February 26, 2024 SPX, ES, SPY Trade Plan

Weekly Market Overview

2021…This market is shaping itself to move very similarly like it did in 2021. Dips are found to continue a push up. I mentioned this in last week’s trade plan that this market is starting to behave like 2021. There was a low in February it found and then a higher low in March and off it went…

In the below 2021 weekly chart of the SPX you can clearly see this “buy the dip” strategy and any opportunities where price came below the 10ema, buyers came in strong pushing price back above that EMA before that weeks candle close…The lone exception to this around that very weak period of September/October.

A weekly chart of SPX from 2021 where the market faced little retracement as it continued up and up

Now compare that to the 2024 market…We have been more bullish than 2021 has been and instead we are more closely tracking with the 5sma. We have yet to have a reversion to any other SMA since this rally began in October. Incredible…

Orange = 5sma, Cyan = 10ema, Red = 20sma, Purple = 50sma, Green = 100sma

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My Trading Rules

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SPX’s Seasonal Performance for February typically shows weakness, but 2024’s market has continued to break this trend. At this point it is a buy the dip at key levels kind of market until proven differently…Be wary as always as we are entering what is typically a weaker period but the key words - prove it bears.

SPX’s Seasonal Performance for February typically shows weakness, but 2024’s market has continued to break this trend

Election years are the second-best year of the four-year cycle, & the market has performed better with a sitting president running for reelection. There have been six election year declines greater than 5% since 1896 & the first five months of the year are stronger when the party in power retains the White House. But war can be a major factor.

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So why do we continue going up in a straight line? To put it simply it is EPS…This past quarter of earning reports was quite healthy and robust and looking at the below chart we are well ahead of market expectations. Consider this chart like a seasonality view of earnings per quarter. You can see how it declines historically as we go into the next 2 quarters of earnings, but this past quarter is well above historical trends.

So until you see something majorly break in this figure which are companies reporting negative earnings this will lend to a market that is…buy the dip.

Then you have this study from Wayne Whaley who shares that when December-February are each positive then the next year (March-February) is up 25 times and down 0 (zero) times. Yes you read that right…So for us in this newsletter and Discord this will be my outlook until proven otherwise. Just amazing stats here from Wayne, take a look.

When December-February are each positive on the monthly then the next year on avg we have returns of about 16% - 25 times up and zero times down

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2/26 News Catalysts

1. 10:00am est - New Home Sales

For more information on news events, visit the Economic Calendar

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