Updating My Price Targets
Where the S&P 500 is Headed
Investors,
If you missed yesterday’s newsletter, describing the ongoing impact of the Earthquake Effect, I’d strongly encourage you to read it using the link below:
Aside from my “2023 Market Outlook”, this was the most important publication I’ve made YTD. The report has been viewed 3,400+ times and has been well-received. If you find it valuable, please share it within your network and help spread the word!
On February 5th, just a few days after the YTD peak for the market, I published “Irrationality” and highlighted the degree of speculation and greed within the market. Since then, the S&P 500 has fallen -7.9% and has nearly given back all of its YTD gains. One of the key charts that I shared in that report was the amount of call option volume, which made a new all-time high on February 2nd.
The Fear And Greed Index hit “extreme greed” for the first time since 2021. The CBOE Market Volatility Index hit levels of complacency. Under-the-hood metrics for the S&P 500 made considerable improvements, in a very short amount of time. I even mentioned that “crypto momentum appears to be waning and I think it’s valid to maintain tight risk controls in this environment.” At the time, the price of Bitcoin was at $23,000. Where we stand today, the pendulum has swung in the opposite direction; however, there’s nothing to indicate that the worst of the situation is behind us. As such, I remain cautious and defensive knowing that the Earthquake Effect is still underway and is perhaps escalating to the new phase of larger market failures, as evidenced by the collapse of Silicon Valley Bank.
Following up on yesterday’s macro-centric report, this premium edition will focus specifically on the asset markets and the key signals that we can interpret from supply and demand. At the end of the day, the price of an asset is merely what two voluntary market participants are willing to trade at, the same as any other good or service. By analyzing the price of key assets, we can attempt to better understand how demand is changing, where it is changing the most, and then attempt to decipher how demand could evolve going forward. This newsletter will focus almost exclusively on price in order to gauge the most likely path for the market in the coming weeks and months ahead. I will also follow-up on prior analysis that I shared exclusively with the premium group in order to track how my previous analysis fared over the recent weeks and months
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