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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
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* If the dots don't connect, gather more dots until they do...or, just follow the $$$...





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Saturday, January 01, 2022

2021 Market Wrap-Up and 2022 Forecast

My 2020 Market Wrap-Up and 2021 Market Forecast can be found at this link.

After witnessing an unusual number of wild parabolic spikes and plunges on a variety of trading instruments during 2021, I'd posit that 2022 will see a return to a state of quasi-rationality... out of necessity in order to preserve one's remaining stash of cash

BUT, this will create higher volatility, lower volumes, lower trend sustainability, longer periods of consolidation, lower expectations, and lower certainty, overall.

2022 will be hung over with higher (persistent) inflation, COVID-19 variants and accompanying economic disruptions, increased interest rates, a changing political landscape, increasing national and international security concerns, and a skyrocketing national debt, to name a few headwinds.

In fact, it may very well feel like market makers/movers and shakers have you "on hold" at times.

There will be surprises, some quite shocking (to markets) if/when they become common knowledge.

"Don't think money does everything,
or you are going to end up
doing everything for money."
-- Voltaire

At its height, the SPX gained around 29.5% for 2021. Assuming we do see quasi-rationality take hold, we could expect to see a gain of around half of that in 2022 -- a 16%+/- increase by year end -- IF the tailwinds outweigh the headwinds

Its trading range for 2021 was 1,146.22 points, with a high of 4808.93 and a low of 3662.71, as shown on the following yearly chart.

The following Pivot Point calculations are provided to illustrate a variety of support and resistance levels/price targets on the yearly timeframe for the SPX. They are based on the high/low/close of the 2021 candle for 2022's levels/price targets.

The Pivot Point of 4412.61 for 2022 (identified below) is one and the same as the Pivot Point depicted on the 2021 yearly candle in the chart above (small horizontal white line). It will act as a major support/resistance level for 2022, with R1/R2/R3 acting as minor resistance and S1/S2/S3 acting as minor support levels.

If the SPX sees a gain of around 16% for 2022 from 2021's close of 4766.18, it may reach a high of 5528.80. That price is just 30 points shy of the R2 target at 5558.83.

However, if it falls and holds below the Pivot Point at 4412.61, we could see a catastrophic plunge ensue in the equity markets...and markets worldwide.

In conclusion, look for more stable and valuable sectors and stocks, commodities, bonds, and currencies which, potentially, may act as a safer hedge against the headwinds (and, as yet, unrevealed shocking surprises) described above.

BUT, keep your wise wits about you!

"If there is no wisdom,
rationality can be very dangerous."
-- Nirmala Srivastava


Happy New Year and best of luck in 2022!


* UPDATE January 5...

It appears that the Fed is confirming many of my 2022 "hangover" assessments, as outlined in their minutes released today from their last meeting. 

As I write this update at 2:30 pm ET, the SPX is currently selling off, but remains above the upper edge (4700) of a sideways consolidation zone that began last November...now considered minor support

A drop and hold below 4700 will see a return to a trendless, whippy and volatile market until it breaks and holds below 4500.

* UPDATE January 7...

The US 10-year treasury yield (US10YT) has spiked upward since the beginning of this year, as shown on the monthly chart below...confirming Fed sentiment described above.

It's now well above major support of 1.50 and is on its way to 2.00...or higher.

And, there's this report pertaining to yields...

* UPDATE January 8...

The following article provides a good explanation of how we got to the point of inflation headaches for the Fed...and where things are headed...(HINT: bad news for consumers)...

* UPDATE January 12...

Inflation has gone vertical over the past two years, as has the SPX...looks like a correlation to me.

CPI (Consumer Price Index) came in at 7.0% today.

By the way, inflation has spiked way above what it was just prior to the 2008/09 financial crisis.

If that's not a warning to traders, I don't know what is! 😕

And, it's bad news for President Biden and his far-left spending agenda/spree. 

So, what will he do for the next three years of his first term that will benefit all Americans?

Unless he shifts radically away from his socialist agenda and unconstitutional mandates and moves toward a centrist stance, he will be hamstrung by factors such as spiking inflation and plummeting poll numbers (currently in the low 30s).

So, brace yourselves for stagflation until the 2024 election.

Zerohedge excerpt