Is a new bull cycle building? Last week Knox examined if the bear market rally will crumble or if a bottom is present. This week Knox notes that the high-frequency data continues pointing toward a slowdown with inflation. The ECB's tone is getting more aggressive, while the FED’s tone is getting less aggressive, suggesting that a new bull cycle is building as we speak. However, with data pointing towards a slowdown in rate hikes and inflation, we are seeing rates press new lows, and how the US dollar is pushing higher, only a few percentage points away from new highs.
Furthermore, crude oil appears to be bottoming and suggesting a run to new highs. In short, the macro factors have been putting pressure on equities and are not buying what the equity market is pricing-in yet.
Until we see 5 waves develop in the S&P 500 off the June low, accompanied by the USD confirming a top and rates signaling the low is in, calling for the end of the bear market is premature. Watch the broad market levels video update taken from I/O Fund's Premium 1-hour webinar below.
00:00 - Key Levels in the S&P 500
04:02 - Structure of the Leading Diagonal
05:13 - Small Caps
07:08 - Macro Assets/Commodities Pushing Equities
10:20 - The U.S. Dollar
12:12 - Crude Oil
Read Knox's Technical Analysis Commentary below.
Bond Market, Crude Oil, and Equities
The bond market is not buying bonds, suggesting that they are not buying the narrative driving equities; crude oil looks to be bottoming, suggesting another run higher is probable. When you factor in the macro forces that have been putting pressure on equities that are not lining up with the narrative expressed in the equity market, it’s worth being cautious until we know more.
Bull Market Signals
Assuming that this is the start of a new bull cycle, we only have 3 waves up off the low. This means we are not even done with the 1st wave of 5 in a new bull market that would likely move into 2023/2024
USD Signals
Until we see 5 waves develop in the S&P500 off the June low, accompanied by USD confirming a major top and rates signaling the low is in, calling for the end of the bear market is premature. Our plan is to wait for 5 waves to complete (wave 1) and then buy into the 2nd wave retrace.
