Chart of the week: S&P 500
Happy new year! It’s time for our chart of the week. Forgive me – I’ve got a bit of a sore throat here and a little bit of a cold. We’ll work through this.
This week we are going to do something a little bit different, and we are going to focus in on the S&P 500 chart. Normally I bring a chart that’s speaking to me and gives us an idea of maybe buy some calls, buy some puts. In this instance, because it’s the end of the year and we get a nice glimpse of how things went in 2023 and take a look at the chart from a weekly perspective. I want to focus in on that.
You can see here I’ve put up the weekly chart of the S&P 500. This goes back to the middle of 2021, which is right over here on the left hand side. You can see the nice move that we made in 2023 – up 24% – literally just brought us right back to the old highs in the beginning of 2022. You can see that from the end of October to now, we’ve had an enormous run – a really steep run. We can certainly pull back a little bit off of that run and still have the uptrend intact.
Why do I say that? I’ve gone ahead and connected the lows from October 2022 right near the lows to March 2023 to the lows in October 2023. We can certainly pull back to some area above this low, which is about 4,100 in October 2023, and still have the uptrend intact.
Even down to say the 20 week moving average, which comes in at around 4,453 – that would be about 300 something point drop in the S&P 500. It’ll feel like the end of the world. It’ll feel like a panic. But it won’t be. We could certainly see a pull down here, and we can still have an uptrend intact. So I’m just putting together a scenario here into the spring and into the summer. I fully suspect that a lot of this move is going to get retraced in the next several weeks.
So what do you want to do? You want to have some protection on, you want to have some puts on. Puts are still cheap. The VIX is up, obviously, into the 14s here. And we want to be able to protect our portfolios, protect our gains we had in 2023. The only way to do that is: A) either sell what you have for cash, or B) have some protection or some combination of both cash and protection.
Look for a little bit of a pullback here. It’s not going to be horrible. We are still in a bull market. The indicators down over here are still bullish. But we got overbought. There are going to be some people who want to take some profits before earnings season gets underway in a couple of weeks. So take a look at S&P 500.
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