- The S&P 500 has had a very rough December, and we suspect that January is just going to be more of the same.
- At this point, the market looks as if it is quite a bit of downward pressure, and it would not surprise me at all to see this market reach toward the 3600 level.
- The 3600 level has offered a significant amount of support recently, but I believe that the market is going to continue to be negative in general.
As you can see on the weekly chart, there is a very clear trendline that we have been following, and it’s also where we failed in the middle of the month. With the Federal Reserve reiterating its desire to be extraordinarily tight with monetary policy, it does make sense that the S&P 500 continues to struggle. At this point, it’s difficult to imagine a situation where you would suddenly get bullish of stocks, unless of course you are buying into the latest narrative. Unfortunately, narratives are a great way to lose money, especially when it comes the stocks, as there is almost always some type of nonsensical wish being fulfilled.
There are a lot of people out there talking about whether or not the Federal Reserve is going to be forced to loosen interest rates, but we are miles away from that happening. Jerome Powell pushes that issue, even though Wall Street is doing everything it can to convince itself otherwise. I do not believe that the Federal Reserve is anywhere near changing its attitude, and you need to look at stock through the prism. We are most certainly going to be in a “risk off” type of year in 2023, with very little to change that Outlook anytime soon. Even if the central banks around the world start to loosen monetary policy, the reality is that if they do, it’s because the economic situation got much worse. I would expect a knee-jerk reaction to the upside in that event, followed by a flush lower. That being said, it’s very likely that the markets will continue to find rallies as a selling opportunity, and they just don’t see how that changes in the month of January. The “Santa Claus rally” never came for 2022, which is an ominous sign in and of itself.
