The uncertain macro conditions continue to pressure the market to go lower. There weren’t a lot buyers, plenty of sellers in the market right now. The selling the rip trades will continue to play out as long as the fundamental macro conditions remain the same. Something at macro level has to happen in order for the correction to stop.
The type of macro events needed to finish the 4-year mid-cycle correction:
- Russia starts the war against Ukraine and the West reacts. When this happens money will immediately flow out of the war zone and Europe to the US and the market will rise to respond to the new capital flow
- Russia decides to not invade Ukraine and everything goes back to normal, which is not likely.
- The Fed raises interest rates in March 15-16 meeting and lays out a clear map of future raises.
These are the things that will provide much needed certainty for the market participants to get back in the market. As we blogged before, March 14th is the ideal location for the cycle to turn. Until then, the market will be under pressure.
In the S&P 500 daily chart below, we added two dotted lines:
1. The first dotted line means the market goes up from last Friday’s low
2. The second dotted line means the market goes straight down from last Friday’s low
The likelihood of the market goes down from last Friday’s low is greater than going up as last Friday’s price action is pretty weak indicating near-term weakness. It has been 19 trading days since the daily cycle low on Jan 24th. 19th bar is in the daily cycle bottom timing band and a turn up is not impossible.
We plot these dotted lines to trade the correction. If you are not trading as frequent as us, please ignore these dotted lines as the market conditions change very quickly and fast response is needed for short-term trades.
In our private email, we added UPST in our shopping list.
We like UPST ticker. Upstart is an AI powered lending software company. It has worked out really well for personal lending so far, the company is working on to push into auto loan (2022) and mortgage lending (2023) markets. This is a new way of lending that will disrupt the current traditional lending based on credit scores. This AI model gathers more data than credit scores, therefore it is more powerful to enable lenders to be predictive and to have less defraud rates.
This company is profitable and the board authorized to buy back $400 million stocks. UPST is profitable and financially strong, that is pretty rare for hyper growth companies.
