Market Health Tracking

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7/18/24 another down day, but on slightly less volume.

The Dow Jones Industrial Average declined 1.3%, reversing lower after posting another record high. The S&P 500 lost 0.8%, while the tech-heavy Nasdaq composite declined 0.7%. For the Nasdaq, it was the largest two-day decline since Oct. 25-26, 2023. RSP and QQEW down 0.9% The small-cap Russell 2000 index dropped nearly 1.9%, as broad-based selling hit the stock market.

S$P500 came to rest on the 21dma while the Naz finished below it. Looks like we could be headed to the 50dma unless some good earnings pull us out of it.

The market has priced in a Trump win, but if Biden drops his presidential bid, the uncertainty of an opponent could shake the markets.

GOOGL and AMZON fell below their 50dma lines, while NVDA bounced off its 50dma.

Update for Friday 7/21/24:

The Nasdaq composite fell 0.8% and suffered a weekly decline of 3.7%. This brought a six-week winning streak to a painful halt. It lost more ground on the 21-day exponential moving average and slipped closer to its 50-day moving average. Nevertheless, the tech-heavy composite remains up more than 18% for the year so far.

○ The S&P 500 also suffered as it reversed 0.7%. The fact it failed to find support at the 21-day line is a disappointment for the bulls. The benchmark index also suffered its worst week since April amid a weekly decline of 2%. But it still holds a gain of more than 15% so far in 2024.
○ Small caps ended off lows for the day, but the Russell 2000 still fell 0.6%.
○ IBD is holding its recommended exposure level in the 60% to 80% range. Given the weakening technical picture, investors could consider moving to the lower end of the scale and locking in some profits.

○ It doesn’t seem like a good time to be making new buys, especially with earnings ramping up. Be quick about cutting losers, which will help reduce overall exposure.
○ The Nasdaq tumbled 3.65%, decisively below its 21-day. It’s now just 1.7% above its 50-day moving average, after being 8.9% above that key level on July 10.
• Friday Video review with Webby (but with Justin Neilson this week)
○ Remember July 11 was a downside reversal. To overcome that, we needed to see the market make highs above that day’s highs. That did not happen. Now we get a couple down days on average volume (but higher than the 3 up days in between). This points to more weakness to come (probabilistically)
○ We were getting a rotation in the market, but unfortunately, everything sold off at the end of the week.
○ On the Naz, this was the worst week since April 19, and then all the way back to Dec 2022.
○ Bitcoin (IBIT) popped, maybe on Trump’s support for crypto. Gold down.

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7/22/24: Are things looking up? S&P and Naz had nice up days and retook their 21dmas without testing the 50dma. We can only go day by day, but it beats going down again.

Some show notes:
○ The S&P 500 and Nasdaq rebounded sharply and gave investors hopes that last week’s selling may be done. The S&P — which climbed 1.1% — has held at its 5,500 level and regained the 21-day exponential moving average. The Nasdaq rose 1.6% and closed a hair above 18,000. The Magnificent Seven did their share, rising more than 2% as a group. (Neither made it very close to the 50dma)

○ Unlike the sector rotation and Trump trade that defined much of last week’s stock market, Monday’s trading was broad and inclusive.

○ On Friday the VIX, as it’s better known, jumped more than 20% above its 10-day moving average. Such sudden spikes often act as bottoming signals. Prior to Friday, the last time the signal flashed was April 12, which lagged the S&P 500’s bottom by five sessions.|

○ Until the stock market offers more signals, IBD is keeping its recommended exposure at 60%-80%

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Keep perspective on the VIX, it’s typically relative

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It was unusual on Friday, question some of the data, but agree it is suggestive.

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7/23/24: Small caps outperformed again, Naz reversed from 0.7% up to 0.1% down, not a desirable result. S&P also down. At least they held the 21dma. Day-by-day.

