Over the the past two weeks we have repeatedly underscored – despite growing anger and resistance in the comment section and elsewhere – that while fundamentals remain bearish and will likely drag stocks to the low 3000s in early 2023 as recession fears overtake inflation concerns, the market technicals are extremely bullish, and growing even more so with every passing day (see “Year-End Rally Driven By $5BN In CTA Buying And $10BN In Buybacks Every Day” for Nov 13 ).
25 trading days left: cue the chase pic.twitter.com/XS4ouYQPza
— zerohedge (@zerohedge) November 22, 2022
It wasn’t just us of course: two of the biggest Wall Street bears made a year-end technical rally the bedrock of their short and mid-term forecasts, with both MS’s Michael Wilson (who sees stocks rising to 4,150 around year-end before tumbling as low as 3000 in early 2023) and BofA’s Michael Hartnett expecting stocks to meltup into year-end only to fall that much harder next year when the full brunt of the economic and earnings recession is revealed.
So to all those who mocked our tactically bullish call two weeks ago, we have just one thing to say: the S&P is above 4,000 for the firs time since Sept, and if Goldman’s calculations are correct it is about to blast off even higher.
As Goldman flow trader John Flood writes, yesterday’s sharp bounce in the S&P meant that CTA medium term momentum is officially back to positive north of 3965. More importantly, coming into today we had $6BN of S&P to buy in flat tape over next 5 trading sessions (specifically from CTAs). But as Flood notes, with S&P well above 4000, this number will grow meaningfully post today’s Tuesday’s close.
More importantly, with stocks rising as high as 4038 on Wednesday morning, they are less than 20 points away from the final, Long-Term momentum trigger point, which flips positive north of 4054.
And finally, as Flood notes, another key technical level to keep up on your screens in 200dma of 4062, adding that he “would not be surprised if mkt make a run towards 200dma but will be difficult to break through it.”
Finally, as we will discuss shortly, today’s FOMC Minutes will most likely read dovish, providing that final trigger to boost the S&P above both the CTA and 200DMA, and send them on their way to Wilson’s 4,150 target if not higher.
There is much more in the Goldman note from both Flood and Michael Nocerino available to pro subscribers.