Market Health Tracking

Investing Strategies Technical Trader's Sanctuary
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11/1/24:

IBD (Dist N4, S4). Recommended exposure reduced to 60-80%

○ The Nasdaq composite saw early gains fade as it closed 0.8% higher. This was not enough to stop the tech-heavy index suffering a weekly decline of 1.5%, snapping a seven-week win streak in the process. It hit resistance at the 21-day exponential moving average but sits 1.6% above its 50-day line. The index remains up 21.5% in 2024.
○ The S&P 500 notched a gain of 0.4% after being up 1.2%. It ended the week down 1.4%, its second weekly decline in a row. The benchmark index has pulled back to its 10-week moving average, but remains up 20.1% for the year so far.
○ Small caps raced out of the gate on the stock market, but the Russell 2000 saw gains fade to 0.6% Friday as it ended nearly flat for the week.
○ Indexes met resistance around the 21dma line and then faded.
○ A rise in Treasury yields to 4.36% weighed on stocks.
○ The market, which has been pricing in a Trump election victory, pared those bets in the past few days.
○ The stock market rally has retreated but is still holding key support. While some mammoth earnings are out of the way, the presidential election and other big news will remain big uncertainties in the short run.
○ The upside from a modest pullback is that most leading stocks still look healthy, pulling back to key levels. If the market takes off, a number of buying opportunities could present themselves. So keep your watchlists fresh.
○ But if the major indexes break below their 50-day lines, you’ll want to reduce exposure. So have your exit strategy in place.

Webby Friday Video
○ Markets broke the 21dma for first time in a long time, that is a change in character. Webby sees today’s bounce on the Naz to be weak, it was an inside day and closed in lower half of range.
○ No reason for the markets to “fall apart” right now, just waiting on election uncertainty.
○ Wait for retake of 21dma before becoming more aggressive again.
○ The bulls could not push us back above the 21dma, but the bears could not push us below the 50dma, so we are at an equilibrium.
○ But it feels like a shakeout below the 50dma is in the cards.

21dma: back in the late 90s, Webby did very exhaustive back testing of many moving averages. The 200dma was not good because we were usually way above or below it. The 50dma cross of the 200dma, up or down, was fairly late in the trend, so he does not wait for that to happen before taking action. 10dma was just too short for position trading and you get too many signals. He finally settled on the 21dma and it meshed well with his own trading. He and the IBD style were making money above the 21dma, but getting chopped up when below it. He wants to see the lows to close above the 21dma before it counts. Other people with different time frames and trading styles might find other averages are better for them.

Looks like S&P is no longer in a short-term uptrend (9 days or more) because it set a tiny bit of a lower low.

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11/2/24:

On Monday, the Dow Jones Industrial Average fell 0.6%, while the S&P 500 lost 0.3%. And the tech-heavy Nasdaq composite also declined 0.3%.

Monday’s action also highlighted a test of support at the S&P 500’s rising 50-day moving average. In fact, this week could mark the third time in which the S&P 500 falls below its 50-day line in the second half of the year. In the first half, the index tested buyers at or near the 50-day line just once, over a three-week time span from April 15 through May.

Amid these declines, it was somewhat puzzling to see smaller issues actually thrive on Monday. The Russell 2000 gained 0.5%, while the S&P MidCap 400 eked out a 0.3% rise.
||○ Volume lower today, but when you consider the average decline among the S&P 500’s distribution days is a pretty meaty 1.2% (down 1% on Oct. 7, 0.8% on Oct. 15, 0.9% on Oct. 23, and 1.9% on Oct. 31), it’s certainly not time to become complacent about stock market behavior.

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11/5/24 Election Day

The market was up very nice today, but nothing really matters until we know who the new president will be. I saw some stats today that show the market performs best with a split government, because with gridlock, nothing big and bad can get passed. We may not know the president tomorrow when the market opens, but we will know if Congress and Senate are split.

○ The Nasdaq composite jumped 1.4% in higher volume and reclaimed its short-term moving averages. The Nasdaq’s Oct. 1 distribution day fell off the count because enough time has passed (25 sessions) to make it irrelevant. That brings the Nasdaq’s count down to three.

○ the Russell 2000 small-cap index outperformed with a gain of 1.9%. The small-cap index is back above all of its key moving averages and less than 2% from an all-time high.

○ The S&P 500 and Dow Jones Industrial Average closed with gains of 1.2% and 1%, respectively. Volume on the NYSE rose slightly from Monday. It was a bullish session despite uncertainty about the presidential and congressional races.

