Stock Market: Up-Down-Sideways? 221023

I used the uptrend this week to close out additional positions.  My remaining holdings are concentrated in Small & Mid Cap Indexes, Energy, Aerospace Defense, and a few ReOpening stragglers. 

I held the COVID90 portfolio too long.  One of the reasons was the Ukraine Invasion.  Counterintuitively, the Invasion was a perfect setup for the ReOpening trade.  It provided the catalyst for COVID amnesia…suddenly the Establishment didn’t care about social distancing, masks or vaccine boosters.  Companies favored by the reopening flourished in both revenue and profit; unfortunately for my portfolio, stock prices were dragged down by the new fear agenda of inflation & rising interest rates. 

In spite of the negative headline, the economy has been resilient and through August there was a strong possibility for a stock market rally into yearend.  But the lower double dip that occurred at the end of September put the Market just above the Danger Zone.  Not “in” the Danger Zone but close enough for concern.  This is the time for building cash reserves.

The below chart illustrates the last two times the Market breached its Long Term Moving Average (LTMA) for a sustained period of time- DomCom Bubble & 2008 Financial Crisis.  Will that occur this time?  Maybe, maybe not.

New Uptrend– the bottom could be in if there were a significant positive catalyst like an easing Fed or resolution in Ukraine.  Consumer demand has remained strong, corporate profits are solid, and LOTs of investor money is sitting on the sidelines.  Pessimists will miss the opportunity.

Sideways Market– the Market could remain range bound, with the S&P 500 trading somewhere near its LTMA low and maybe as high as 4000.  Swing trading the volatility can be very profitable in a range bound market.

Catastrophe– a severe breach below the LTMA would result in another notable stock market crash.  For this to occur, there will likely be an event that triggers the cascade.  In 2008 it was the bankruptcy of Lehman Brothers; after the initial drop of the DotCom selloff it was the 9/11 Terrorist Attacks that propelled the Market lower for longer.  Crashes are not enjoyable, but they always set the stage for the next big bull market cycle.  Be patient and have a HIGH level of cash on hand to buy the dip.

The next couple weeks will be busy.  The Fed announces its next rate hike on Nov 2 and the Midterm elections are the following week, Nov 8.  Expect more volatility (positive or negative) around these events.

If you find these ALERTs informative, please share them with a likeminded friend AND reference this post on your website or social media channels.

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Scary chart obscures opportunity 221001

Markets are turbulent but despite the selling, the double bottom is holding and the S&P 500 is remaining above its 4 year moving average.

Note the attached chart.  Purveyors of fear will use it to scare you.  I offer it as an explanation of a Bear Market versus a Catastrophic Market. 

Listen to the latest episode of the Wealthsteading Podcast for an explanation:

If you find these ALERTs informative, please share them with a likeminded friend AND reference this post on your website or social media channels.

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Forced to sell at the bottom 220929

Today I did something that I NEVER like to do…I was forced to sell, at what I believe is likely a Market bottom.  I won’t list the entirety of what I sold, it was approximately 30% of my portfolio.  The stocks I sold were generally the frailest.

I say “forced” to sell, because my gut instinct is to hold; however, today’s price action triggered a predetermined long term “tripwire” that I use as a “line in the sand” that can’t be crossed.  Rule based logic outweighs emotion.

The tripwire is also being reinforced by deteriorating conditions overseas- sabotage to the natural gas pipeline under the Baltic Sea; UK pension fund panic; and growing concern about Emerging Market currency crisis due to the extreme strength of the US Dollar.  I continue to believe the overall status of the US economy is resilient, but these externalities might prove to be a stock market “Lehman Brothers” type event that would breach support at the 4 year moving average.

I still anticipate a bounce off this double bottom low; however, if my next tripwire is triggered, I’ll take more chips off the table.

This is not yet a time to panic.  A 2023 mild recession is already priced into the Market.  Corporate profits are being adjusted down, but they’re still strong.  Any “good news” type headlines will likely drive at least a short term rally.  Conditions are forming for an excellent opportunity to swing trade between what will likely be a long term range bound market.

As always, trade with caution.

If you find these ALERTs informative, please share them with a likeminded friend AND reference this post on your website or social media channels.

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Double Bottom test of June Low 220925

The S&P 500 is currently forming a double bottom pattern, testing the June 16th low.

NOTE- in a previous post, I stated:  “…the odds of a drop all the way back down to the low is HIGHLY unlikely.”  That was based on the 50% retracement which had taken place in August.

Three quick points-

  1. “HIGHLY unlikely” isn’t DEFINITELY.
  2. So far, the S&P 500 is testing the closing low from June, but hasn’t yet reached or exceeded that level. 
  3. A bounce from the retest is a Bullish signal.

I don’t have time to discuss the attached chart. It’s a jumble of concepts, but I wanted to get the graphic out there.  Tune into the next episode of the Wealthsteading podcast, where I’ll talk about the significance of these lower boundaries.

Spoiler alert…for now, I still believe it’s HIGHLY likely that the Market will “relief rally” into year end.  I don’t think the major impact from the brewing Global Recession hits until 2023.

If you find these ALERTs informative, please share them with a likeminded friend AND reference this post on your website or social media channels.

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50dma uptrend 220910

The 50 day moving average (dma) of the major indexes is trending up, likely indicating the start of a new bull market cycle.

The Markets bottomed on June 16, and then their 50dma’s bottomed a little more than a month later.  Since their July 50dma bottom, the Small Caps 50dma has recovered the most (up 4.7%), followed by the Mid Caps 50dma (up 3.43%), with the S&P 500 50dma bringing up the rear (up 2.84%).

As I’ve mentioned previously, I believe the uptrend could continue at least until the Midterm elections.  Corporate profits have remained resilient and inflation is waning.  For now, the greatest threat appears to be a European recession that drags down the global economy in early 2023.

Time will tell.

If you find these ALERTs informative, please share them with a likeminded friend AND reference this post on your website or social media channels.

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