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Still Within a Down Trend October 15, 2022

Posted by Tom in Thoughts.
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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.

click on chart to enlarge

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:

  • Has inflation shown signs of slowing?
  • Has the FED indicated stable or slower rate increases?
  • Has the market trend changed?

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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