This week we have a stock market forecast for the week of 1/16/2022 from our friend Bo Yoder of the Market Forecasting Academy. Be sure to leave a comment and let us know what you think!
The S&P 500 (SPY)
While my forecast for a weak or "false" breakout in my last forecast has proven correct, I still won't have that much confidence in the sustainability of this top until we have a clear break below the support level at $450 per share and a weekly close below that area.
The Fed is running the show with its endless printing of money. Imagine yourself back in high school and working your tail off to scrape the money together to buy a car. In the meantime, you see several kids show up at your school in brand new BMWs that daddy bought.
As long as a monetary system exists where people who create value and are paid for that value creation like myself can have their gains devalued aggressively through inflation, we will have malinvestment and "looting" of the western world.
It's time for all of you to read (or re-read) "Atlas Shrugged," "The Creature From Jekyll Island," "End The Fed," and "When Money Dies." The concepts in these books will become VERY relevant in the next 3-5 years in the western world. Watch Turkey, and how its central bank manages the collapse of its economy, that should be very educational!
SPDR Gold Shares (GLD)
Gold is stuck in an endless "Symmetrical Triangle," which is essentially a coiling spring of energy in that market. There is a big "problem" coming for the institutional traders in gold. Depending on whose numbers you believe, there are something like 200-250 ounces of paper gold (contracts and obligations on physical gold) for every ounce of real heavy yellow physical gold on the planet.
Simply put, this means that every oz of gold in existence has many entities that could claim legal ownership. If inflation continues to accelerate, as has always happened in history, there will be a "flight to safety" in precious metals. Cryptos will be in competition with metals in this cycle, but there will still be a rush to own physicals.
If/when this happens, the gold simply will not be there to fulfill legal obligations, and then the horse-trading will begin, just like when a large entity "restructures debt" instead of going bankrupt, those short paper gold will come to the table and say something along the lines of. We can't fulfill our obligation to deliver you gold as per our contract. We can either default, and you get ZERO, or we can pay you in dollars, and we can settle on a number.
I suspect when this crisis hits, that's when we will see the crypto space bust wide open and could see more widespread adoption. If confidence in the US Dollar is poor, these aggrieved parties may demand their paper gold settlements in cryptos, and that would bring strong demand to those markets.
Let me be clear, Bitcoin is currently under bearish control, and I'd not be accumulating at the moment. I just wanted to put forward this forecast, to plant a seed and spark you to do your own research... because I believe it will become a generational opportunity in a couple of years or so, and I'll be very focused on the timing for entry when that occurs!
iShares Silver Trust (SLV)
Silver printed a higher low, and that confirmation attracted a lot of bullish interest. The slow and stable rally is positive for this position, and I would hope to see a clear and positive break of resistance in the $24 per oz range, which would post a clear signal to the market that a new uptrend is forming.
Goldman Sachs (GS)
The lows near $370 are a critical failure point for the GS position. After yet another squeeze attempt was rejected, the manipulators have been left with egg on their faces, and this should bring out bearish aggression and lead to a breakdown.
I always laugh when losing traders whine about "market manipulation" as an excuse for their troubles. The markets ARE ALWAYS and HAVE ALWAYS BEEN manipulated! Suck it up, buttercup.
Then, once you have your emotions under control and look at things from an adult perspective, you might have a chance to realize the truth.
If the markets are manipulated, logically, they are being "put" from one price zone to another, right?
Ok, then in order to accomplish this manipulation, the "bad guys" must have the resources to push, prod, and cajole the market to make its moves…right?
If the above is true, then wouldn't it be worth your time to figure out how to track and forecast the movements in the market of these financial behemoths?
It's learning how to "think differently" that allows the TINY minority who is consistently profitable in the markets to understand what truly moves markets and forecast them just like a top poker player reads the, "tells" of his opponents.
Ulta Beauty, Inc. (ULTA)
ULTA has turned out as a classic "ripoff trade." It went up and took out the highs of the red zone, triggering stop-losses. THEN it went right back down and will likely break down and trend.
This heartbreaker action is similar to a poker player who goes all-in with a dominating hand to win a tournament, only to be "sucked out" by a low probability hand connecting for their opponent.
It's an unpleasant experience and one you will NEVER BE RID OF if you choose to trade the markets. We are in an odds-based business, and even with a 90% win ratio, you will lose 1 out of every 10 trades on average!
The sooner you embrace the uncertainty that comes with any odds-based process (poker, insurance, cancer treatment, advertising, trading), the sooner you will de-stress and reduce human error from your trading operations.
Voya Financial, Inc. (VOYA)
Contrast the false whipsaw in ULTA with the "true pattern failure" in VOYA. IN this case, price rallied up and broke out, violating the highs of the red zone and triggering stop losses, and continuing up, up, and away!
When I am looking back on my losing trades, this is what I look for. As long as my forecasts were wrong and my stop losses saved me from losing more than I needed, I mark it down as a "good loss."
If I find that I have too many whipsaws, then I am likely placing my stops too tight and can look at optimizing my stop setting strategy to lower the incidence of "false stops" in the future.
To Learn How To Accurately and Consistently Forecast Market Prices Just Like Me, Using Market Vulnerability Analysis™, visit Market Forecasting Academy for the Free 5 Day Market Forecasting Primer.
Check back to see my next post!
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About Bo Yoder:
Beginning his full-time trading career in 1997, Bo is a professional trader, partner at Market Forecasting Academy, developer of The Myalolipsis Technique, two-time author, and consultant to the financial industry on matters of market analysis and edge optimization.
Bo has been a featured speaker internationally for decades and has developed a reputation for trading live in front of an audience as a real-time example of what it is like to trade for a living.
In addition to his two books for McGraw-Hill, Mastering Futures Trading and Optimize Your Trading Edge (translated into German and Japanese), Bo has written articles published in top publications such as TheStreet.com, Technical Analysis of Stocks & Commodities, Trader's, Active Trader Magazine and Forbes to name a few.
Bo currently spends his time with his wife and son in the great state of Maine, where he trades, researches behavioral economics & neuropsychology, and is an enthusiastic sailboat racer.
He has an MBA from The Boston University School of Management.
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation for their opinion.