All in all, the key sectors (retail, transportation) have more to prove especially by clearing the 23-month moving average or 2-year business cycle.

This is a significant level as these sectors proved recession was held off when they both held the 80-month moving average or their 6-7 year business cycle low.

So, after 2021 was a huge up year and 2022 was a huge down year, 2023, if clears a 2-year cycle, looks way better for the economy and market.

If SPX cannot clear, we are back to predictions that SPX can fall as low as 3200.

And stagflation predominates.

To date, there has been incredible resilience of the market indices.

All indices are in a trading range. SPX 4200 is the key resistance. 4100 is pivotal (above bias more positive, below bias more negative). And 3900 is the key support.

The chart is of the weekly price action. Striking is not only the 4200 level but also that we had an inside trading week last week (inside the trading range from the week prior). Furthermore, this week begins within the trading range of last week.

A range within a range means pause. It also means the investors/traders are getting smarter-holding off until the next direction becomes clearer.

Let’s look at more charts.

CPI tomorrow could shed light on next moves.

In the meantime, here is the monthly chart of the retail sector or our very own Granny Retail.

Note how the blue line confirms that 2-year business cycle resistance as if to say, we are a bit optimisitic about the future growth of the economy and hardiness of the consumer.

Nonetheless, Granny XRT also says not so much as we can easily get dismayed and break under the green line or (we are in a) recession line.

Of course, if Granny is hesitating, the Transportation sector is as well.

Looking a bit more positive than consumerism, transportation or the movement of goods and services, certainly defies recession.

However, IYT sits between the 23-month and 80-month moving averages as well.

Most of the family charts, in fact, look the same. As if we are this close to a new leg higher, or a major disappointment for the bulls.

Interesting to follow right now is how our MarketGauge’s GEMS Model is positioned.

GEMS has broad exposure to sectors, regions, bonds, indicies, and global macro assets.

The top-ranked ETF using our Trend Strength Indicator (TSI-measure of momentum using our proprietary software) is the Europe Index (VGK).

However, that too sits right below its 2-year business cycle or 23-month moving avaerge.

It seems, pretty much everywhere we look, the market is paused waiting to see what happens next with inflation.

Please read the weekend update as we believe the real pause is in inflation.

And we see no reason to believe that central banks of governments are close to having it under control.

ETF Summary

S&P 500 (SPY) 420 resistance with 390-400 support

Russell 2000 (IWM) 190 pivotal support and 202 major resistance

Dow (DIA) 343.50 resistance 338 support

Nasdaq (QQQ) 300 the pivotal area 290 major support

Regional banks (KRE) 65.00 resistance 61 support

Semiconductors (SMH) 248 resistance 237 then 229 support

Transportation (IYT) The 23-month MA is 244-now resistance 228 support

Biotechnology (IBB) Sideways action 130-139 range

Retail (XRT) 78.00 the 23-month MA resistance and nearest support 68.00

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