Some notes:
○ The Russell 2000 outperformed again in the stock market Tuesday after regaining the 2200 level Monday. The session served up plenty of strong earnings movers, even though the major stock indexes faded off highs during the final 30 minutes of trading and closed with mild losses.
○ The Russell 2000 rallied 1%, bringing its two-session gain to 2.7%. The Dow Jones Industrial Average, S&P 500 and Nasdaq composite ended lower by 0.1% to 0.2%. The Nasdaq had been up as much as 0.7%.
Nvidia (NVDA) fell back, stopped at the 21-day line. Fellow Magnificent Seven stocks Microsoft (MSFT), Amazon.com (AMZN) and Meta Platforms (META) rose, but also hit resistance.

7/24/24 Update:
Markets down big today on increased volume.
At 3:11PM, Naz is well below 50dma and S&P is at the 50dma.

This will add a distribution day for each, but with the drop below the 50dma, IBD will no doubt call it at least “market under pressure”, but maybe not “Market in correction” yet. Will probably move suggested exposure to 40% or less.

I would not try catching any knives today.

7/24/24 9:24PM update…
As suspected, IBD has lowered exposure to 40-60% for traders. There are 3 distribution days on Naz and 6 on S&P. Two days ago we had a nice up day on Naz and S&P500. Maybe it was going to be another quick correction. Yesterday was a small down day, but it closed at the lows, which we don’t like. Today confirmed this is a real downtrend to take seriously as we fell below the 50dma with strong vol on the Naz and we just stopped at the 50dma on the S&P. Webby would call this a change in character and then he would probably say that his expectations were for further decline as we closed at the lows. At least that is how I will set my expectations. I have closed a number of positions and hope for a bounce in the morning to close more.

Look at the correction we had last time the Naz went below the 50dma. Not terrible, but not just a couple percent and a couple of days.

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Power Trends: by definition end when the 21dma goes below the 50dma. They can also be declared over when the index falls badly through the 50dma as it did today. I suspect they will announce that soon, certainly on Friday if Webby is back.

Some notes from my readings…
○ On Wednesday, the Nasdaq gapped lower at the market open, and kept dropping throughout practically the entire regular session. At 17,342, the composite index lost 3.6%, finishing almost at session lows, its biggest hit since Oct. 7, 2022. Closed below 50dma with prejudice.

○ The S&P 500 also got whacked, falling 2.3%. The Invesco S&P 500 Equal Weight ETF (RSP) dove 1.2%. It now shows a mild gain of 1.8% in the current quarter. But it did stop at the 50dma.|
○ The small-cap Russell 2000 also fell sharply, though looks less damaged.|
○ The big, broad declines came amid a perhaps too-high optimism among newsletter pundits. This is the seventh straight week in which the bullish ratio was 60% or higher, typically a level in which the market takes a break.|
○ the suggested exposure to the stock market drops to 40%-60%. This change means active traders and investors would benefit from quickly taking gains in some existing positions, cutting losing stocks, and sitting on one’s hands for the most part. In the increasingly rocky environment, playing more defense and keeping one’s guard up is key. It will likely take time and patience before the high-probability trade on new breakouts works out well.|
||○ According t the 2024 Stock Trader’s Almanac, the week after the July expiration of options is prone to wild swings. Monthly options on stock and index options expired last Friday.|
||○ Q2 GDP due Thursday AM, PCE Friday AM.|
||○ Tech stocks are looking weak, and it’s not just the megacaps. Investors have to recognize that, getting out of losing positions and taking some profits. If you want to hold core positions in a couple of long-term winners, that’s a different story, but the market has been signal the need to scale back overall tech exposure for some time.|
||○ A divided-to-weakening market in the middle of earnings season is not an ideal time to be ramping up exposure. If the Nasdaq does break lower, there’s a high risk that the rest of the market will also come under pressure. The Russell 2000 and many non-tech sectors still look fine, but another day or two like Wednesday and it’ll be another matter.|

7/25/24 Update:
Roller coaster ride today, fell at the open, then staged an upside reversal for S&P and Naz. The Naz touched the 50dma, but then sellers came in and drove it down almost to its lows of the day. The S&P fell below the 50dma, rallied back up, the had a downside reversal to finish near lows and below the 50dma.

