Just Another Bear Market Rally?

by Greg Rieben

Just Another Bear Market Rally?

Here we are three weeks into 2023 and stocks have been on a solid run with all the major indices in the black.

  • NASDAQ 8.53%
  • Russell 2000 7.35%
  • TSX 6.43%
  • S&P 500 4.7%
  • DJIA 1.45%

Many bears and short-sellers are beginning to doubt their positions, but with key levels just above the major indices, it may be too soon to predict a market bottom.

Lets take a look at some broad market ETFs.

QQQ - Big tech has not yet regained its footing and has not yet risen to its 200-day moving average. If prices can get above and hold 296/297, it would be a positive sign for bulls, but there's still a long way to go.

SPY -  The S&P 500 is nearing a closely observed trendline. If it closes above it a few times, it would generate significant interest and hype among analysts and the financial media, potentially leading to FOMO among underinvested individuals.

IWM - The 189/190 level in small cap stocks has effectively hindered previous rallies. Will this trend continue or will bulls succeed in pushing prices above this level?

TSX - The TSX index, which is heavily influenced by the financial and commodity sectors, has been trading above its 200-day moving average and is currently nearing the December 2022 high. If prices can break above this level, it could lead to a test of last year's high.

Last year we witnessed one of the most significant changes in interest rates in recent history, possibly ever. This provided significant support for the US Dollar Index (DXY). However, the DXY has dropped significantly from its peak in September.

Is a countertrend rally in the USD imminent? If so, could it negatively impact equities and curb the current rally? This is one area of the market that we are closely monitoring in the near term.

Let us know what you think.

Thanks for reading.

GR

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