Some of you might have already heard us speak about the monthly moving averages or have read our commentary about their significance.
On Monday, we asked, “What if the trading range top at 4200 we have been calling for in the S&P 500 turns out to be… the top?” Then, on Fox Business’ Making Money with Charles Payne, I discussed the 2-year business cycle.
Today, we show you the charts on how that business cycle looks. A two year or 23-month moving average in blue is at the very least, interesting.
What has happened in the last two years?
- A bullish run in 2021 based on easy money.
- Inflation running hotter than most expected.
- The banks caught off guard… and by 2022… party over.
So, that really begs the question of why this year’s 23-month moving average is one of the most important indicators for equities.
The chart above is of the iShares Russell 2000 ETF (IWM). Even cleaner perhaps. As Granddad of the Economic Modern Family, a break and close over the 23-month MA would be enough evidence to believe in a soft landing and good news for the economy and market. A failure to pierce that MA means chop. A break of the also majorly important 80-month MA (green) that represents a six to seven year business cycle-bad… very bad.
In October, IWM held the 80-month MA which led us to believe that a recession would be averted. Now, the market literally hangs in the balance between a longer-term and a shorter-term business cycle.
Trust the charts and know your timeframe.
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- S&P 500 (SPY): 420 resistance with 390-400 support.
- Russell 2000 (IWM): 190 now support and 202 major resistance.
- Dow (DIA): 343.50 resistance and the 6-month calendar range high.
- Nasdaq (QQQ): 300 is now the pivotal area.
- Regional banks (KRE): 65.00 resistance.
- Semiconductors (SMH): 248 is the 23-month moving average–key.
- Transportation (IYT): The 23-month MA is 244–now resistance.
- Biotechnology (IBB): Sideways action.
- Retail (XRT): 78.00 the 23-month MA, resistance and nearest support 68.00.
Director of Trading Research and Education
Mish Schneider serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision.