Are Stock Investors “Dazed & Confused”?

by Ana Lopez

Investor confidence towards the stock market (SPY) is very low. This is due to the large differences in market forecasts of leading market forecasters. Some argue for a new bull market emerging. Others make an equally logical pitch for the return of the bear market with new lows on the way. That’s why 40-year-old investment pro Steve Reitmeister shares his thoughts in his brand new market commentary below.

the fair (SPY) has gone up and down since last week’s comment. That’s because bulls and bears battle it out for dominance during this “Dazed and confusedphase for the market.

What does that mean?

What happens now?

What should an investor do about it?

We’ll explore the answers to each of these pressing questions in this week’s Reitmeister Total Return commentary.

Market Commentary

Now let’s take a step back to last week’s commentary where I outlined 4 possible outcomes for the market following the all-important Fed interest rate announcement on Wednesday 2/1. Indeed, we’ve landed on the least attractive of those. That means…

“Scenario 4: dazed and confused

This is where the Fed is sending mixed signals. Still hawkish for a long time to save face given previous statements. And yet they doff their hats a bit to moderate inflation.

This gray area leads to a trading range until investors have more facts in their hands. I’m guessing 4,000 is the low end with 4,200 on the high end. This goes hand in hand with a lot of volatility as investors have to recalibrate bull/bear odds with every new headline.”

The market has since lived up to every syllable of the above expectations. Especially the volatility part that comes after each major headline.

Furiously higher after the speech

Plunged Friday and Monday after the unemployment report came in WAY TOO HOT, suggesting that the Fed will have to remain vigilant about inflation for quite some time to come.

And then up again today after Chairman Powell’s interview at The Economic Club of Washington DC

Check it out here if you want, but to me he just reiterates the point that inflation is too hot and the aforementioned employment report only confirmed that idea. This prompts him to keep rates high for much longer than most investors appreciate.

Heck, he even stated that this surprising strength can lead them to be even more aggressive than previously stated. Maybe that means higher rates than 5%. And maybe it means they’ll be at it longer than the end of the year. Maybe both.

These ideas are very aggressive, increasing the likelihood of a recession, driving Tuesday’s rally almost insane. But again, that was the quirk of the response last Wednesday when he said nearly identical things.

Looking ahead, the key catalysts for stocks will be:

2/14 Consumer Price Index

2/15 Retail sales

2/16 Revenue price index

That means there’s a bit of calm before the next storm and so expect stocks to keep thumping around the 4,000 to 4,200 for the S&P 500 (SPY) until then.

What’s so special about 4,200?

The official definition of a new bull market is when you rise 20% from the lows. In this case, the October lows were 3,491 x 20% = 4,189…which adds up to 4,200.

Notice how we’ve flirted with that level a few times over the past week, only to find too much resistance.

Here’s our game plan from here…

Right now, I see a 65% chance that we will enter another bear market and make new lows in the coming months. Only 35% chance of a soft landing giving way to the next bull market.

This explains why the Reitmeister Total Return portfolio is currently 36% long in the stock market with a mix of Risk On and Risk Off positions.

If and when the bear market retaliates, as likely indicated by a pullback below the 200-day moving average (3,947), then we will return to our bearish hedge that so successfully gained nearly 7% from August 2022 through the year end when the general stock market collapsed.

On the other hand, if instead we move above 4,200 in a meaningful way, then the likelihood of a bull market is higher… . The new additions should be of the Risk On variety (growth companies at discounted prices with impressive POWR ratings).

I will end by sharing this analogy.

The investment journey is often like driving around a Grand Prix circuit. Lots of twists and turns that make us cautious and slow down. But immediately after the corners comes the straight where we can step on the accelerator with more confidence.

This is indeed a pretty tight turn right now as we could break north with a bull market or go back to the rougher bearish detour. So hold on tight to the wheel now, because there’s likely to be a straight ahead that will make our lives easier…and our wallets thicker.

What to do now?

Check out my brand new presentation: “Stock trading plan for 2023” covering:

  • Why 2023 a “Jekyll & Hyde” year for shares
  • How the bear market could retaliate
  • 9 trades to make a profit now
  • 2 Trades with 100%+ upside potential as new bull emerges
  • And much more!

Watch “Stock trading plan for 2023” Now >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, and Editor, Reitmeister Total Return

SPY Stocks. Year-to-date, SPY has gained 8.57% versus a percentage increase of the benchmark S&P 500 index over the same period.

About the author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the company, but he also shares his 40 years of investing experience in the Reitmeister Total Return Portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.


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