Rising Yields, Falling Market
Patience is required
The Market:
The Nasdaq fell just over 3% this week on its way to making new lows. Did inflation finally peak and is the FEDs action of raising rates finally having the desired effect? Those are the questions investors were anxiously waiting for the answers to based on Thursdays CPI report. Unfortunately for the bulls, the CPI report was a worst case scenario as all three measure came in above expectations. As expected the market gapped down on the news, but a massive short covering rally sparked a wild day as the Nasdaq went from a nearly 3% loss to a 2.25% gain.
In typical bear market fashion, Thursdays rally was met with fierce selling on Friday as the market closed lower than it was pre CPI. Thursday’s rally attempt, while strong on the surface showed some cracks under the hood. For one, the net new lows expanded to the highest level in just about 3 weeks, while the 2 year and 10 year yields both made new highs. For a new rally to stick, the bulls will need those yields to come down.
On a positive note, we are technically 2 days into an attempted rally since Thursdays “day 1” low has not been undercut yet.
Secondary Indicators:
Put Call Ratio: Neutral reading at 0.91
Percent of Stocks above the 50 day: Nasdaq - 16% S&P – 11%
Percent of Stock above the 200 day: Nasdaq - 22% S&P - 14%
Looking Ahead to Next Week:
Next week continues with a busy week of economic reports, however Thursday’s jobless claims and the Index of common inflation expectations on Friday will be the ones with the potential to move the market.
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)
No Open Positions / All Cash
Actions taken:
Bought:
Sold: PCTY 0.00%↑ – Stop Loss, WSC 0.00%↑ - Stop Loss
Potential Leaders:
AMN, CCRN, DV, FOUR, LPLA, PCTY, SWAV, WSC, YELP
Additions: AMN
Removed: ALB, ANET, MELI, PCTY, WOLF,
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 best as we wait for a follow through day. I recommend studying up and refining your strategy. Here is some study material to review.
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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.