6 Reasons to Become Bullish Now

Please enjoy this updated version of weekly commentary from the Reitmeister Total Return newsletter. Steve Reitmeister is the CEO of StockNews.com and Editor of the Reitmeister Total Return.

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I was not the first guy to get bearish in 2022, but by May I got the memo just in the nick of time. This led to a major shift in my portfolio that allowed me to profit on the way down. And I have been steadfastly bearish since.

But just like the Fed, my outlook is “data dependent”. And recent data has me becoming less bearish. Note that is not the same thing as becoming bullish.

Why the change of heart? And what does that mean for trading strategy going forward?

Read on below for the full story…

Market Commentary

First, let’s start with some important terminology. Less bearish is quite different than being bullish.

Imagine that I previously saw 80% odds of bear market and lower stock prices in 2023. Thus, only a 20% possibility of bull market.

Given recent information my view has shifted down to about 65% bearish probability versus 35% bullish. That is nearly 2 to 1 in favor of bear market forming… just a notch less bearish than before. The next logical question is…

Why still bearish?

You have already me talk non-stop since last May about all the reasons to be bearish. That is overflowing in my article archive. Plus my most recent presentation puts that all into perspective in a nice concise way: Stock Trading Plan for 2023.

Now we are going to flip over this coin and talk about the bullish view. It is hard for me to say it in a straight forward manner. Instead, I am going to flush out all the individual ideas that point in a bullish direction…the sum total of them is still less likely than the bearish thesis playing out. Continue reading "6 Reasons to Become Bullish Now"

Stock Buyers Beware!

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The bull vs. bear tug of war is at another critical juncture as they battle over 4,000. The two previous skirmishes were won by the bears.

I am referring to the big rallies that ran out of steam in mid August and early December. The hawkish Fed was the main catalyst each time to swing things back to the downside.

Will that be the case once again after the February 1st Fed announcement?

That is the topic that most deserves our attention at this time, and will be the focus of this week’s Reitmeister Total Return commentary.

Market Commentary

The boiled down version of today’s commentary can easily be labeled: Stock Buyers Beware!

That’s because price action is saying one thing…but fundamentals are saying another with the final verdict likely coming after the 2/1 Fed announcement.

Now let’s go back to the starting line by evaluating this picture of where we stand now with a possible breakout above the long-term trend line. Also known as the 200 day moving average for the S&P 500 in red below.

Yes, it appears that we have a break out forming at this time. However, see how similar events happened back in late March and late November before the bears took charge once again.

Chartists will also note that this is still quite bearish. First, because we are officially in a bear market. We would need to cross above 4,189 to state that a bull market was in place.

Second, we have a series of lower highs which is a negative trend until it is officially reversed.

To be clear, this could be the forming of the new bull market. And you should never fully ignore the wisdom of the crowd as it appears in price action. Continue reading "Stock Buyers Beware!"

KISS Investing in 2023

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It been roughly 40 years since investors have been faced with high inflation as the cause of a recession and bear market. And yet we have been dealt 5 bear markets since that time.

The point being that the majority of today’s investors have either never seen inflation cause a recession… or it is so far back in the memory banks that they don’t know how to properly react to the information in hand.

This begs us to get back to KISS investing.

Instead of what it usually means: Keep It Simple Stupid

In 2023 we will go with: Keep Inflation Separate Stupid

The reason for this pearl of investing wisdom will be fully illuminated in this week’s Reitmeister Total Return commentary.

Market Commentary

There have been quite a few joyous bear market rallies this past year based on the notion that inflation was cooling…which would mean the Fed would pivot to more dovish policies soon… which eventually fell apart when the Fed dumped cold water on the situation.

I sense the same set up is taking place now coming into their February 1st rate hike decision and announcement. And that is why I continue to be bearish even as the S&P 500 (SPY) is flirting with a breakout above the long term trend like (aka 200 day moving average) @ 3,978.

Yes, one could say that we have closed above for 2 straight sessions. Yet hard to call it a breakout when the psychologically important 4,000 level looms large overhead. Until we break above that key hurdle, then the bears are still in control.

Back to the KISS theme: Keep Inflation Separate Stupid Continue reading "KISS Investing in 2023"

Are Stocks Stuck in a Trading Range til February?

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Stocks are likely going to be stuck in a trading range until the next Fed announcement on Wednesday February 1st.

Why?

Because investors have been burned many times before getting bullish in hopes of a Fed pivot that did not arrive.

So even with signs of moderating inflation providing a modest lift to stocks of late…there is a limit to the upside until investors hear from the Fed again. There is also limit to the downside. And this begets a trading range.

Let’s discuss the shape of the trading range and possible outcomes after the Fed announcement. All that and more is on tap for this week’s Reitmeister Total Return commentary.

Market Commentary

In many ways the trading range has already been in place for the past month flitting between 3,800 and 4,000 for the S&P 500.

And this is likely to stay in place as investors are fearful of reading the Fed tea leaves wrong as they have so many times this year. So even though there were welcome signs of moderating wage inflation (public enemy #1 to the Fed) there are enough whispers from the Fed that their job is far from done.

One such whisper from the Fed recently came from Atlanta Fed President, Ralph Bostic. During his speech he shared that interest rates will get above 5% and hold there for a while. He was then asked for how long would they remain elevated above 5% for which he stated emphatically. “three words: a long time”.

This harkens back to December 14th when the market was on the verge of a breakout above the 200 day moving average before Powell slammed the door on that notion. He too repeated the 3 word mantra (a long time) over and over again when discussing their plans for higher rates. Continue reading "Are Stocks Stuck in a Trading Range til February?"

Precious Metals Commentary

February gold closed sharply lower on Tuesday and below November's low crossing at 1674.70 thereby renewing the decline off October's high. The low-range close sets the stage for a steady to lower opening when Wednesday's night session begins trading. Stochastics and the RSI are diverging but are bearish signaling that sideways to lower prices are possible near-term. If February extends the decline off November's high, the 62% retracement level of the May-October rally crossing at 1638.00 is the next downside target. Closes above the 20-day moving average crossing at 1714.50 would confirm that a short-term low has been posted. First resistance is the 20-day moving average crossing at 1714.50. Second resistance is November's high crossing at 1757.10. First support is today's low crossing at 1662.00. Second support is the 62% retracement level of the May-October rally crossing at 1638.00. Continue reading "Precious Metals Commentary"