Phases & Cycles: Market Outlook – February 02, 2023

Larry Gaucher |

The correction is over. It ended on October 13th when all North American Indices (the DJI, DJT, SPX, NASDAQ and the TSX) hit a major low; when stocks above their respective 10- week and 30-week Moving Averages were at an extreme low; when the bullish newsletter writers and the members of the AAII, expressed unanimous negative opinions.

Any analyst would have been derided, ridiculed and teased if he openly expressed or published such “nonsense” at that time. Although yours truly did. The October 12th Market Comment states that “the Declining Volume (DV) was almost ten times larger than the Advancing Volume (AV), which often signals a “selling climax” and the end of a downtrend”. However, it would have been wrong to call the end then, given that all the indices were below their respective 200-day Moving Averages (200dMA), which is the most significant and most respected technical tool.

What has changed? Six important events:

1) all the indices mentioned in the first paragraph (even the Dow Industrials and the Dow Transportations) are now above their 200dMAs (see charts for SPX & TSX on following page).

2) the first five days of January were ahead,

3) January ended higher (“as January goes so does the year”),

4) the AAII members are still 37% bearish and only 28% bullish,

5) global fund managers have their lowest allocations of U.S. stocks on record,

6) the “super bears” are still super bearish.

Why was it a “correction” and not a “bear market”? Our next Market Comment will elaborate.

 OUTLOOK

Despite everything mentioned above, the markets are not going to new alltime highs just yet. They could use a pause after the January rush with a weak February, and the AAMNG stocks (previously FAANG) are still below their 200dMAs (except for Netflix).

However, in Toronto, the Banks (except BNS and CM) and the Insurers have moved above their 200dMAs and the Energy Sector is still alive.

Capitalight Research . 130 King Street West, Exchange Tower Suite 1940, Toronto, Ontario M5X 2A2

subscriptions@capitalightresearch.com . Capitalightresearch.com

The contents of this report may NOT be copied, reproduced or distributed without the explicit written consent of Capitalight Research Inc. ©2023, Capitalight Research Inc. All rights reserved

The opinions and projections contained herein are those of Capitalight Research Inc., its principals, associates and employees (collectively “the researchers”) and are subject to change without notice. The information contained herein has been obtained from sources that we believe to be reliable but cannot guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that “the researchers” are to be under no responsibility or liability whatsoever in respect thereof. “The researchers” may, from time to time, buy, own or sell securities mentioned herein. “Capitalight Research Inc” is a division IC Capitalight Corp.

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This newsletter was written, designed and produced by Phases & Cycles Inc. for the benefit of Larry Gaucher who is a Senior Wealth Advisor for iA Private Wealth and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.

iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.