The US equity funds surged from the bottom of their price channels to the top last week due to short sellers covering their over weight bets that interest rates would continue to rise. They will rise in time, but the trade had become so lopsided that only a small catalysts was needed to reverse the trade.
Rallies like last week do not happen in Bull markets, only Bear markets. Bull markets are slow and steady. What we have now is a slow declining price channel, but certainly not steady.
The SP500 did break above its price channel but not the equal-weight SP500 index. The mega cap stocks are still getting bid up into ever higher valuations relative to their fundamentals. When this trade reverses, look out.
We are in the strongest time of the year for equities through Christmas historically. But we are also in a market and economy and a geo-political situation that is not similar to recent history. The market may hold up through the end of the year, but the real fun will begin in 2024.
In the meantime the trend is not your friend as of today as you can see with the declining price channel in our chart. Be careful and do not follow the perma-bull media talking heads whose job is to keep you invested while the smart money sells.
Michael Bond
Categories: TSP Charts