Market Outlook
Since that mini 1 day sell off in October, where we got close to breaking 650, it felt like that was the moment that the market started to shift into a slower gear. Something that I have noted in previous newsletters from time to time, as the market just felt sluggish these past few months. Semi's rally, market barely moves, Energy rallies, market doesn't care. Lagging sectors like Consumer Staples playing catch up and the market still doesn't care.
At times I felt like the boy crying wolf that I was keeping cash close to the chest as the market was not providing notable set ups. While now in March we are starting to see some broad weakness across the board except in the energy space.
Which historically speaking, when there is a massive spike in Oil prices going back to the late 80s, has provided a bullish backdrop a year ahead, except for 2008.
Historically, there are a few months where weakness is often found, February leading into March is often a quite time of the year after the exciting January rally start to fade. Looking back to 2022 till present, we can see 2 confirmed market tops and what could be a 3rd market top during the same period of time.
Now back in 2022, for those who were in the group, that was a tough year, quite frankly that first half of 2022 was harder then the covid drop since it was so slow. While the more recent market top last year was a quick bandid rip that barely last 30 days.
It goes without saying that a pull back is in the works (5% drop = pull back) as we are already 4% off highs. The question is a correction up next or a broader pull back in store, like we saw in 2022 and 2025?
If the market continues to pull into 650, even if it gets down to that area this week, it could still bounce off it and still look fine. But with each passing attempt at 650, the odds increase of a break down lower. IF* 650 breaks, the measured move lower is almost perfectly into correction territory.
We don't have to spend much time thinking about a broader breakdown until 650 breaks as we can't skip a correction. So for now, we are just hunting for clues, if 650 is going to break and knowing if it does. We step aside and wait out for 620.
Quite frankly checking the box off of getting the correction out of the way now or soon. Would set the market up for a nice wide range to develop for the 700 breakout down the road.
On the swing trading side, it has been quite and almost boring, boring is good. When names are breaking support and you are sitting in cash. There is no a better feeling then boredum. That feeling may almost feel lazy when the goal is to grow your account but it is a far better feeling then to have regret for rushing into the market too soon.
Now on the passive side, these are often times, when people will ask if they should stop there daily or weekly contributions because the market "has" to drop. This is not the time to do so because we don't know where or exactly how far it will go. Sure some of us we got lucky last April buying the 490 near low in the S&P but I still had to buy 520 and 540 to get lucky that one time. When you stick with consistenty buying repeatedly, you will get lucky without trying. Trying to time luck waiting for the bottom is one of the most costly game in the market.
Right now this mini pull back in the market has been quite and easy with the VIX barely moving. If we break 650, fear levels should actually start to tick up and capitulation tends to be around that corner after those things start to happen.
From Bennett
Founder Big Picture Trading
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