○ Breadth was strong and improved as the session wore on, with advancing stocks beating decliners on the Nasdaq by nearly 3-to-1. Over on the NYSE, winners beat losers by nearly 5-to-1. The Invesco S&P 500 Equal Weight ETF (RSP), one of the better gauges of breadth on the NYSE, jumped 1.2% and reclaimed its 50-day moving average after three straight closes below the line.

○ The 10-year Treasury yield is up 14 basis points overnight to 4.43%, which would be a four-month high. The bet is that a Trump presidency would lead to even higher deficits and perhaps unleashing bond market vigilantes.

○ Dow Jones futures are up 1.5%, S&P 500 futures 1.4% and Nasdaq 100 futures 1.4%. Russell 2000 futures soared 3.4%

○ Activist investor Carl Icahn sees a M&A boom under a second Trump presidency.

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11/7/24: Another great day for the market.
S&P and Naz hit all time highs. Leading stocks doing well. A number of huge gap ups after earnings today and previous days.

IBD raises recommended exposure back to 80-100%. The distribution days on the Naz are down to 0 after the Naz rose 5% or more since those days occurred. S&P Still has 3 distribution days.

The Fed cut 25bps as expected and clearly indicated they are not done.

For now, it is a nice little party.

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11/8/24 - markets remain strong. IWM has gapped up above Webby’s ATR channel in a way that he calls “a change in character”. This new character sets the expectation that it does NOT regress to the mean of this channel. SPY and NAZ showed strong moves up from outside of lower channel.

In the video he makes some interesting comparisons to 1999 and how to get into stocks that have gapped up huge. See the thread for Webby’s tech talk.

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Do you have a link to the tech talk?

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Party Like It’s 1999? How To Play The Bullish Stampede As APP, ALAB, RDDT Surge | Stock Market Today - YouTube

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Markets take a rest, Small Caps get bruised. Still only 2 distribution days on S&P. All indexes above 21dma, but keep an eye on that as your primary indicator. Still get post-earnings blast offs every day. Don’t get too giddy.

One talking head reminds us that in election years, the market usually runs up into the inauguration, but then for the next 6 months, as we wait for policy to unfold, it corrects a bit. (But Trump has been very clear about policy and his cabinet selections are showing that) He also says that if Republicans win the House of Congress, which is likely, then we will get corporate taxes cut to 15% and that would cause a big boost in earnings that would take the S&P from a forward PE of 22 back down to 16, which will allow the market to go up. I noticed a big flaw in his logic, and that is that Trump said that rate only applies to items made in America. Still, it will have a big impact.

Seasonally, this is the best time of year for the stock market
Fed still has to cut rates.
People with money on the sidelines are coming in. When a retail investor puts money in an index fund, that fund has to buy the components, no matter how much they have gone up.
Fund managers that are lagging will try to catch up.

The Russell 2000 slumped 1.8%, but the decline didn’t look too bad in light of an 8.6% gain for the small-cap index last week. Despite the loss, the Russell is still well clear of short-term support levels like the 10-day and 21-day exponential moving averages. Partially to blame: The 10-year Treasury yield soared 12 basis points to 4.43%

The Dow Jones Industrial Average also lagged with a loss of 0.9% and closed below the 44,000 level. The S&P 500 eased 0.3% as it wages a battle near the 6000 level. The Nasdaq composite dipped 0.1% and continues to show strength by trading tightly near highs.

While it may seem natural to look for stocks building bases, keep in mind that the big stock market leaders started coming out weeks ago. Most stocks building bases now have lagging relative strength lines. Meta Platforms (META) offers a good example as well as Heico (HEI), a maker of aircraft components tracked in the aerospace and defense group.

China stocks generally underperformed, with the Krane CSI China Internet ETF (KWEB) down 4.5%|
Patience is a virtue for now. In the meantime, keep close tabs on your winners. If they’re pulling back in light volume and finding support at key levels, there’s nothing to do. But if volume starts to pick up to the downside, treat your winners with care and don’t be afraid to take partial or even full profits.

Stock market bulls wouldn’t mind seeing an orderly, low-volume pullback from here. If it comes to fruition, it shouldn’t take long for new buys to present themselves. For now, avoid chasing the big leaders that are well extended from proper entries. That’s an easy way to lose money.

Again, you are not a genius, the market is great, keep your FOMO in check. I always feel very smart right before the market reminds me otherwise.

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Third day down in a row for Naz, S&P down a bit, but was up yesterday. Small caps getting hit harder thanks to worries about interest rates. Looking at the Naz chart, we have not had 3 days down since that early August plunge, but those were big down days. We have not had 4 down days since April.

