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Stock Market Reality Check

Stock-Markets / Stock Market 2022 Sep 05, 2022 - 10:33 PM GMT

By: Nadeem_Walayat


Mega earnings week saw the stock market soar on reporting euphoria where apparently the worse the earnings the stronger the rally in stocks such as Amazon due to the twin forces of investors piling into breakouts AND the market running short stops, which surely implies that the bear market could be OVER! After all the stock market discounts the future and so is looking beyond current BAD earnings and economic data to the blue sky's of future quarters, that coupled with US bonds rallying as the market tempered future interest rate expectations down from a peak of 4% for Mid 2023 to currently 3.25% all contributing towards the S&P closing higher at 4130.

Whilst the market was in the grips of BAD earnings mania I took the opportunity to trim my holdings which is another word for light selling, where my selling only went deep for Amazon which took my percent of portfolio down from 1.6% to 1.3% though after taking account of the price jump it's back up to 1.5% of portfolio which means I will probably sell more Amazon next week/ Whilst percent exposure is irrelevant right now as I am seeking to further reduce my max exposure limit. So more selling in the pipeline for Amazon and to a lesser extent others as the stock market so far has not done anything I have not been expecting it to do with the S&P having fulfilled my minimum target of 4080 and now has entered the TREACLE resistance zone of 4080 to 4180 as my forecast graph of some months illustrates.

Yes, the stock market could punch through resistance but I doubt it, lemmings piling into a few already over priced tech stocks such as Apple, Amazon and Microsoft is not going to turn a bear into a bull.So whilst possible is not probable and thus my even longer range trend expectations still remain the most probable outcome in that the indices look set to print fresh bear market lows between Mid August and early September.

Put what the two charts together and what they are saying is that there is NO significant deviation in trend thus we remain on target for this rough pattern to unfold. In terms of fine tuning in the light of 7 weeks of additional price action since I made the trend pattern, I would expect August to end DOWN as indicated, and September to end UP this despite expectations that the whole price action from the End of August through to the End of November is expected to be very volatile, but future fog has cleared enough for an increasing probability that September will end UP for the month. So all those pinning their tails on the September CRASH Donkey will probably be amending their gobbledygook to imply they actually meant the CRASH would be in October and not September, with hindsight of course during late September when the writing will already be on the wall.

The importance of actually having a forecast graph is that it boils ALL of the analysis down onto one chart and thus stops one from getting carried away with technical analysis which is ONLY ever CLEAR with the benefit of HINDSIGHT, everything is obvious in HINDSIGHT, oh look it was clearly an Head and shoulders pattern! Yes, in HINDSIGHT! Instead what I have always relied up on are concluding TREND FORECASTS against which to measure relative STRENGTH or WEAKNESS. Which tells me a heap of a lot more about the markets than what CURRENT TA resolves to which is usually that the market could either break higher or lower. That is where most so called analysis resides with reams and reams of commentary explaining what happened, but going forward it's literally ALWAYS a COIN FLIP! Because they know if they actually put their necks on the block that it's going to get CHOPPED OFF!

So what's the mechanism for arriving at high probability trend forecasts?

It's simple, PUT ONES MONEY WHERE ONES MOUTH IS!, iF i AM WRONG I LOSE MONEY! IF I AM RIGHT I MAKE MONEY! SIMPLE! So I really do want to know that which is the most probable else I will LOSE MONEY! So I go that EXTRA MILE! Which at times can leave Patrons irritated or confused such as during February and early March 2020, where I was getting comments why the hell am I wasting so much time analysing the outbreak in China, as there have been no deaths outside of China and thus has nothing to do with the markets, we'll patrons soon found out why. To know what is going to happen one CANNOT STICK TO SCRIPTS, Methodology, rules, procedures, it won't work, one needs to have the ability to dive off the deep end into obscure tangent events, and thus those are the primary mechanisms for arriving at high probability trend forecast, being skeptical of TA, tuning into anomalous behaviour and events, perhaps in 1914 it would have been to investigate who the hell is this Archduke Franz Ferdinand and why did he get shot in Sarajevo, Or early 2016 why is this realty TV star still in the Republican race? Could the bugger actually win?

Why BrExit Will Happen and Trump Will Win 2016, Lose 2020 and Leave Office with a BANG!

This anaysis is an excerpt from Stocks Bear Market Rally End Game that was as first made available to patrons who support my work.So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $4 per month.

Most recent analysis includes -

Whilst my recent in-depth analysis is - UK House Prices Three Trend Forecast 2022 to 2025, where I pealed away every layer of the UK housing market I could think of to arrive at a high probability of trend forecast, no following of the consensus herd here! Whilst completion of my extensive analysis of the US housing market is imminent.

UK House Prices Trend Forecast 2022 to 2025

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So if you want immediate access to a high probability trend forecast of UK house prices, with US and global housing markets analysis to follow soon then do consider becoming a Patron by supporting my work for just $4 per month.

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Your watching the British pound burn at the official rate of 9.4% per annum analyst.

By Nadeem Walayat

Copyright © 2005-2022 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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