March's Close Relative to 23-Month MA Is Key for SPY and Semiconductors

 | Mar 30, 2023 12:32AM ET

We have written lots of Daily’s, not to mention, talked a lot about on media, the significance of the 23-month moving average.

Here are some past comments:

What has happened in the last 2 years? A bullish run in 2021 based on easy money. Inflation running hotter than most expected.

The banks were caught off guard, and by 2022, the party was over.

So, that begs the question of why this year’s 23-month moving average is one of the most important indicators for equities.

The business cycle generally consists of four distinct phases: expansion; peak; contraction; and trough.

And it takes about 4.7-5 years to run through the cycle. However, in the spirit of our new paradigm, or rules that are square pegs fitting into round holes, we must ask:

Was Covid the trough?

Was the expansion in 2021?

The peak January 2022?

The trough in October 2022?

And now, 2 years later, expansion again?

No need to stress about that we just need to watch the charts.

With only 2 more days until the end of the month and the quarter, we see one area potentially expanding further, while the key S&P 500 index ETF SPY has more to go.

Plus, we have learned from the past that chip stocks can lead only so far before they run out of gas, pulling the economic boat all by themselves.

The 23-month moving average, or just shy of a 2-year business cycle, speaks volumes.

The Semiconductor ETF VanEck Semiconductor ETF (NASDAQ:SMH) is clearing the 23-month MA assuming it can stay above that level through the end of the day.

If SMH sells off from here, failing the blue line, that would be very informative, not to mention emboldening the bears.

However, if SMH does indeed close above the blue line, what might be expected as we start the 2nd quarter?