IBD Says

The stock market rally still looks relatively healthy, but is pulling back. After the huge election gains and with Nvidia earnings looming, that’s understandable. A modest pullback could create new buying opportunities. But right now doesn’t seem to be a great time to make new buys. New buys have been scarce and several of those have fizzled as the market drifts lower. Definitely don’t buy extended. Yes, if you buy a stock that’s run up it may keep running. But the risks are higher. Anyone buying Cava or Tesla stock at this week’s highs is down more than 10%

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Convergence of a timely pullback with max pain/OPEX.

TSLA would need a 25% pullback to match Calls and Puts, CAVA would need 11%. SPY about 6-7% as well as QQQ. Rarely, if ever, make full adjustments but there are billions of reasons for market makers to pressure in that direction.

Lakedog

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Hope so, I wrote Jan covered calls for $310 before election. Never write calls before an election!

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IBD notes from Friday 11/15/24

○ The stock market Trump trade faltered last week. The major indexes fell sharply, especially on Friday, testing or undercutting some key levels. A number of leading stocks suffered sharp losses or downside reversals, often around earnings.|

○ The Dow Jones Industrial Average shed 1.2% in last week’s stock market trading. The S&P 500 index slumped 2.1%. The Nasdaq composite lost 3.15%. The small-cap Russell 2000 tumbled 4%|
○ The Nasdaq, S&P 500 and Russell 2000 have undercut the lows of the Nov. 6 postelection gap-up day. The Nasdaq fell below its 21-day moving average. The S&P 500 finished just below that key short-term level while the Russell 2000 just held that level.
○ The key indexes are around natural areas of support. Holding and rebounding from these levels would signal the bullish trend will continue. But breaking lower from here, and moving toward the 50-day line, would be highly negative.
○ Investors should be wary of new buys in the short run, while cutting losers and recent winners that are round-tripping gains.
○ Nvidia earnings are due late Wednesday. Progress of the Blackwell chip is of key interest.
○ The stock market rally, which looked so strong just a few days ago, is facing a key test. The major indexes and leading stocks could quickly rebound, but right at this moment investors have to acknowledge the potential character change.
○ This is not a good time to be buying stocks. Several stocks that flashed buy signals this past week faltered by Friday’s close. Few stocks are in buy zones and not many more are setting up after the huge Trump gains followed by sizable losses.
○ Investors may want to reduce exposure, especially if they are on margin. As a practical matter, eschewing new buys and paring losers and round-trip stocks will whittle down your overall portfolio. You can also choose to take some partial profits or exit successful positions. It depends on your investing style, your conviction in various holdings and the size of your stakes.

Investor’s Business Daily is continuing to recommend exposure at the 80% to 100% level, but shifting to the lower end of this range makes sense due to the bearish action.

Friday Video with Webby.

This is a test and it has not failed yet, S&P stopping at the 21dma and Naz just below it.

○ Webby was thinking Friday would be a weak open with an upside reversal into the weekend. The Friday close is the most important of the week. Don’t like going into the weekend like this. But with the election and Fed, he thinks the wind is still at our back.
○ This is still normal action, but an ugly Friday is not great.
○ For IWM, it has been very hard to trade. Very sensitive to interest rates, which are up on the 10-year. Mike would not get back in until it gets above Friday’s high. It did stop at the 21dma.
○ For MarketSurge users, they have now added a %ATR column. Webby uses the 21day, but there is an option for 30 and 50. He says add the 21 to all your lists and start sorting by that to get a feel for which stocks move a lot and which move a little. |

Webby’s TA starts at 44:58.
○ SPY finds support at -1 standard deviation, if we can get back to -0.75 regression, then we expect it to get back to the mean. -0.75 is also around today’s close. Trend is not broken yet.
○ The SPY is also just above the 50% regression point of most recent highs and lows. Worry if it starts living below that.
Naz not as healthy.

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11/18/24: Market finally ended its decline, but early morning gains did fade. S&P finished above 21dma and so did Naz. IWM still sitting on 21dma.

Friday, Webby said he would feel good once we closed above the gap-down opening price for Friday. We did not do that today.

While the markets were relatively quiet, the hot stocks made big moves. See SQ, AFRM, HOOD, COIN, ROOT, LMND, INOD. Smaller moves, but worth watching: ALAB, APP, RDDT, and others I no doubt missed.

11/19/24: Good day.
Fears of Russian nukes seemed to spook the market in the morning, but a down session reversed into a positive close, which is usually considered a sign of strength. The indexes fell below the 21dma, but finished above it, which is good. The S&P had an outside day that was also an upside reversal, another sign of strength.

