Good News = Bad News
An Aggressive Fed
The Market:
While the market fell almost 4% on Friday it ended the week slightly positive with the rally attempt still alive. Monday morning the market got off to a hot start, as it started a new attempted rally bouncing from the June lows. The JOLTS reports showed a decrease of over 1 million job openings giving hope that the FED aggressively raising rates was starting to have its effect on the economy and a pivot could happen soon. Those hopes were short lived though as Friday’s economic reports showed a lower than expected unemployment rate and a slight beat in the payroll numbers, giving the FED more ammunition to continue raising rates aggressively. As expected the dollar and yields moved up on this data as the markets fell. We are currently at a point in time where good economic news is bad news for the market and vice versa.
The economic background continues to be unfavorable for risk assets, however we still need to have an open mind and be on the lookout for a Follow Through Day as we are 5 days into an attempted rally that has not undercut the day 1 lows. Markets can change on a dime and it is our job to be flexible and ready to act on the information the market gives us. You need to have a plan for any and all scenarios. I shared an example of this on Twitter the last week talking about different ways I could see a trade in $TTD play out. I also go into details about staying flexible in this weeks video linked below.
Secondary Indicators:
Put Call Ratio: Neutral reading at 1.04
Percent of Stocks above the 50 day: Nasdaq - 16% S&P – 11%
Percent of Stock above the 200 day: Nasdaq - 22% S&P - 16%
Looking Ahead to Next Week:
Next week continues to provide pivotal economic reports that will be scrutinized very closely to help determine the FEDS next move. Wednesdays very important CPI numbers will help shed some light on inflation and can move the markets in either direction.
Before we dive into my current portfolio and actionable ideas, make sure you are subscribed so that you don’t miss any future updates!
Current Portfolio:
(Avg. Price, 1st Purchase Date, Stop Loss)
PCTY 0.00%↑ ($253.36, 7/27/22, $243.50)
PCTY has been holding up extremely well since gapping up on earnings in August. A very nice 8 week consolidation has formed with the relative strength line continuing to hit new highs. I initiated a position as the stock pushed through a multitouch trendline.
WSC 0.00%↑ ($42.14, 9/28/22, $40.50)
WSC is acting like an absolute monster. It’s tough to imagine there are stocks making new all-time highs with this current market environment and the severity of the bear market. This formed a very nice double bottom base within a flat base as it only corrected 11%. I initiated a position as the stock reclaimed it’s 10 week line on heavy volume and then added again using a shakeout + 10% buy, which would be 10% higher than the first low in the double bottom.
Actions taken:
Bought: WSC, PCTY
Sold: TTD – Stop Loss, ENPH – Bear flag breakdown,
Potential Leaders:
ALB, ANET, CCRN, DV, FOUR, LPLA, MELI, PCTY, SWAV, WOLF, WSC, YELP
Additions: ALB, ANET, CCRN, FOUR, LPLA, MELI, YELP
Removed: CELH, ENPH, TSLA, TTD
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 nice basing patterns. I won’t be going out and buying all of these, but if something with the markets do change, these would be towards the top of my list.
CCRN 0.00%↑ – Failed Breakout Pullback –  ~ $29.50
CCRN broke out of a very well structured cup with handle base to new highs this week on enormous volume. The relative strength line is at new highs along with price, I will be watching for a failed breakout pullback to the 21 ema to happen sometime early next week.
WSC 0.00%↑ – Failed Breakout Pullback –  ~ $41.95
WSC broke out of a double bottom base and into new highs this week. The relative strength line and price are both at new highs. A pullback to the 21 ema sometime next week could provide a nice lower risk entry.
YELP 0.00%↑ – Double Bottom Base - $36.34
YELP continues to build the right side of a double bottom base. Price regained its 10 week moving average this week as the relative strength line continues to hit new highs. A break above $36.34 with an increase in volume would trigger the standard double bottom base pivot.
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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.