In short, terrible action that makes us expect continued weakness.

Small caps represented by the Russell continued to outperform with a 1.26% gain. The rotation seems to be continuing. So many institutions were out of the small caps, that it will take a while for them to rebalance. The shorts may be covered by now.

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Friday 7/26/24:
PCE numbers made traders happy, even though there was a 100% probability of a rate cut in September, traders probably think there is a 110% chance now :wink:

Naz up 1%, but still below 50dma, SPY up 1.1% and now above 50dma. Both below their 50% retracement line. Friday’s rebound felt good, but it was still an inside day on Naz and S&P indexes

IWM holding up well, the rotation is keeping it strong.

“it remains prudent to hold exposure to the 40% to 60% level for now.”

Update Tuesday 7/30/24:
Market feeling a little woozy. Tech and Naz continue to sell off, S&P also pulled down by Mag-7. Both below the 50dma. The morning started with a tiny move up, then went south. Russell Small caps still positive, up 0.4%

Now 4 distribution days for Naz and 7 for S&P - getting iffy. 21dma is approaching 50dma, if it crosses below, that is a very bearish sign.

Fed Speaks Wednesday.

Update Wed 7/31/24
What a difference a day makes. Last night’s earnings reports (META) boosted NVDA and ANET and other AI related stocks. The market took off in the morning and then Powell spiked the punch in the afternoon. Big moves on the indexes. S&P moves farther above the 50dma, Naz rests right on it. Russell 2000 (IWM) set another intra-day high. Tech is back and we still have breadth.

IBD moves suggested allocation up to 60-80% range. We still have jobs numbers and some big earnings Thur and Friday, so I feel the Friday close will be an important indicator.

Update Thursday 8/1/24
Overhead on the trading floor today…“Mommy, can I get off the rollercoaster? I feel sick”.

Or, as I said yesterday “what a difference a day makes”. Today was a serious expectation breaker after yesterday’s strong move. IWM may have given us a hint with its sell off at the end of the day yesterday, but S&P and Naz seemed fine. Now, Naz is seriously below 50dma and almost down to lows from a few days ago. Ugly outside day with downside reversal. S&P was ugly, but did finish right at the 50dma.

PCE tomorrow could give us a big swing.

A lot of traders put more stock in how the week closes over the days in between.

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Friday 8/2/24:
Preliminary observations, IBD take coming this weekend.
To state the obvious, it was another bad day with high volume declines for the indexes. S&P and Naz fall farther below the 50dma. S&P on higher vol than yesterday, Naz on high vol, but slightly lower than yesterday. That will add another distribution day to the S&P and IBD will probably change to “Market in Correction” or 0-20% exposure level (skipping over 20-40% level). I would think it is always a better bet to raise cash or go short when the 50dma has been violated so rudely.

There has been talk of a trade that may be driving tech down. Apparently, a lot of hedge funds were shorting the Yen and using the money to buy tech. This was a great trade, for a while. It is essentially leverage, like trading on the margin. So now, the yen is climbing vs dollar. I think the Japanese central bank did something, like may stop trying to drive it down. Whatever the reason, the chart below shows the sharp rise in Yen vs dollar. Now people that went short a losing money and need to close out their trade, so they sell tech to fund it. I hope this is true, because it means this it will be sort lived. Of course, people are now worried about a recession, but the Fed can end that worry with a 50 basis point cut anytime they want.

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Update: for Friday.
Webby’s weekly review confirms the obvious, we are in an intermediate correction.
Webby RSI: SPY is -3.1 (bad) But not enough time at the bad levels to expect and oversold bounce back yet.
ATRs off highs are almost to the level we saw in the April pullback. No where near as low as when we saw the 3-waves down in the fall of last year. Naz is worse, now below the April lows. “There’s no lipstick for this pig”.
Keep doing your screens and building your lists so you are ready when the market changes character. Will need a FTD.

Exposure level is 20-40%, but seems like it should be lower to me. In the old days this would be “Market In Correction”.

