State of the Market: Q1 2023 Review
With 25% of the year now behind us I think this would be a great time to do a quick review of how the market acted in the first 3 months of the year and more importantly how it closed out Q1 2023!
In early October 2022 the market made a low and has since retested around that area in early November 2022 and again in late December of 2022. While chopping and churning during high volatility it was able to squeeze out a higher low.
Since then the market pushed on strength from January 2023 into Early February, some of this could have been tax loss selling rebuys which is a quantifiable seasonal trend but much of it came on stronger than expected earnings from names like $TSLA, $MSFT, $NFLX, $AAPL and many others.
What's even more fascinating about this strength was the markets (Nasdaq in particular) and now S&P 500's ability to brush off what I would call a mini banking crisis just 3 short weeks ago. Instead of the market selling into new lows it quickly reversed and continued to push higher on strength. $QQQ was able to close out +20% and on 2023 highs just this past Friday. A very strong development for the bulls!
One observations I've made over the years is more market bottoms seem to happen in October than in any other month and so far we have observed a potential bottom in the market from October 2022.
Here is an observational tweet I made earlier last week on the Nasdaq from prior bear market bottom reversals.
See any similarities in the charts? Stretched out bottoming patterns followed my higher lows!
Ok, now that we've covered the developments of Q1 2023 how does this translate over to a short term trading strategy?
After strong short term runs in the market I like to keep an eye on $NYMO and $NAMO charts. This is one of my favorite indicators to help identify short term oversold and overbought conditions. We've actually had a couple of those cycles in 2023 so far!
How does $NYMO and $NAMO look after last week?
$NYMO is currently testing "overbought" territory:
$NAMO still has room to extend higher:
What could this mean short term? It could just mean that the market might need some time to churn before the next potential move higher. Caution with sizing and entries is something to keep mind of while the market builds for the next potential rally phase!
That said here are some better looking charts to put on your watchlist for next week:
Cheers and happy trading!
Art of Trading