• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock Stock Market Waiting Game: What You Should Be Watching
Stock

Stock Market Waiting Game: What You Should Be Watching

by March 2, 2023
by March 2, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

February, according to the Stock Trader’s Almanac 2023, tends to be a weak month, especially in pre-election years. Now that February is behind us, does it mean the worst is over? Not necessarily. Each year comes with unique scenarios and challenges; this year, all else being equal, a huge worry is that the Fed’s attempt to tame inflation may not work as planned. Recent economic data has been sending mixed messages, making it difficult to see stock market directionality.

Stock Market in Holding Pattern

Earnings season is winding down and estimates, in general, were down compared to last year. We also got February’s Consumer Confidence Index, which came in weaker than expected. And the Case-Shiller National Home Price Index for December indicated a deceleration in home prices. The Manufacturing Purchasing Managers’ Index for February came in at 47.7%, slightly lower than estimates. A reading less than 50% indicates contraction. 

None of these pieces of data moved the markets much. Inflation is still way above the Fed’s 2% target. Until there’s some certainty about how prices could move, the stock market will probably continue to be rattled. There’s talk about the possibility of a 5.4% terminal rate, which is higher than the 5% a month ago. It’s a similar story across the pond, with expectations for an ECB terminal rate of 4% by early 2024.  

Given the jittery macroeconomic backdrop, how long before we see tailwinds or headwinds that can break the market’s holding pattern? Given that the next Fed rate decision isn’t till March 22, we could still be a few weeks out. And in the stock market, that can feel like eternity.

A Technical Perspective of the Stock Market

If you pull up a daily chart of the S&P 500 index ($SPX), you’ll see a few points that are worth noting (see chart below). Note: Click on chart for live version.

CHART 1: S&P 500 INDEX STILL HOLDING SUPPORT. The 200-day moving average is a support level to watch as investors await jobs data and the next Fed meeting. Chart source: StockCharts.com. For illustrative purposes only.

The S&P 500 is in critical territory. It’s hovering close to hitting its 200-day moving average support; there’s a chance the index could bounce off the support and move more sideways until some certainty surfaces. When that happens, it could break out either to the upside or downside of its trading range. If the S&P 500 breaks below the 200-day moving average, the next support level could be the 50% retracement level from the August high to the October low. That would bring the S&P 500 to around the 3,900 level.The downtrend that started on February 2 is still intact. If there’s a bounce off the 200-day moving average and a break above the downward-sloping trendline, it could mean the market could trade sideways between 3,940 and 4,000. On the flip side, the downtrend could continue if the S&P 500 falls lower.

Market Breadth Indicators: Pick Up the Clues

It may help to watch market breadth indicators to see if there are shifts in investor sentiment. Are investors becoming more bearish? What about institutions? There are several market breadth indicators available in the StockCharts platform, including advance-decline indicators, bullish percent indexes, percent of stocks above a moving average, and so on. Some of these indicators give you the overall market breadth, but you can also focus on the breadth of specific sectors, industry groups, or indexes.

In the one-year daily chart of the S&P 500 Index below, you’ll see the McClellan Oscillator in histogram style and the S&P 500 bullish percent index. Not surprisingly, both indicators are showing negative breadth. The Fed is saying that the disinflationary process has started, yet inflation is still hot, the labor market is strong, and the economy seems to be growing less slowly than expected.

CHART 2: S&P 500 MARKET BREADTH INDICATORS. Indicators such as the McClellan oscillator and Bullish Percent Index can help identify reversals in investor sentiment, which in turn could reverse market trends. Both indicators are showing bearish sentiment. Keep an eye on these for any changes. They could give clues for market direction.Chart source: StockCharts.com. For illustrative purposes only.

The McClellan Oscillator and Bullish Percent Index can stay in negative territory for a while. Both can be used to identify reversals in sentiment, which could indicate potential reversals in the overall market, sectors, or industry groups.

McClellan Oscillator. The ratio-adjusted McClellan Oscillator ($NYMO) indicates that there are more declining issues versus advancing issues. Keep an eye on any sign of divergence between the S&P 500 and the histogram bars.Bullish Percent Index. Typically, when the bullish percent index drops below 30%, that could indicate very bearish sentiment. The S&P 500 hasn’t reached that level yet, although it’s getting below the 50% threshold, which is a bearish sign. It’s coming close to the December 41.82 level, which could coincide with the 50% retracement level of the S&P 500, which is 3907.

Prepare For Any Scenario

The next jobs report could provide further clues about the state of the overall economy. But that isn’t till March 10. Until then, remain engaged with the market. There’s no better time to pull out your favorite indicators and run through different “what-if” scenarios. The charts provided in this article are a starting point, but explore other indicators and set up a ChartList for a “holding pattern” market, then scroll through those charts to see if anything jumps out. Maybe by the time the Fed makes its next interest rate decision, you’ll start seeing the wind blowing in some direction.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

You Might Also Like
  • Navigate Market Shifts Like a Pro: Utilize This Key Indicator Effectively
  • The Bears Are On Life Support And Hoping For A Fed Miracle
  • Santa Claus Rally Alert: Predicting a 70% Chance of Surge in the Dow Jones This December!
  • Technology Resets PPO, Now Rolling; Fed Should Pause
Share
0
FacebookTwitterPinterestWhatsapp

previous post
The War of Art (and Trading)
next post
Nebraska legislators begin debating no-permit concealed carry

You may also like

The Fed Talked, The Market Reacted. Think Value.

December 18, 2023

Sector Spotlight: Three Takeaways from Seasonal Sector Rotation

August 29, 2023

Top Strategies to Outperform This Market

May 13, 2023

Sector Spotlight: The Current State of ARGoN — Applying the...

September 16, 2023

Sugar Prices Soar — What Could It Mean?

February 24, 2023

MUST SEE! Top 10 Stock Picks For June 2024

May 31, 2024

Surprise Negative Divergence on Nasdaq Advance-Decline Line

March 26, 2024

The Halftime Show: Deciphering the Fed After Jackson Hole

August 30, 2023

Two Ways to Use the Zweig Breadth Thrust – Plus...

March 21, 2025

The Best Five Sectors, #2

January 10, 2025

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right Now

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025
    • U.S. foreign tax bill sends jitters across Wall Street

      May 30, 2025
    • Amazon taps Xbox co-founder to lead new team developing ‘breakthrough’ consumer products

      May 30, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,765 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,472 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,451 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,432 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,308 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right...

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Week Ahead: RRG Indicates Sector Shifts;...

    April 26, 2025

    Market Breadth Gains Momentum; Don’t Fight...

    December 21, 2023

    META’s Reverse Island – Two More...

    April 26, 2024
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here