If the S&P 500 breaks below 3795, then the next support zone will be around 3730-3615. There is a chance that we can go as low as 3505-3390. As long as the Dow holds its October low, we will be looking to buy weakness in Q1.
Below, we describe why the broad market is the most important signal to watch for a tech portfolio right now as it determines every action we will take in Q1: when we buy, when we sell, and/or when we wait on the sidelines.
In other words, providing a regular stock tip right now is futile because nearly every tech stock will be trading lower in the near term. We only provide actionable analysisactionable analysis including what informs our own portfolio. Therefore, the most actionable information we can provide is on the broad market.
In Late November/Early December we began raising a lot of cash in preparation for a difficult December. The bounce we were expecting was quite weak, which is signaling that the volatility is not over. We believe that we could see one more small bounce, but the most probable path is down into Q1.
We’ve been trained to follow the FAANGs as leading indicators. This is not so in this market. Money is and has been rotating into high quality Value names that are profitable, safe, and not solely tied to the consumer. That being said, we expect to see the NASDAQ-100 make fresh lows, and even the S&P 500 come close to making new lows. In fact, it can even make slightly new lows. The only index that matters to us is the Dow Jones Industrial Average.
The Dow is the new leader in this market, along with some choice tech names. As long as it holds its October low, I expect the coming weakness to be a tremendous buying opportunity as we set up for a large, multi-month rally into Q2-Q3 of 2023. If the Dow breaks that low, then 2023 could be a continuation of 2022, as we will start looking to sub-3000 SPX in a more direct fashion. We remain hedged in our premium service, and will wait for the market to make a decision before putting our cash to work.
Provided the Dow holds up, our most ideal buy zone is going to be when the S&P 500 is sub-3700. However, we will wait for a trend reversal to put the bulk of our cash to work.