Heads Up: A Change in Character October 29, 2022
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October 28, 2022 – Heads Up Folks ! This looks like a “change in character” in this market. That means either “a low” was put in or “the low” for this market cycle was put in. In either case it sure looks like at least a “tradeable bottom” so I am starting to phase in some equity positions. I’ll start with index ETF’s since they will cover a broad area of the market and if I’m wrong (which could be) I can exit back to neutral / cash quickly.
I’d like to see two closes above the resistance level of 11230 (green dashed line) on the NASDAQ Composite Index before I’d feel more comfortable and increase long positions. That level along with a few more confirming indicators would improve confidence. But . . . let’s not get ahead of ourselves.
On Wednesday of next week (11/2) we’ll get the next dose of FED interest rate speak. This market sure wants to see a more modest increase in interest rates . . . say ½%. I note that the US Dollar is down and the Treasury Bond rates have recently gone down. Both events support a rally in US equities. Earnings and guidance have slowed so perhaps the FED will take a ½ step back from the rapid interest rate increases and give the economy a chance to stabilize. One can only hope.
The Short Term Sector Strength table –
It’s nice to see something other than defensive and Energy sectors toward the top. An encouraging sign, let’s hope it continues. That’s it for now. I expect a slight pull back early in the week and then a push higher IF the FED shows some encouraging news on Wednesday. Now is the time to keep your head up and observe. So far the rallies have just been short term short covering by traders. The question now is: will investors start to come back into the markets? Have a good week. ………… Tom ……………
Price chart by MetaStock; table by http://www.HighGrowthStock.com. Used with permission.
What Effected The Market This Week October 21, 2022
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October 21, 2022 – Many think when they’re trading the stock market, that they are trading stocks. But this week it was more correct that they were trading Bonds (interest rates), Currencies (Pound & Yen) and Option Hedging (continuing). These three have a significant effect on what the markets did this week. We’re right in the middle of earnings season and outside of Energy stocks, things are looking like a slow down or barely OK at best.
It sure feels like nearly everyone is waiting for the other shoe to drop and they’re not willing to take any significant positions. News from the UK disrupted both rates and currencies and the Bank of Japan was trying to prop up the falling Yen by selling US Dollars; it didn’t work. So it continues to look like the market is trying to stabilize and build a base . . . if the news would just cooperate.
Here’s the Short Term Sector Strength table –
So not much new to discuss this week. I’m heavy in Cash with a single minor position in Oil Services. I’m expecting a bounce up next week, but maybe only for a week or so. I doubt if the market is done with us yet. Have a good week. ………. Tom ……….
Price chart by MetaStock; table by http://www.HighGrowthStock.com. Used with permission.
Bottoming Or Lower ? October 8, 2022
Posted by Tom in Thoughts.Tags: market analysis, market commentary, Stock market analysis, stock market commentary, technical analysis
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October 7, 2022 – Here’s my quick read of this market: We are either in a broad “Bottoming” / base building process (scenario ‘A’, green lines) or headed lower (scenario ‘B’, blue lines).
The market rocketed up about 5% early in the week and then gave it all back late in the week. This is typical of a nervous market where folks are trying to anticipate the next move, which causes ‘Shorts’ / Hedges to cover their positions and buy. The technical term is a “Short Squeeze”.
What is causing this nervousness is the very fast rise in interest rates and a large amount of debt / loans that are affected by interest rates. The market (according to CME interest rates futures) is expecting 80% chance of another .75% interest rate rise come November (Bearish). Watch for the latest CPI (Consumer Price Index) data that will be coming out on Thursday. That could be a big mover in either direction, as the FED is keying off of inflation data, and that drives their decision on interest rates.
What will confirm that a move has “legs” will be how the US Dollar and Treasury Bonds react. A lower US $ and stable or high bond prices (lower rates) would be Bullish and support at least a longer run higher. Of course the opposite is true too.
The Short Term Sector Strength table is shown below –
I am very heavy in Cash waiting for a sign of at least a ‘tradable bounce’ . . . . in either direction. I’d like to think that the worst is behind us but proof of that is not easy nor plentiful. This market is nervous and right now the institutions are staying hedged and away. Me too. Have a good week. …. Tom ….
Price chart by MetaStock; table by http://www.HighGrowthStock.com. Used with permission.
Forward Into The Past October 1, 2022
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September 30, 2022 – The markets made a new low on Friday, touching the same price level going back to August, 2020. (yes . . . 2020). We’ve had one “tradable rally” since the peak in January of this year but I decided to only take a few small positions, then “down the hatch” it went and sold them out.
Where from here? The blue lines show my current ‘Plan A’ thinking with a recovery bounce next week followed by a lower low; likely to around the 9663 area. But . . . there is always a ‘Plan B’ if ‘Plan A’ doesn’t materialize. Volume this past week is low and traders are not anxious to stick their necks out, nor am I, at least not yet.
Here’s a pie chart of the strength of all of the stocks in the S&P 1500 Index –
The darkness of the color indicates the strength of the price relative to their Bollinger Bands and their direction. Not much green and a whole lot of red. The market is “oversold” so a recovery bounce next week is likely. But until there are some creditable signs that the economy has at least flatten out and interest rates are likely to stop rising we are susceptible to another leg down. In short, we need to see a few positive signs and we really have not seen a washout of investors throwing in the towel. That might be coming.
Here’s the Short Term Sector Strength table –
Again, not any positive signs yet. I’m heavy in Cash waiting and trying to be patient and not anticipate much. J Have a good week. ……….. Tom ………..
Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.
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Still Within a Down Trend October 15, 2022
Posted by Tom in Thoughts.Tags: market analysis, market commentary, Stock market analysis, stock market commentary, technical analysis
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October 14, 2022 – There really isn’t much new to discuss. Overall, the environment has not changed. These massive one day moves are generally started with Put options and short covering (up) followed by short term day traders piling on. After the “evening out” of short positions stops, reality returns and we just come back down.
The hedging activity remains high, the big intuitions remain concerned about a 10% drop and are not taking chances right now. What is driving this are rising interest rate fears driven by the FED who is driven by inflation data, and we got two doses of that in the past week.
Ask ourselves:
I’m answering ‘No’ to all of these right now. But all is not gloom & doom. The number of stocks making new lows is slowing (selling drying up ?). Retail investors are flooding into Cash; looks like capitulation. The market (in general) is “oversold”. But . . . “Selling begets Selling (& Buying begets Buying), so if we see a sustained amount of selling, that could be the final ‘blow off low’. Right now I’m holding a heavy position in Cash and trying to be patient because the market will turn. I sure would like to see it put in a base over a month or more before any spring higher happens, but one must stay flexible.
Short Term Sector Strength table –
I note the previous market leaders are at the bottom. One bright spot is BioTech, but that could be a short term blip; we’ll see. Have a Good Week. ……….. Tom ………..
Price chart by MetaStock; table by http://www.HighGrowthStock.com. Used with permission.
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