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8/5/24: Intraday notes. Futures were down huge and then the market opened way down. However, they immediately and continually moved back up, until they started to fade around 12:30.

I have heard more chatter that the “black swan event” of the BoJ raising rates has a lot to do with this. Hedge fund using the carry-trade to short yen and buy tech were caught off guard and over leveraged (always the problem). They now have to sell tech to buy back their shorted yen. If this is truly the major fact, then today could be capitulation and today’s bottom could be good or could survive a retest. Talking heads note that the spreads in the credit market have not reacted in such a way as to think this is going to be a huge problem

How the market finished today will be very important. IBD people (e.g. Bill) like to see an upside reversal end at 40% of the trading range or higher (probably of the true range that starts with yesterday’s close). If they close near 70% or higher, I would expect that Webby would say that is a very good sign. True IBD dogma says we need a follow through day 4-10 from the bottom. Today will be that bottom if the lows are not violated.

IWM bounced off the 200dma. QQQ went below 200dma but is now above it. Naz barely went below 200dma but is now above it. SPY did not make it down to the 200dma.

8/5/24: &:46PM
Updated Naz Chart showing long term support at 200dma. We got it again today, but will it hold.

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Remember, we had that 3-waves-down correction at the end of 2023 and you can see where that stopped at the 200dma (just a little time under it.)

Update 9:30PM

Here are some show notes:
IBD Exposure 0-20%

○ On Monday, the Dow Jones Industrial Average moved down 2.6%, while the S&P 500 lost 3%. The tech-heavy Nasdaq composite declined 3.4%.
○ Financial markets are suddenly pricing in a strong likelihood of 1.25 percentage points in Federal Reserve rate cuts by the end of the year. Just a week ago, markets saw a 0.2% chance of such an outcome.
○ On Monday, the VIX spiked from around 23 to above 65, reflective of extreme fear, before pulling back below 39. This is the highest the VIX has been since March 2020
○ the Japanese Topix index suffered its worst day since Black Monday in October 1987. It wiped out all its gains for the year amid a 12.2% decline. The Nikkei 225 index fell 12.4%.
○ The S&P 500 sectors all ended red Monday. In fact, it was the first time since Nov. 2, 2022, that all 11 sector lost more than 1%. (Hmm, Nov 2, 2022 was about a month before the market made its final bottom at the end of Dec and then started the bull run of 2023)
○ If you are going to get a rally that will last weeks, months or even years, wait for the FTD, don’t try to guess the bottom and start buying.
○ Naz held at the 200dma today. That is what happened at the end of 2023 when we got that 3-waves-down pattern. So maybe we are done with the declines (after this week??) The bears/shorts would love to push it below the 200dma again and cause algorithms and TA traders to sell and drive it even lower.
○ I did some calcs and NAZ, SPY, IWM seemed to have finished at about 50% of the true daily range (when considering yesterday’s closing price and today’s low). Bill used to say if a rebound finished 40% or above, that was a sign of support. It’s not going to make me jump in, but it would sure be nice if that is indicating support. Notice that this is also a 3-day plummet for the three indexes, and that often exhausts the move for a bit.
○ It is advisable to continue to pare back positions in a measured fashion. Locking in profits in stocks that have rallied more than 20% above entries and jettisoning any issues that are flashing sell signals should take priority.

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8/6/24 tonight’s notes…
• IBD Exposure 0-20% Market In Correction
○ The stock market bounced back Tuesday after three straight days of sharp declines. But 1% gains for the Nasdaq composite and S&P 500 — and some late-session selling — weren’t enough to lift the market out of its corrective phase.
○ At its high, the Nasdaq was up 2.6%, but sellers came into the market during the final hour of trading
○ The Nasdaq closed in the upper half its trading range Monday, giving the session the look of a “pink rally day,” or the first day of a rally attempt. But it fell short because the midpoint of the Nasdaq’s true range Monday, based on Friday’s closing price (16,776) and Monday’s low (15,708), was 16,242. The Nasdaq closed Monday at 16,200, just below the midpoint. That means Tuesday marked the first day of a rally attempt.
○ The stock market is now in a correction. On Monday, IBD lowered the invested percentage to 0% to 20%. If you’re holding a lot of cash, it’s OK to stay engaged and wade into the market with a pilot buy or two. But keep in mind that weak markets eventually bring everything down with them — even stocks showing strength in a down market.

