Overview
The markets cleared the decks for a rally. After a sharp sell-off on Monday that tested the lower boundary of the ascending triangle, the market rallied all the way into stout resistance around 4750 on the S&P-500 index (or around 475 on the SPY ETF).
My analysis has been spot-on so far, when, immediately after the Omicron outbreak, I projected risk down to 445 on the S&P-500 SPDR SPY ETF. The actual low was about 449.
Worries about Omicron’s impact abated a bit this week, as the infection seems to have peaked in South Africa, and the UK reported that infections were less severe (versus the Delta variant).
Key Question:
What can we say about the market’s potential performance next year?
Performance Summary
The technology stocks (via ONEQ, QQQ) and small-cap stocks (via VTWO) rallied this week after declining for the past few weeks.
The net bull-bear balance from inverse and leveraged ETFs has moved above 65, indicating that bulls may be regaining control.
Looking Ahead to 2022
Wall Street’s projections for 2022 S&P-500 performance are all over the map, with estimates ranging from 4600 to 5330. This is not helpful.
I think we have three main worries next year: omicron, rising rates, and the mid-term elections. I agree with IHME projections where they expect a peak in late January.
The SPY index chart suggests a breakout in January, which could coincide with a decline in Omicron infections. As you can see below in the red rectangle, the breakout could occur before the end of January. My optimistic projection is 520 or up approximately 10% from today’s close. I expect a weakness going into the elections, and so, if the Fed starts raising rates mid-year, then we could see a sideways-to-down period from perhaps May into November.
Wrap-up
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Disclaimer
And now for some housekeeping. This publication is for “edutainment,” education, information, and entertainment purposes only. It is not to be construed as investment advice. Past performance is not necessarily indicative of future results. Our disclaimer at chandeindicators.com is included herein by reference.