Jerry Samet
01-01-2023, 11:22 AM
2022 is finally over. It ended with a slightly negative session on lower volume across the board. The major averages opened lower and traded in negative territory most of the day. Late buying came in and the major averages finished high in their intraday trading ranges. Volume was lower across he boars, as you would expect on the last trading day of the year before a long holiday weekend. The bear market that I talked about in last year’s final update occurred. The Fed stuck to its guns and aggressively raised rates and began running off its balance sheet. We have seen a significant bear market in 2022, that is now more than a year old. It began in the first week of January for the SPX and the end of November 2021 on the Nasd. The Nasd averages took the worst of it with the COMPQ down just under 38% from peak to trough. This is just short of bone cruncher status, which starts at 40% on any of the major averages. The question now is where do we go from here. This bear has already lasted longer than most and will likely reach bone cruncher status before it is over. The next line in the sand are the lows of 10/13/22. The major averages are just a few percentage points above this support level and I don’t think the current bear market lows will hold. The remaining duration of the bear market depends on how much below this support level the major averages will go. That is impossible to know in advance, but there are some time frames to work with. My most important indicator at these times is the monthly Coppock. It is well into negative territory so is set up to signal the end of this bear market and the beginning of a new cyclical bull market. The question is when. That will be determined by how far below the 10/13 lows the major averages go. I have been playing around with numbers that would produce a buy signal. I think the earliest there will be a signal is late in the second quarter. This will occur if the major averages don’t go to far below the recent lows. If they do the buy signal could be pushed back into the third quarter and likely occur during the summer of 2023. This has been a pretty bad bear market, at least on the Nasd averages. The New York averages have held up better because the greatest part of the speculative action in the last bull market was in the Nasd stocks, particularly the big cap tech stocks. The actions of the Fed will also have a great deal of influence on the timing of the next bull. I suspect that they will raise the Fed funds rate to slightly above five percent then wait and see what happens to inflation and the economy. If this occurs the market could hold up better and the buy signal would come in the earlier part of the time frame I mentioned above. Either way it is likely we will see an end to this bear market by the third quarter at the latest. This could be thrown off if the market takes a large dive from here, which is possible. This has already been a longer than average bear but even bone crunchers usually don’t last much longer than 18 months, but they can go two years like we saw in 2000 to 2002. I expect that there will be a monthly Coppock buy signal in the time frame I mentioned above. This would mean that the first half of 2023 will be tough but that the second half will be strong, as it will be after that. A new bull will produce great opportunities to make significant profits and we will see it later this year, it is only a matter of timing. The first year of a new bull market usually produced the best gains but the first two years are usually strong. I suspect the majority of this bear is behind us, but we have to wait for the monthly Coppock to signal when it is finally over. I think it will be an overall good year in 2023. Jerry