Update 8/7:
Bad day for the markets, they did just what we don’t want:

  • Start up, but finish down
  • Big downside reversal on high volume
  • outside-day downside reversal
  • The IWM bumped up against the 50dma and got rejected.
  • The Nasdaq advance-decline line is at its lowest point in more than 12 months
  • Nvidia stock rose 4.4% Wednesday morning, but finished off 5.1% to 98.95 in an ugly, downside, outside reversal day

This may be an expectation breaker. We are in an attempted rally, and it is good until it falls below the recent low, but we would not have expected such a sell off while working toward a FTD. At least that is my expectation.

The 200dma is looking like a magnet for Naz. That is where the low is from Monday. If we get there, the big shorts could try to push us below and trick the algos into selling, thus causing a self-fulfilling prophecy. The S&P is the more important index for the algos, and it is farther above, so keep focused on that one.

$537.72 is 50% retracement (SPY) of this move from top to bottom. Getting back to that would be normal, but going above it would be a trend change to the positive.

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So… what does a poor intermediate-long investor do? Ignore this b.s. manipulation / tantrum / voting pressure by trade? Like most of the popular wealth management services are saying… it looks like a risk-shifting sausage making event of positioning before the Fed finally (gasp) drops interest rates a whole quarter of a percent… sturm und drang to get some trading volume and fees up.

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Make sure the market shows enough strength so you have confidence the probability of a severe downtown is small.

For example, Mike Webster likes to look at 50% retracement areas and here is one he mention for the SPY.

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If the index/stock can move above the 50% area and stay above, that is a show of strength and could give you the confidence you are looking for. At that point, the probability of going to the 200dma may be significantly reduced. Maybe it is like Texas Hold’em, as each river card is flipped up, the known probabilities change, and you can make a better decision.

Mike Webster (IBD) mostly prefers to see things “living above the 21dma”, which is when he “presses on the gas”. That means, at least several days or more of the closing price being above the 21dma. But for a long term investor wanting to take advantage of a “sale” on a stock they have confidence it, that may be too long of a wait. Cramer would say to have your list of great companies and when the market drags those down through no fault of their own, then start buy. He likes to pyramid down: 25% for first buy, then 25% more if it goes down another x%, and so on.

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8/8/24: Big up day for the markets, but volume not impressive. Gains were broad, with advancers beating decliners by a 4-1 ratio on the NYSE and by nearly 3-to-1 on the Nasdaq, The Investor S&P 500 Equal Weight ETF (RSP) jumped 1.8%, its best day of the year so far.

This is day-3 of an IBD “rally attempt”, which means we can officially have a Follow-Through-Day tomorrow given a 1% or more move and volume higher than today. That said, the decline was fast and steep and full of volume. I don’t know if this qualifies for a “vertical violation” example, but close. Those types of declines result in less successful rallies, so don’t go crazy. Bill would always walk around the team and make sure they were buying something on and FTD (which means you have to know it is an FTD while it is happening and you have to have your watch list ready).

Mike Webster puts more weight on the 21dma, so might want to be cautious until we can live above that. But we are also below the 50dma, so that comes first.

