The world could get some serious problems when the Winter Olympics end. If Russia were to do anything, this is when it will happen. If they tempt fate, China could really put the fire on the pot with a move toward Tawain. The Geo-political picture is very dangerous at this time. The market has this as a shadow at the moment. There are other obstacles in the wall of worry. Not to take a bow on our call for a market pullback, but we were right!
Now, we must consider the other problems facing the bull market. The first is the Federal Reserve. They will raise their discount rate by a quarter point in March. This is basically nothing. The BS after the moment indicates how the market will react. The Fed will hope that they will scare the bulls. They would prefer a sideways reaction. This, however, does not bode well for the long term. Sebatian will get to that in a moment. The ongoing supply chain and shortages could continue. Then, there is inflation itself to which the Fed will be attacking. A quarter point increase is hardly an attack; however, they are really seeking to buy time.
Dow Theory...
says that the Industrials and Transports must act in conjunction for the market to be in harmony. Of course, we all know the term, Industrials is out of date. It is really about technology (XLK). Chips have led the market up and now; they are leading it down. The only member of the FAANG group that is up is Apple. This gives the bulls some serious doubt. Buy the dip is getting weaker and weaker. If one were to look at the tech sector, the XLK closed at 154 last week. It has already pierced 147 which indicates to us that the next support level is 130. If a retest occurs, volume will play the next picture. High share count will mean a retrace to the 2020 March lows. This could be the ultimate test for Dow Theory. Both the industrials and transports could follow the chips.
NASDAQ and IWM
They are the weakest link in the market. Nasdaq could test 9500 and the small caps 170. If either breaches this support level, they too could fall in line and retest the 2020 March lows. Dear Reader, if you noticed while reading, the recuring theme of the 2020 March lows. It is being repeated too many times to be ignored.
Fibonacci...
is always a must with us. There have been three bounces of 6.18. What next, you ask? The market generally goes sideways or consolidating after this market action. With all the aspects mentioned above, this appears to be where the market will trend. If this happens, there is a strong possibility that there will eventually be another leg down. The Fed is buying time again just like their ill-fated "transitory" remark about inflation. One thing that you can bet on is these corrupt idiots will be wrong. There is also one other aspect that one can add to the pot about the market. The outcome of the Super Bowl.
Market Craziness
There are some crazy stats that come to us from people who love to do stats. All of this relates to the NFL. These people have theories like a team does better in daylight as opposed to night games. Some do better on grass than turf. Then, the trip into different time zones and home field advantage. This deviation from the normal pertains to the Super Bowl. I have to admit that we were included to follow these nutty "facts." It was believed that if an original NFL team (NFC) won the game that the market would rise. Conversely, if an AFL team (AFC) won the game, the market would fall. This theory seemed to work. However, realignment by the NFL saw the Steelers go to the AFC and other changes with expansion. I no longer follow or believe this foolishness. There are more. If the game is high scoring, this bodes well for the market. They go on and on. This year had a new aspect. The stat people threw in the Chinese zodiac. This is the Year of the Tiger. Was this lost that the Bengals went from last to first? Well, the Chinese zodiac is for the Chinese culture. Do you recall the Year of the Rat? According to the people who explain the Chinese symbols, the rat signifies prosperity. We had a down year. Believe in the Lord and not the stupidness of man. Peace.
