The S&P 500 has had a pretty good start for 2023. This is likely because inflation numbers are suggesting that we might be through the worst of it and the economy continues to perform reasonably well. This gives hope that the Federal Reserve can manufacture a soft landing. Sometimes, when there's lots of confusing data being released, it's easier to use technical indicators to figure out where we are in the investment cycle. Based on the chart below, it is literally a make it or break it time for the S&P 500. As you can see from the chart the S&P 500 peaked at the end of 2021 and has continually made lower lows and lower highs. As I write this, the S&P 500 is at 3,950 which is right on the cusp of either breaking out to the upside or hitting its resistance and breaking back down. Only time will tell however the next few weeks and earnings season will be important from a technical point of view.

 

 

Another chart of interest is the bull-versus-bear's sentiment. The chart below indicates bullish sentiment could not be any lower. From a historical point of view, when everyone is bearish, that is typically the best time to buy. This might sound counterintuitive but consider that when the market is bottoming out, it tends to be when people have a negative outlook and want to sell. Based on the chart below, history would tell us that this would be the right time to put more money into the market. Again, the next few weeks will be significant from a technical point of view.

 

 

I have also included a piece from our CIBC Economics team entitled "Testing the meaning of data dependence".

 

As always if you have any questions please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan