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Asset Watch
Tuesday, January 10, 2023
The good news is that the S&P 500 closed above its 100-day moving average on Jan. 6, which it could not do during the October rally. However, the black arrows on the graph show that 3,900 is a key resistance level, as it’s near the closing lows from May, the closing highs from June and July, the closing lows from September, and the closing highs from October. As a result, a confirmed breakout needs to materialise before the risk reward becomes more attractive.
Seasonality also turns bearish mid-month. With the ‘January effect’ often eliciting a bid for stocks due to a reversal of the tax-loss selling from December, the New Year often begins on a high note. A pullback will then usually hit mid-month, and the S&P 500 often bottoms near the end of the month.
So, should you wait for a more compelling entry point, or does Friday’s rally have legs?
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