Here is a screenshot from a recent video. It compares current rally to 2003 and 2009. Looks like we went into correction a little earlier than the others. Time to start a new rally

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Late post for Friday 8/9/24. Just my raw notes…

• IBD
○ The Naz was down 3.4% Monday, but found support at the 200dma and only finished the week down 0.2% and the S&P was essentially flat and ended about 2% below the 50dma.
○ The currently rally attempt is still in play and has cleared its fourth day. A follow-through day could signal the start of a new stock market uptrend and an appropriate increase of exposure from the current levels. If the market undercuts Monday’s low, however, the rally attempt would be null and investors would need to wait for a new attempt to transpire.
○ PPI and CPI next week along July retail sales and jobless numbers.
○ Investors should still largely be in cash, awaiting an FTD. When that happens, whether it’s Monday or next year, you can exposure gradually as the market and your positions draw you in. If you’re adding 10% a day, it doesn’t take that long to be nearly fully invested. For now, focus on those watchlists. Have a broad list of stocks showing promising action, while focusing on a smaller list of top potential targets.
• Friday Video with Webby
○ Webby mentions that Monday’s reversal came close to a “Pink RFD”, but was not. You can get an official first day of a rally on a down day, but it would have to finish above the 50% true trading range and that did not happen. Bill wanted it to be 75% of true range, but the team decided to make it 50% so as not to miss some possible rallies. Tuesday was the start of the rally (day 1). Friday was day 4.
○ It would be “normal and logical” to retest the lows and “If I were a bear I would try to break it if it retested”. That is, once the bears and shorts smell panic and see people selling, they will try to exacerbate the panic selling by shorting. You always want to be aware of what the bears are thinking. Right now, we have wedged up and are nearing some trend lines so if you are a bear, you are getting ready to short if the market can’t make it back above those trend lines (e.g. 50dma)
○ Looking at the weekly of SPY and Naz, you can see strong support at some trend lines.
○ Thursday was a positive inside day (Naz) and that is good. Closed near the high.
○ Webby calls Friday a “Set Up” day - one with a very tight spread and closing in the upper half of the true range, the higher, the better.
○ Remember, Bill and Mike always bought something on an FTD. That is because you need to force yourself to change your mindset at that point. FTDs come after market corrections and you are probably thinking everything is bad and uncertain. You need that first buy to help snap out of it. If your early positions are starting to work, then you can add.
○ But, we could easily test the 5000 level on spy, so if you are still heavy in the market, evaluate your holdings this weekend. If you have new buys you are down on, kick them out.
○ With the uncertainty of the Fed and the election, there is no reason we can’t just have several months of the markets just grinding us up, so don’t discount that in your investments.

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8/13/24: IBD declares a Follow Through Day on Naz and S&P. Big moves on volume higher than yesterday. This on day 6 of the rally attempt. recommended exposure 20-40%

CPI is tomorrow and could crash the party.

The Dow Jones Industrial Average rose just over 1% in Tuesday’s stock market trading, back above its 50-day line. The S&P 500 index popped 1.7%, reclaiming the 21-day line and approaching the 50-day. The Nasdaq composite jumped 2.4%, also above the 21-day. The small-cap Russell 2000 rallied 1.6%, almost back to the 50-day line.

We will now look for continued bullish behavior, such as gains in strong volume and breakouts among top stocks, before considering a larger exposure level.

Remember, many follow-through days fail, so raise exposure in a measured fashion. Look for top-performing stocks clearing proper buy points in high volume.

My next Goals

  1. survive CPI
  2. SPY lives above 21dma.
  3. SPY gets above 50dma
    Same for Naz.

You can see the FTDs I have marked. The ones during the 3-waves down at the end of 2023 all failed. Could be the same now, but it does not feel that way.

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Update 8/14: SPY closed above 21dma and daily low was above 21dma, but touching bottom side of 50dma. Naz closed above 21dma, but daily low was below it. Progress.

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@PuddinHead42 These are really good posts explaining IBD’s solid short-term trend-tracking methodology. Thanks very much for the reminder, I used to follow them closely some years ago.

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8/15/24: Market still in confirmed uptrend.

Markets had a good up day with Naz up 2.3%. Volume was higher so IBD confirmed it was a “subsequent FTD”. These are FTD-like days that show institutional investors are supporting the market and very good rallies will have multiple days like this, so it is a good sign.

Strong retail numbers and Walmart’s earnings beat gave investors courage.

