Edition #208

Premium Market Analysis

Investors,

I’m feeling bullish.

At the beginning of September, I posted the following perspectives on Twitter:

“I don’t know about you, but I feel like the U.S. Dollar $DXY breaking to new YTD highs is foreshadowing that the stock market is going to hit new YTD lows.”

Since posting that commentary on 9/4, we saw the $DXY rise another +1% before reaching a new local peak several days later. However, the stock market did not fall to new lows. As we reviewed in yesterday’s newsletter, the strong mid-week rally seems to have produced an official higher low relative to the YTD lows from June.

Whether we’re talking about the Dow Jones, the S&P 500, the Nasdaq-100, or the Russell 2000, each of the indexes is making a momentum thrust and attempting to produce a higher low. Quite simply, the fact that the market failed to produce a new low while the $DXY produced a new high is an extremely bullish divergence.

I’m going out on a limb here, but I think we’re seeing concrete evidence for another substantial market rally. In combination with the July 2022 market study that I published for the Nasdaq-100, I think odds are in favor of a rally. Could I be wrong? Absolutely. But “scared money don’t make none”, according to 1990’s rap group named A Tribe Called Quest.

While I still see the threat that the S&P 500 might retest the 200-week moving average cloud once again (chart below), I think there is sufficient evidence to suggest that we rally higher in the short-run.

I don’t know how long a potential rally would persist, nor the magnitude of it, but that’s what makes a market: risk/return.

In the remainder of this analysis, I’ll provide quantifiable evidence that suggests bullish market dynamics in the short-run. While there are still significant downside threats, I think that financial market data and some fundamental economic catalysts could push risk assets higher. I’m taking a swing on short-term trades, and I want to share all of the new data & market dynamics that I’m focused on right now across the economy, the stock market, and crypto.

Let’s dive in!