Stock Markets Analysis and Opinion

8 Monster Market Predictions for the Week Ahead

2022.12.12 06:39


It will be another busy week for the market, with on Tuesday, the on Wednesday, on Thursday, and and meeting on Thursday. Additionally, on Monday, there will be a and a Treasury auction, followed by a auction on Tuesday. So plenty of data points to move stocks, bonds, and the dollar all week.

The headline CPI is estimated to have risen by 7.3% y/y versus last month’s 7.7%, while the is expected to have increased by 6.1% y/y, down from the previous month’s 6.3%. Meanwhile, the general market expectation is for the Fed to raise rates by 50 bps, with one left to wonder what the dot plot will look like. I believe it will increase the 2023 target to at least 5%.

1. Dow Industrial (DJI)

technical charts suggest that a pullback is now in order. The Dow is the best place to start because this has been, without a doubt, the leading average over the past several weeks. The diamond top, which has formed over the last two weeks, has broken down, and the pattern has shifted into a head and shoulder reversal pattern, suggesting the average fills the gap at 32,500 and potentially goes lower.

Additionally, the RSI has broken down and is trending lower, a sign that momentum has shifted from bullish to bearish.

DJIA Daily Chart

2. Dow Transports (DJT)

On top of that, the has also broken lower, after forming a double top reversal pattern, with the potential to fill a gap at 13,490.

DJT 1-Hour Chart

3. Goldman (GS)

A big reason why the Dow has broken down is that Goldman Sachs (NYSE:) has broken down after falling out of a diamond reversal pattern. The stock filled the gap and fell below support at $360. Now $360 has served as resistance, with the next support level not found until $348, where another gap waits to be filled.

Goldman Sachs Inc. 1-Hour ChartGoldman Sachs Inc. 1-Hour Chart

4. IBM

Another reason the Dow appears to have a Head And Shoulders pattern is that IBM (NYSE:) has a Head And Shoulders pattern. IBM had been one of the leaders of the Dow, and if IBM breaks $145, it is likely to result in IBM falling to $139 and taking the Dow lower with it.

IBM 1-Hour Chart

5. Honeywell (HON)

Honeywell (NASDAQ:) is also rolling over and is very close to breaking its significant support level at $211, which could send the stock significantly if it starts filling those gaps down to $174.

Honeywell 4-Hour Chart

6. S&P 500 (SPY)

Of course, for the , the significant level of support remains at 3,900, and should that support level break, there is still that big gap at 3,750 that needs to be filled. The pattern appears to be one massive bear pennant that has broken lower. So a drop to 3,750 may only be the beginning.

SPX 1-Hour Chart

7. 30-Year Yields

I also think yields are approaching a low and are due to reverse high again. This past week, the 30-year hit oversold levels, with the RSI dipping below 30. It also hit the 61.8% retracement level in the recent rally.

For the 30-year, it is easy as watching the 10-day exponential moving average because it has served as resistance as the yield has moved lower. A break above the 10-day moving average would also take the rate above the downtrend formed from the peak and send the 30-year rate higher back towards 4%.

US 30-Year Govt Bonds, Daily ChartUS 30-Year Govt Bonds, Daily Chart

8. TLT

It means the same thing for the iShares 20+ Year Treasury Bond ETF (NASDAQ:), in which the uptrend and the 10-day exponential moving average act as support on the way higher. There is a gap to fill down around 95; it is far off right now but worth being aware of.

TLT Bond ETF Daily Chart

More details in the video below:

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