A thought for all bullish calls

18 Oca 2023

SPX is up 4.5% since the start of 2023 and 14.5% since its lows in October 2022. As a result, we are noticing an increase in calls for recovery and the beginning of a bull market. However, we are skeptical about these calls. With 2022 full-year results from U.S. banks, we now know their net profit decreased dramatically from the previous year; in the case of Morgan Stanley and Goldman Sachs, we saw this trend also in net revenue. Now, we expect companies in other sectors to follow suit and show corporate underperformance in 2022 (versus 2021). We expect that to confirm our thesis about the economy progressing deeper into recession; due to that, we have strong doubts about the sustainability of the current rally. Accordingly, our price target for 2023 stays at $3400.

Change in net income for particular U.S. banks - 2022 vs. 2021.
Bank of America = -14% YoY
JP Morgan Chase = -22% YoY
Morgan Stanley = -26% YoY
Citigroup = -32% YoY
Wells Fargo = -38% YoY

Illustration 1.01

Illustration 1.01 displays the daily chart of SPX and sloping resistance. Currently, SPX trades slightly below the resistance. The breakout above the resistance will be bullish in the short term. We would look for a retest of the $4100 level in such a case.

Technical analysis
Daily time frame = Bullish
Weekly time frame = Slightly bullish

Illustration 1.02

Illustration 1.02 shows the daily chart of SPX and alternative resistance levels. A breakout above Resistance 1 will further bolster a bullish case for the index.

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DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.