Technically And Fundamentally Speaking, The Major Stock Markets Look Sick
The bulls and bears are battling things out on a pair of long-term trendlines.
S&P 500 Weekly Trendline Battle
S&P 500 Weekly Chart courtesy of StockCharts.Com
The S&P 500 broke through key weekly resistance at the beginning of 2023. That breakout has not failed yet, but is already in a backtest of trendline support.
Nasdaq 100 Weekly Chart courtesy of StockCharts.Com
Nasdaq 100 Weekly Trendline Battle
The Nasdaq 100 is in nearly the same patter except that it is a bit further away from the downtrend line.
Monthly charts can help with the overall picture.
Nasdaq 100 Monthly Chart
Nasdaq 100 Monthly Chart courtesy of StockCharts.Com
On a monthly basis, the Nasdaq is below the long term uptrend line. Make the line with a fatter crayon or change the line slightly and the uptrend is still intact.
The horizontal lines are areas of technical support.
S&P 500 Monthly Chart
S&P 500 Monthly Chart courtesy of StockCharts.Com
On a monthly basis, the S&P 500 is above the long term uptrend line. I ignore the Covid-related trendline break.
The horizontal lines are areas of technical support. There is support at 3400 and 3200 (not shown) and 2400 and 1800 (shown).
Fundamentally Speaking
- Companies are paying more for labor
- Biden's clean energy demands are greater than monetary support from the ridiculously named Inflation Reduction Act
- Consumer spending is not keeping up with inflation
- Many banks are in poor shape
- De-globalization (barely started), adds to corporate expense
- A switch from just-in-time resource stockpiling to just-in-case resource stockpiling add to corporate profit woes
In bull markets, upward trendlines are bought fiercely and technical resistance is futile.
In bear markets, the reverse is true. Support eventually breaks, and breakouts are false.
In a typical bear market, the S&P 500 would lose about 50 percent. That's the 2400 level in the preceding chart as well as one of my likely targets for this mover lower.
Given this is a bear market, there is no fundamental or technical reason to believe any alleged breakouts will hold.
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