The tip is at hand. Bears, simply give up now. Because the mid-June low (the place I known as the S&P 500 backside), we have seen the fed funds fee leap from 1.00% to 4.75%. In fact, all we have heard since then is what?

Do not Struggle The Fed

Properly, since that first 75 foundation level hike on June sixteenth, the S&P 500 is UP, not down. We have had 4 75-basis level hikes, two 50-basis level hikes, and two 25-basis level hikes. For my part, all of it was constructed into inventory costs on the June 2022 low. How else do you clarify the numerous fee hikes over the previous 12 months and an S&P 500 that’s 10% greater than it was when the primary 75-basis level fee hike was introduced? Cease listening to CNBC and the media clowns and take note of those that really do analysis – like EarningsBeats.com. 2022-2023 is not the one interval the place we have seen a variety of fee hikes coincide with inventory market energy. Do you bear in mind early 2016 when the market bottomed after which soared? That occurred throughout a interval when the Federal Reserve raised charges 9 occasions:

This chart reveals the “Efficient” fed funds fee, which coincides with the course of fed funds. Good factor we “fought the Fed” throughout that HUGE market rally. Ohhh! And what concerning the 2004-2006 interval when the Fed raised charges at 17 consecutive conferences!?!?!?!?!?

No matter you do, do not struggle the Fed! (sarcasm)

I’ve really had loads of of us come as much as me and ask how the inventory market can go up when the Federal Reserve is so hawkish – that the inventory market has NEVER gone up when the Fed is mountaineering charges. My response? Perform a little research and STOP listening to the media. Many authors writing articles have by no means completed an oz. of analysis, however these headlines drive plenty of viewers! Fairly truthfully, that is all that issues for many authors. Drive that viewership!

Market Rotation

Let me let you know what’s been taking place “beneath the floor” of the inventory market. Really, earlier than I do, let me present you why I informed everybody {that a} cyclical bear market was an actual menace as we entered 2022 at all-time highs. An enormous a part of it was sentiment (and I will get to that in a minute), however one other massive half was market rotation into defensive areas. Because the S&P 500 printed its all-time excessive in January 2022, Wall Avenue was repositioning in these defensive areas. Numerous Monday morning quarterbacks will let you know how they identified the bear market. The issue is that almost all of them identified the bear market after it occurred. What good does that do? I fired warning pictures in December 2021. On the final day of that December, I wrote an article, “It May Be A Very Tough Begin To 2022”. That was simply at some point earlier than the all-time excessive was set. I’ve had dozens and dozens of emails and suggestions from EarningsBeats.com members, indicating how a lot cash they saved by exiting shares firstly of 2022. And it was so simple as following a number of key charts. Right here was one in all them:

That red-dotted vertical line represented a MAJOR warning sign for shares because the bulls’ final gasp got here after vital bearish market rotation befell. Let’s have a look at, ought to we observe the intermarket relationships or tune into CNBC? Those that used the previous and prevented the latter did fairly properly in 2022.

However now the bulls are getting excited. Why? As a result of the intermarket relationships not favor the bears. Cash is rotating fairly bullishly into progress areas. This is the identical chart because the one above, however this time for the previous six months:

The expansion ratios I observe are all hovering. Wall Avenue is repositioning into progress and this has been occurring all through 2023. Ask your self why. For everybody that is now screaming “inverted yield curve” and “recession”, why would cash rotate so closely into progress shares. It does not make sense, and that is why you’ll want to take note of it.

However market rotation is not even probably the most bullish sign.

Sentiment

The equity-only put-call ratio ($CPCE) is my “go to” chart after I wish to perceive how retail merchants really feel about shares. And when the 253-day (1 12 months) transferring common of the CPCE begins to show – and it does not occur typically – you’ll want to take observe. Excessive readings, both to the upside or draw back, can mark main inventory market bottoms and tops, respectively. This is how this chart regarded on Saturday, January 8, 2022, at our 2022 MarketVision occasion:

The pink arrows mark reversals in long-term downtrends. These are reversals off EXTREMELY bullish readings and sentiment indicators are contrarian indicators. They primarily let you know to “batten down the hatches” and develop way more defensive, and even take into consideration shorting the inventory market. The other is true when this 253-day transferring common reaches a cease and begins to roll over. On the chart above, it does not seem as if we’re fairly able to roll over, however I’ve used a Person-Outlined Index at StockCharts to trace what I think about to be a way more cheap CPCE. There have been a number of outrageously-high every day readings in November and December of 2022, as a consequence of uncommon hedging actions of establishments. They skewed the readings on the CPCE and wanted some adjustment to extra precisely mirror the true psyche of the retail dealer. After making these changes, here is how my “adjusted” CPCE chart now seems to be:

The long-term 253-day transferring common is simply starting to roll over and in case you look above on the earlier CPCE chart, you may see that when this rolls over, the S&P 500 begins to soar.

If the inventory market was chess, and I used to be on the bull facet, then I have been calling “Verify” for a number of months now. I am calling “Verify” one final time. We’re about to witness “CheckMATE”. It is time to ditch your bearish ideas. Shares are about to scream greater. The Fed is our wild card short-term, however as soon as the results of this assembly dies down, shares will soar.

If you would like REAL analysis and information and what actually drives the inventory market, you’ll want to be a part of us at EarningsBeats.com. I am by no means quick on conviction. Even in case you disagree with my views, I will present you fascinating perception to make higher funding selections. When you suppose realizing {that a} bear market was coming earlier than it ever arrived would have helped you in 2022, then I consider following us at EarningsBeats.com in 2023 throughout a large rally will show fairly helpful as properly. CLICK HERE to get your FREE 30-day trial began!

Completely happy buying and selling!

Tom