A Time for Fishing?
The Market:
Jesse Livermore said “there is a time to go long, a time to go short and a time to go fishing.” While the current market seems like the time to go fishing market, it’s important to not lose sight of the bigger picture and the amazing life changing opportunities that will present themselves when this bear market ends.
The Nasdaq finished the week lower, however as we saw on Wednesday with the FOMC this market is ready to rally on any signs that the fed will slow the pace of it’s hikes. Dovish wording in the FOMC announcement sent stocks roaring higher only to be sold off when Chairman Powell’s press conference was very hawkish. The market believed Powell’s words as he said rates would need to stay higher longer and it was not the time to think about pausing or cutting.
If we dive into the Nasdaq on a daily chart, things don’t look good. You could argue that we have a higher low still, however there is more evidence to suggest lower prices might be in store. The Nasdaq staged a day 7 Follow Through Day on October 27th, only to have a distribution day 3 days later, which according to research from IBD shows a failure rate of 80%. On top of that, on November 2nd we closed below the low of the Follow Through Day and below the June lows while we also flipped back to net new lows. Fast forward to today, and the Nasdaq was rejected at those same levels from the underside after trying to rally on a slightly higher than expected unemployment rate.
Despite things not looking great in the near term, the opportunity that comes out of this bear market will be amazing. It is important to be ready for when that time comes and to be scanning for stocks showing Relative Strength as they tend to be the next big winners.
Secondary Indicators:
Put Call Ratio: Neutral reading at 1.07
Percent of Stocks above the 50 day: Nasdaq - 47% S&P – 57%
Percent of Stock above the 200 day: Nasdaq - 33% S&P - 35%
Looking Ahead to Next Week:
The never ending cycle of market catalysts continues next week with the US midterm elections, plenty of Fed speakers and important inflation data with the CPI report on Thursday.
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Current Portfolio:
(Avg. Price, 1st Purchase Date, Stop Loss)
Cash
Actions taken:
Bought: XMTR
Sold: DV - Stop, ENPH - Stop, XMTR- Stop, YELP – Lock in profit
Potential Leaders:
AEHR, CELH, DY, ENPH, GPK, LPLA, PI, SMCI, SWAV, WING
Additions: CELH, GPK, PI, SMCI, WING
Removed: AMN, CCRN, DV, FOUR, SRPT, WWE, XMTR, YELP
https://www.tradingview.com/watchlists/84325802/
Actionable Ideas:
Stocks listed in the actionable buys are stocks with strong fundamentals and showing good technical action that can offer a low-risk entry. Not every entry will trigger, but also just because a stock is listed here does trigger does not mean I will take the trade. Portfolio exposure, market health and other factors will also be considered.
While the overall health of the market is very weak and the macro back drop is not favorable for risk assets such as stocks, there are some stocks that are showing relative strength and are forming proper basing patterns. For now, patience is required and a wait and see approach seems like the best approach. While I don’t personally plan on adding any exposure until conditions improve, the stocks in the potential leaders list are the ones I will be watching to form a low risk entry throughout the week. I cover some of them in following video:
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The content presented is for informational and educational purposes only. Nothing contained in this newsletter should be construed as financial advice or a recommendation to buy or sell any security. Please do your own due diligence or contact a licensed financial advisor as participating in the financial markets involves risk.