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S&P 500 Pauses at 23-Month Moving Average Ahead of Big Week

By Michele SchneiderMarket OverviewFeb 20, 2023 01:38AM ET
www.investing.com/analysis/sp-500-pauses-at-23month-ma-gold-holds-steady-ahead-of-big-week-200635465
S&P 500 Pauses at 23-Month Moving Average Ahead of Big Week
By Michele Schneider   |  Feb 20, 2023 01:38AM ET
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US500
-0.61%
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Gold
-0.04%
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This week is a big one.

We have FOMC on tap with some Fed members calling for a .50 bps rate hike on the heels of the hot Producer Price Index and inflation.

SPY vs Gold Monthly Chart
SPY vs Gold Monthly Chart

We have Gross Domestic Product on the heels of a strong retail sales number while also a record amount of credit card debt could hurt later on.

We have 600 companies reporting earnings-the largest week of earnings for the last quarter. We have 2 of the 4 key indices posting 2 inside trading weeks, meaning a range within a range within a range.

In other words, the market has taken a giant pause near the recent highs. We have written about the 23-month moving average and the correlation to the 2-year business cycle.

The SPDR® S&P 500 (NYSE:SPY) (and most key sectors) all stopped dead in their tracks right at that moving average. Why is this significant?

Because until proven otherwise, it not only supports the trading range theory for 2023, but also shows that the rally since October is still looking like a bear market rally.

Should a soft landing turn out as a possibility, then we would want to see the price of the indices and key sectors move beyond that 2-year cycle.

Meanwhile, as so many are dismissing gold, citing a stronger dollar and stronger rates will not help the shiny metal, the chart looks very different stepping back to the same 2-year cycle.

Although gold sold off for most of last week, it closed green on Friday. Gold held the key weekly and monthly moving averages. Gold, silver, soft, and food commodities all closed in the green. Inflation is far from dead.

Again, all rallied in the face of higher yields and a firmer US dollar. Now, it could be that we saw the dip in gold futures to around $1820 an ounce, then the bounce back to $1850, a key pivotal point, and that’s that.

It could also mean that the market remains highly optimistic that higher yields, even ½% higher, will not hurt the economy or the market too much.

It could mean that countries and hedge funds that have been accumulating gold bought this dip, while retail investors have turned their focus more to AI, defense stocks, and consumer staples.

Too soon to say. Nonetheless, if just looking at the chart, what we can see is that gold is following through above its 23-month MA or 2-year business cycle while the market remains agnostic at best.

ETF Summary

  • S&P 500 (NYSE:SPY): 420 resistance with 390-400 support.
  • iShares Russell 2000 ETF (NYSE:IWM): 190 pivotal support and 202 major resistance.
  • Dow Jones Industrial Average ETF Trust (NYSE:DIA): 343.50 resistance 338 support.
  • Invesco QQQ Trust (NASDAQ:QQQ):  Still 2 inside weeks working, so watch 311 as a good point to clear or fail from.
  • S&P Regional Banking ETF (NYSE:KRE): 65.00 resistance 61 support.
  • VanEck Semiconductor ETF (NASDAQ:SMH): 248 now has to clear again with 238 support.
  • iShares Transportation Average ETF (NYSE:IYT): The 23-month MA is 244-now resistance 228 support.
  • iShares Biotechnology ETF (NASDAQ:IBB): Sideways action 130-139 range.
  • S&P Retail ETF (NYSE:XRT): 78.00, the 23-month MA resistance, and nearest support 68.00.
S&P 500 Pauses at 23-Month Moving Average Ahead of Big Week
 

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S&P 500 Pauses at 23-Month Moving Average Ahead of Big Week

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Comments (5)
Adamo Nals
Adamo Nals Feb 20, 2023 9:16PM ET
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Looks like all of your brains have been taken over by fantasyland aliens. The markets ARE simple MATH
Adamo Nals
Adamo Nals Feb 20, 2023 9:15PM ET
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The real number where the S&P should be is 2600-2800. Not a dollar higher. We are over 1100 points over value. And that still is over valued at 3000. You all know nothing. Its become hysterical and embarrassing
Adamo Nals
Adamo Nals Feb 20, 2023 9:13PM ET
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WRONg wrong wrong as usual Ya cannot throw math and fundamentals out the window. $200 a share times 15x at best is 3000 s&p. You will allnsee the tsunami completely replaced the market finally after homework unlimited free money, 0% rates. Suggest everyone come back to reality and leave your fantasy world. Math doesnt lie PEOPLE LIKE MICHELE DO. Do the math NONE OF IT AdDS up! Period
Jarran Strzelecki
Jarran Strzelecki Feb 20, 2023 8:51PM ET
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Nicely written article, very informative
Alexandros Masoutis
Alexandros Masoutis Feb 20, 2023 6:32PM ET
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please write the true number forS&P
 
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