S&P Analysis

When the market goes up, there are those who predict stars on the S&P500; when it goes down, fate turns ineluctably to 3000.  There has also been one voice, that of Mike Wilson, head of Morgan Stanley’s investment department, who predicted a minus 26 percent for the S&P500 in 2023. That means about 2800, whoever offers more, indeed less, raise your hand.
On Thursday it was Raphael Bostic, Atlanta Fed, who dressed as a dove saying he would support the line of a 0.25 rate hike at a time. The market fears a 0.50 percent hike at the next Fed meeting in late March (complete with the almost daily publication of the likelihood of that happening).
The ISM services index, Friday’s news, remained stable and slightly above expectations. News that did not alter indeed seems to have encouraged, the market rally that began on Thursday and then continued very strongly into Friday.
The big news that animated the day on Friday was the rumor that the United Arab Emirates was about to leave OPEC. As a reminder, the Emirates are, along with Saudi Arabia, the two OPEC countries with the largest spare capacity.
The impact of the rumor drove the price of oil down, only to have it rise again, in a mini-rally when in an official statement the Emirates claimed loudly that their exit from OPEC was fake news.
On the other hand, United Arab Emirates had already publicly stated that they would stick to the current OPEC agreement through 2023. So the rumor only served to create some volatility. Oil now seems to have taken a bullish trend, we will see if the breakthrough of recent resistance will confirm this.
China is emerging from the COVID-19 blockade. So much so that the country’s manufacturing indexes show expansion at the fastest pace in a decade. This news is strongly inflationary.
We remain in our opinion of a market that in 2023 will leave intact the lows and highs of 2022 on the S&P500.
We would be very surprised if the recent bearish retracement of U.S. stock markets was already over, and we believe it is not. Moreover, looking at the bounce of the last two days, it would seem to be on an upward path, but we fear it is just a way to sell from as high as possible.
The downward target for the S&P500 in March remains 3850 in our view, with possible sinking even as low as 3788 (and if it breaks that, there could be serious trouble). We will see, also because all the classic indicators are laying in favor of the upside, the 200 moving average, rather than holding the trend line of the lows.

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