The Pullback is in Effect - Broad Market Levels - 08/26/2022
August 29, 2022
Knox Ridley
Portfolio Manager
The next 2 weeks will be very telling on what to expect over the next year. The pullback we've been warning about is in effect. In this week's broad market levels update, Knox walks through possible scenarios the market may face as 2022 comes to an end. Find out what the two long-term bullish scenarios that are most probable now.
Timestamps:
00:00 - Knox’s Two Most-likey Scenarios
03:38 - The Bullish Scenario & Major Support Zones
07:40 - In a Bullish Scenario, When’s the Right Time to Buy?
09:25 - The Third Largest Down Day in a Bear Market
Two Long-term Bullish Scenarios
Market Scenario #1
The first scenario is that June 16th was the major low and that we are now in a new uptrend. As long as we hold 4000/3975 and then turn back up to make one more high above 4330 SPX, then the case for a new long-term bull market will remain intact. On the other hand, if we break below 4000/3975 SPX, the risks become much more elevated as we move into the end of 2022. In this scenario, Knox would expect one more big push higher before the next large leg lower manifests.
Market Scenario #2
The second scenario is that we are currently finishing the first of three legs of a larger bear market. In this scenario, if the SPX breaks below 4000/3975, the risks become much more elevated as we move into the end of 2022.
In the bullish scenario, Knox advises investors to buy on the second wave retrace, sometime in October. On the other hand, if we are in a larger bear market then the I/O Fund will take on momentum plays.
The Third Largest Down Day Since the Bear Market Started
Finally, Knox also touched on the railroad track pattern on the third largest down day since the bear market started.
"It was such a low-volume day for such a huge move." - Knox Ridley
Despite the day’s bearishness, it was well below the 162 trading day volume average. There seem to be positive signs from divergence/oscillation indicators, which could signal a reversal in the SPX.
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Catch up on I/O Fund Broad Market Levels
Levels to Monitor in the Coming Pullback
In early July, the broad market failed to make new lows even despite the bad news. The CPI print came in at a 40-year high, followed by the producer price index surprising the upside. This told the market that inflation was still an issue and would likely be in the near future. This was then followed by mixed banks earnings, as reports of a looming economic slowdown and run-away inflation were starting to show up in earnings.
Is a New Bull Cycle Building? - Broad Market Analysis
Broad Market Levels Update - August 18, 2022 - Knox notes that the high-frequency data continues pointing toward a slowdown with inflation.
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About I/O Fund Portfolio Manager Knox Ridley
Knox Ridley began consulting on portfolios in 2007 and is an experienced growth investor in both bull and bear markets, which is hard to find these days. As the portfolio manager of the I/O Fund, he beat the top-performing funds on Wall Street in both 2020 and in 2021. His real-time trade notifications to premium subscribers have garnered 27 entries with over 100% gains in the last two years. Knox began his career as an ETF wholesaler in 2007 before becoming a portfolio consultant for large RIAs, FAs, and Institutional accounts. He is very keen on macro trends and is trained in Fibonacci Trading, Elliott Wave theory, as well as Gann Cycles. He also uses classical technical analysis to manage risk and identify great risk/reward setups. Knox is known for increasing and decreasing allocations for record-breaking returns.
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