We had a really strong start start into 2023 with a lot of bullish breadth thrusts. Starting with Breakaway momentum BAM (Walter Deemer) and Whaley Breadth thrust of Thursday 12th of January. We have more New highs than new lows; we have 68 % of stocks on NYSE and 67 % of Nasdaq above 200 SMA. FED does not mention inflation anymore, rather they started talking about disinflation in the last FOMC.
On the other side we have high employment numbers; prices of energy are still high; Yield curves are inverted and Yield rates are still rising.
“Bull markets climb a wall of worry“
Please note that my positioning is mid to long term, meaning weeks or months into the future. When I am bullish it does not mean that next few days cannot be red or vice versa when I am bearish. In majority of cases I adjust my portfolio on weekly bases trying to filter out the daily noise. Only rarely I adjust my positions based just on daily market moves.
General market analysis:
An indicator with which I track performance of sectors based on Weekly RSI levels. RSI Above 52 is bullish, below 48 bearish, between neutral – marked by candle colours. Red diamond – RSI crossed below 50; Green diamond crossed above 50 – can be used as buy/sell signals. Keep it simple.
A pullback this week created some damage to the charts, but I do not see anything critical as for now. Almost all ETFs I track are above 50 RSI weekly. Plenty of bullish MACD and RSI weekly divergences are playing out. The strongest sectors at the moment is Energy XLE, with potential bearish RSI and MACD divergence. Those that are lagging are ARKK and XLV.
See charts for more explanations.
Longterm main models
Both longterm models are #bullish.
- Weekly Longterm model – New buy signal based on stochastic oscillator issued this week. Model flashed accumulation signals based on putcall ratio in June, September and December. Another very reliable putcall buy signal was triggered in October. Data is available only since 2009 so I do not know if it is reliable in Bear markets, but in last 14 years it proved to be very reliable signal spotting bottoms almost perfectly.
- Daily Longterm model – #bullish accumulation signals and favourable VIX/VXV ratio (purple dots) – see chart.
To learn more about my models, check this link.
Midterm main models
3. Daily midterm model – buy signal issued on October. Confirmed by Breakaway momentum BAM and Whaley Breadth trust on Thursday 12th of January. BAM is very rare; one should check Walter’s website https://www.walterdeemer.com/bam.htm for more information.
Advance/decline and volume 10 day average oscillator issued a strong buy signal on Thursday 12th of January.
Midterm daily model is #Bullish.
To learn more about Midterm model, follow this link.
4. SPX Daily – Midterm main model – issued a buy signal on 28th of October. Additional buy signals on 12th January confirming buy signal in October. 
4.1 SPX Daily – Lower panel – a battle between bulls and bears is ongoing since May 2022 with many 90 % down days and many 90 % up days or two consequent 80 % days. Last one was 90 % up day! Bulls are winning. 
4.2. Rare Breakaway momentum BAM signals since 2016 
4.3. Rare Breakaway momentum BAM signals in 2009
New Highs New lows model
#Bullish
SPX – New Highs crossed above New Lows; it looks like new Bull market.
QQQ – New highs vs New lows still in favour of Bears but the gap is closing (1st panel from the top on QQQ chart)
See charts for more explanations.
Risk ON or OFF environment?
We are in RISK Neutral environment leaning towards Risk ON.
Number of All charts – 8; 5 charts are Risk Neutral, 3 Charts are Risk ON.
Summary
- General market analysis – Major improvement in recent weeks. I believe we are entering a new Bull market.
- Longterm model is #Bullish
- Midterm model is #Bullish
- New Highs New lows is #Bullish
- We are in Risk Neutral environment
An answer to question in the title is: It looks like market bottomed in October and we are in new Bull market. We have some very good signals that confirm that. Almost all ETFs and sectors are above 50 sma weekly – this indicates broad market participation. In markets everything is possible but For now market favours the bulls.
Be patient, stay healthy and good luck.
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