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In Range, Building a Base July 23, 2022

Posted by Tom in Thoughts.
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July 22, 2022 –  OK we had a good week but there is still work to be done before we can confidently say that the low is in and we’re in an uptrend.  On the chart we can see that we’ve broken above near-term resistance but remain within my called-out trading range.

click on char to enlarge

Many short term indicators are positive but I note that volume during the last couple of days was low; no major commitment by traders just yet.  I’m seeing the hedge levels (Put options) dropping but that leads me to think that these short term up ticks are mostly driven by short covering to reduce the Put / Hedge exposure.  We need to see some follow through if this is in fact a change in trend.

Next Wednesday is the next FED announcement date.  And ALL eyes will be watching at about 2pm on Wednesday.  From what we’ve seen lately the initial move switches back quickly in the opposite direction; it pays to wait and see how the entire market reacts.  I am seeing some improvements in “Market Breath”, that is, the amount of volume during Up bars vs. Down bars.  There is still a bunch of down volume over the past month to “absorb” with buying but it is a start. Note: major earnings are being reported next week.

Remember that the stock market anticipates the economy and reacts to where the consensus thinks it is headed, not where it is now.  To that end the U of M Consumer Confidence chart shows that the market typically bottoms out as the consumer is the most negative on the economy.  That doesn’t mean that the market can’t go lower, but it shows that it may (just may) be getting closer to a bottom.

The Short Term Sector Strength table is shown below –

Semiconductors and Technology lead the market higher last week and much of that was news related, so let’s see if that strength can continue into next week.  Right now I’m Cash heavy with exposure in select Biotech stocks and I’m waiting for a better market indication before I phase into the market.  As I mentioned last week, the Treasury Bond auction went well and that’s a potential sign . . . but then again there is the FED and interest rates.  Are we done yet?  (not likely, IMHO)

Have a good week.   ……..  Tom  ………

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

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