2-year business cycles matter in this market

Some of you may have heard us talk about monthly moving averages or read our commentary on what they mean.

On Monday we asked, “What if the 4200 range top that we’ve been calling for in the S&P 500 turns out to be… the top?” Then move on fox business’ Make money with Charles PayneI discussed the 2-year business cycle.

Today we are going to show you the charts of what this business cycle looks like. A 2 year or 23 month moving average in blue is at least interesting.

What happened in the last 2 years? An uptrend in 2021 based on quick money. Inflation is running hotter than most expected. The banks were caught off guard… and by 2022… the party is over.

So this really begs the question of why this year’s 23-month moving average is one of the most important indicators for stocks.

Here is the Russell 2000 (IWM). Maybe even cleaner. As the grandfather of the Economic Modern Family, a break and close above the 23-month MA would be enough evidence to believe in a soft landing and good news for the economy and the market. Failure to pierce this MA is hacking. A break of the also very important 80-month MA (green), which represents a 6-7 year business cycle – bad… very bad.

In October, IWM held the 80-month rate, leading us to believe that a recession would be averted. Now the market is literally caught in the balance between a longer-term and a shorter-term economic cycle.

Trust the charts and know your time frame.

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• S&P 500 (SPY): 420 resistance with 390-400 support.
• Russell 2000 (IWM): 190 now support and 202 main resistance.
• Dow (DIA): 343.50 resistance and the high of the 6-month calendar range.
• Nasdaq (QQQ): 300 is now the crucial range.
• Regional Banks (KRE): 65.00 resistance.
• Semiconductor (SMH): 248 is the 23-month moving average – key.
• Transport (IYT): The 23-month MA stands at 244 – now resistance.
• Biotechnology (IBB): lateral action.
• Retail (XRT): 78.00 the 23-month ma, resistance and next support 68.00.

Misch Schneider

MarketGauge.com

Director of Trade Research and Education