500 is up about 25% from its bear market low hit in early October. While it might be reasonable for the market to have rallied a little bit from that point, the extent of the rally has caught many off guard. Driving the gains has been the hope the Federal Reserve should end its interest rate hikes soon, as inflation continues to cool. The idea is when rates stabilize, the economy and corporate profits will do the same. But there’s near-term risk to earnings as the impact of higher interest rates happens on a delay.

Meanwhile, the market is now expensive, with the S&P 500 trading at just over 19 times forward earnings per share estimates. That’s up from about 15 times at the start of the rally—compared with how high interest rates are, it’s a historically high multiple.

That’s why any number of events could have caused the market to pull back, such as the jump in Treasury yields that happened in the first week of July. In another example of something that typically would put the market under pressure, the federal-funds futures market still expects the Fed to raise rates one or two more times before it’s finished. A future possible drag on the market could be lackluster corporate outlooks during second-quarter earnings season.

And yet, stocks have broadly powered higher, choosing to look past such headwinds. The market seems to be laser-focused on the eventual dip in interest rates and the boost that will give to profits.

That means, at some point, those bearish on the market will have to “capitulate” and ditch their pessimistic views and opt to buy stocks. That point seems to be approaching: Evercore strategists wrote that roughly the 4560 level for the S&P 500 is where bears will become more bullish. The index is currently a touch above 4500. The 4560 level would be up just over 27% from the October low.

That gain would mirror something seen in the past. During the financial crisis, the S&P 500 rose just over 27% from a low point—only to fall back down to that low as it priced in the recession that was to come. So if the index hits 4560 and holds steady and doesn’t show much sign of cracking, bears will likely assume the market has moved on from recession fears—even if a mild one is on the way in the near-term.

At that point, if bears can’t beat the market, maybe they’ll join it.

Reading the entire article has not changed my previous assessment.   The author is very good at writing but has a lot to learn about charting.

[uncleharley]

Reading the entire article has not changed my previous assessment. The author is very good at writing but has a lot to learn about charting.

[archer]

uncleharley, Any thoughts on small caps vs the overall market?

Yesterday I did a lot of buying but didn't include my usual IWM or TNA, which I am now regretting seeing it gapped up so strongly. I don't know much about gap trading, so I am concerned that a significant gap up can be followed my profit taking.

[uncleharley]

Most of the GAPs up that I see on most of the major indexes, including the S&P small caps are gap & run gaps, which is a continuation pattern. I have no idea how the small caps will perform versus the large caps in the future. Follow your allocation plan.