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Most significant technical developments for Q1 2023:

SPX, DJIA and Value Line Composite all broke uptrend lines from last October, giving rise to fears of possible bear market resuming to retest October 2022 lows.

The About-face in SPX that gave back most of January’s gains caused weekly momentum to turn bearish and Intermediate-term breadth has faltered to levels below last December 2022. Just over 45% of all SPX issues above their respective 200-day moving average (m.a.)

Interest rates on the long end plummeted over the last month, yet failed to lead Equity markets higher as the former tight correlation between Equities and Treasuries became unwound.

Technology’s rebound has helped this sector join the late 2022 broad-based rally in other sectors, but now Tech is one of the “last men standing” following several other sectors having rolled over. Tech outperformance might give way to Healthcare and Energy gains

Cycle composite shows intermediate-term lows for this bear market to be in place by March-May. Gann’s Mass Pressure index turns higher sharply in March, and this composite is worth keeping an eye on given 2022’s success.

Pre-election year seasonality favors far better performance than mid-term election year seasonality, and it’s expected that 2023 will show strength into Spring

Sentiment swung sharply back to bearish levels given February’s decline, made worse by the bank failures. Trends have turned back to bearish on a short-term basis after diverging from long-term sentiment into early February. AAII bears are at the highest levels of the year (+44.8) and 10-day m.a. of Equity Put/call ratio is at .75, highest since January. Net Non-commercial S&P Futures positions are also still bearish nearly -200k contracts in E-mini S&P Futures per CFTC data
Emerging markets and commodities have both been under pressure given failure of the US Dollar to roll back over to new lows, along with WTI Crude weakness. Metals appear attractive on an intermediate-term basis after their recent strength

Conclusions:

Stock indices lie near key upside resistance following a steep 200-point SPX run-up into March FOMC meeting. Near-term trends remain bullish as part of mildly negative trends since early February. Recent 1st Quarter consolidation has defied Pre-election year seasonality along with cycles which inverted at mid-March.

Equity indices have not shown sufficient deterioration to think the bull market rally from last October 2022 lows has run its course. Bearish sentiment coupled with Technology outperformance and bullish pre-Election year seasonality remain key reasons for optimism.

Treasuries have defied last year’s trend of positive correlation with Equities after rallying sharply into the month of March. Yield curves steepened dramatically, and Yield cycles still call for lower yields into late April.

US Dollar index pullback very well could stabilize and attempt to bounce in the months ahead vs. immediately breaking February lows. Weekly momentum improvement and Elliott-wave structure argues for stabilization and possible upward reversal in USD in April.

Commodities have largely trended lower as Energy declines have persisted; Meanwhile precious and Base metals have demonstrated some good outperformance; Precious Metals, Sugar and Live Cattle are most bullish.
Cryptocurrencies have shown some minor decoupling from Equities over the past month; as Bitcoin and Ethereum rose to the highest levels in months into mid-February while most Equities were falling; Bitcoin looks to be near initial resistance just above 28k and could benefit by consolidating gains.