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Flirting with a Bottom January 8, 2022

Posted by Tom in Thoughts.
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Jan. 7, 2022 – This report will be short and to the point since I’ve got a lot of things going on.  To start with let’s look at the market overall; chart below.  Market Sentiment = Bearish, Money and Volume Flow = Bearish and Price Strength is Weak.  Overall not a good environment for investing.

click on chart to enlarge

But as I look to the volume bars at the bottom I see that volume has been dropping off over the past 3 days.  To me this indicates selling is also dropping off and we now have to consider “No Demand” (i.e. no appetite for buying) right now.  As the market flirts with touching the previous low near the 14860 level there are 3 scenarios:

  1.  Investors getting concerned even more and we drop below the Support level.
  2. We enter a trading range where prices consolidate for a few weeks; zig-zag.
  3. The market bounces off the Support level forming a triple bottom pattern and heads back higher.

My preference at this time is scenario #2, a consolidation pattern.  This will give the market time to sort out Covid, geo & domestic politics and the upcoming earnings for the 4th quarter.  I can’t help thinking that a good chunk of this selling right after the first of the year was related to taxes.  Sell & book those profits and reload while delaying long term gains for 12 more months.  Just a feeling, especially with how well the markets have done over the past 12-24 months.

The Short Term Sector Strength table is shown below.  What got me here was that Technology is at the bottom.  OK in the short term but not so much in the long term. (note ‘Bear’ Treasury bonds are inverse to the bond)

I’m keeping a close eye on the 14860 level on the NASDAQ Composite Index.  That has shown support twice before & that’s important.  Have a Good Week.   ………  Tom  ……….

Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.

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