The S&P 500 decisively regained its 50-day moving average, and with the market generally acting better, IBD is raising its recommended exposure level to 40% to 60%

The Nasdaq still needs to clear the 50-day line decisively, though it’s possible that won’t happen right away. After so many up days, the market could pull back or pause. That could be constructive, however, letting many stocks forge less V-shape patterns and build handles.

The stock market rally is sending signals for investors to build up their exposure. As long as the market and your holdings are making progress, you can keep making new or add-on buys. But do so gradually.

From 8/13

  1. done
  2. done
  3. done
  4. (Done for 21dma, needs to start living above 50dma)

I would like to see a quite Friday and Monday. Let stocks take a breath and go sideways for a bit. Coming Straight Up From The Bottom create risk.

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Market keeps going up, maybe too much, but just have to take it day-by-day.

Friday’s bullish action led IBD to raise exposure rate to 60-80%. The action: positive close. Small caps positive, Naz closed slightly above 50dma. S&P still way above 50dma as is the DJIA.

The coming week features a few noteworthy events that could further drive the stock market. Monday sees the release of the U.S. leading economic indicators for July. Meanwhile, the minutes from the July Federal Open Market Committee meeting come Wednesday. There will also be a slew of Fedspeak, with Fed Chair Jerome Powell’s speech at Jackson Hole Economic Symposium on Friday being the main event. If Powell surprises and hints that Fed rate cuts are not a done deal, the market reaction could be significant.

The stock market rally has made a big comeback and offered a number of buying opportunities in the past week. Investors should be taking advantage, adding exposure gradually as long as the market continues to act well.

The market may be due for a pause or pullback, especially with Fed chief Jerome Powell on the horizon, so you don’t want to suddenly jump from lightly to fully invested.

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Many of the market hiccups, generally in a southward direction, can be timed to speeches by Mr. Powell. My stops will be tight on Friday, should we make it that far.

Lakedog

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Don’t forget, the market has swung in one direction when he reads the speech then the opposite direction when he answers questions.

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Sir, you absolutely are hitting the nail on the head. August 26, 2022 is absolute case in point. The infamous, “pain ahead” statement. You think he’d learn.

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8/19/24: Good day for the market, lots of bullish signs:

  • morning started weak, but day closed strong.
  • S&P closed above the high of 8/1/24 - that is the day that started the 3 day slide into Ugly Monday.
  • Naz up 1.39% on higher volume than yesterday. That may be called a subsequent FTD or “accumulation day”, but the team did not mention that.
  • Naz closed well above 50dma. Looks like an upside reversal from a tiny tick down to the 50dma. IBD did not mention “upside reversal”, so that may be bad terminology on my part. Dip was too small.

I am a bit worried that lots of high expectations are being built into the market price in front of the Friday Jackson Hole speech from Fed.

Next important milestones: 21dma goes above 50dma for indexes.

Update 8/20: I was listening to Cramer (podcast) in the car this morning. He has mentioned the S&P oscillator for years and swears by it.
0 = market is neutral
-5 = market is well oversold
+5 = market is well overbought

It is currently +7.5 so he has his investment club selling some losers to raise cash for dip opportunities.

Update 8/20/24:
Markets finally took a pause today, which is a healthy thing for them. After shooting almost straight up from the 8/5 low, we need some rest. Unfortunately, the Fed speaks Friday and that can break any expectation we might have for a normal market.

Despite the quiet day on SPY and Nax, the small cap Russell was down 1.2%. These stocks love lower rates, so are investors making a bet on the Fed not being dovish enough, or is it a random divergence from the SPY and Naz?

It is being reported that the BLS is going to update employment numbers Thursday and the rumor is they underreported unemployment by 1 million!

Will the market go yay, now the Fed will drop rates faster? Or will the market say, oh poop, the economy is much worse than we expected and we will have a hard landing. And how could the mistake be that big?

Time to evaluate your explicit and implicit expectations. What will you do if the Fed breaks those. Do you expect the markets to find support at 50dma if they go done? What if they keep going below, how fast will you want to sell?

Sweet Dreams.

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