SPY closed about 10 cents above the Friday gap down high, something Webby was looking for. I think that also takes it from 1 standard deviation down back to 0.75 down, which Webby also wanted to see because that means we are likely to get back to the regression line of 0 standard deviations. I suspect Webby was “pushing on the gas” at this point. If I have time, I will watch the Tuesday Swing Trader video with Webby’s detailed technical analysis.

IBD:

Investors could have made some incremental purchases or add-on buys Tuesday as some leaders such as Nvidia and Tradeweb stock flashed entries. Generally standing pat, perhaps after trimming exposure last week, makes a lot of sense.

Work on watchlists and exit strategies. The recent pullback is creating potential buying opportunities. On the flip side, what’s your game plan if the major indexes sell off and drop below their 50-day lines?

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11/21/24 - market is in very good health. S&P and Naz tested 21dma again and closed above. We would like to seem the keep their daily lows above the 21dma to pass the next test of strength. The big techs were sluggish today allowing the S&P and Naz a 0.5% and 0.1% increase respectively. Meanwhile the equal weights had very good days.

The Invesco S&P 500 Equal Weight ETF (RSP) jumped 1.3% while the First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) gained 1.5%.

NVDA did not blast off, nor did it tank after earnings, but this big risk event is now behind us and investors can move on. In addition, the labor numbers were weak today and that may have given investors more optimism on a Dec rate cut, which was becoming in doubt.

Please take a look at the Microstrategy (MSTR) chart, is shows how fast these highfliers can reverse on you.

I am going to keep saying this is like the 1999 market until proven otherwise. That ran up big until January.

Update 11/22/24 (Friday)
Naz, SPY, IWM, DJIA all finished above their 21dma. Equal weighted, IWM and DJIA outperformed SPY, Naz, signaling increasing breadth. Maybe Megacaps are now a source of funds.

IBD:

Many stocks flashed buy signals last week, offering opportunities to add exposure. There are still stocks in buy zones or setting up.

Investors, who should be heavily invested, can look for incremental buys or add-on purchases, while also paring laggards.

But after the huge gains in many leaders over the past few weeks, keep a level head. Weekly gains of 10%, 20% in leading stocks aren’t the new normal. Enjoy these periods, but buying extended and other super-aggressive moves that worked in the past few weeks could backfire now.

Webby said something like

Small caps have been very tough to trade but it really feels different this time.

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11/25/24 (Mon)
Market continues winning. Small caps, MDY, RSP, even DJIA performed very well compared to SPY and Naz. The market continues to broaden. Ten-Year rates plummeted today, thus helping drive rate sensitive smaller caps, home builders and retail.

NVDA testing 10 week ma, has this become a source of funds? If the stock breaks that level in heavy volume, then further downside would be likely. Conversely, a decisive rebound would place the AI stock in a new buy area. Its breakout in October of this year was from a late-stage base. Such formations entail more risk than first- and second-stage bases. META is below its 50dma.

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The stock market cooled off Wednesday, as the Nasdaq composite ended a four-day win-streak and the S&P 500 snapped a seven-day win streak. Yet, indexes remained in position for a push into December.

The Nasdaq lost 0.6% while the S&P 500 fell 0.4% and continued to arm-wrestle the 6,000 level. The Oct. 23 distribution day for the S&P dropped off because 25 days have passed. Small caps outperformed, with the Russell 2000 up 0.1%. The index is nearing its record close of 2,442.74 set on Nov. 8, 2021, and is up more than 10% for November.

○ While selling certainly wasn’t isolated to the technology sector, it was the area of most concern Wednesday. Of the 15 worst-performing industry groups Wednesday, semiconductor, software and other tech groups accounted for 10 of them.|
○ The Nasdaq is up 27% and the S&P 500 has risen close to 26% year to date.|
○ I forget which brokerage house/bank said this but they said people are just buying anything. Also remember hearing cash is pouring into the market.

○ Adam Turnquist, Chief Technical Strategist for LPL Financial, says that since 1950, the S&P 500 has generated an average gain of 1.8% from Thanksgiving through year-end. The index has finished higher about 70% of the time. By comparison, the broad market’s average gain is 1% — and up 63% of the time — during all six-week periods. When the index is higher on the year into Turkey Day, the average gain into year-end bumps up to 2.1%, with 75% of occurrences yielding positive results, he added. |
○ The Stock Trader’s Almanac says December is one of the top three months of the year. The Dow and Nasdaq have climbed an average of 1.6% since 1950 and the S&P is up 1.5% on average.

○ NVDA barely avoids closing below the 50dma for the first time in months.|
○ The stock market rally is acting well, with a broad-based advance. Small and midcap stocks are leading, along with financials, homebuilders and a number of non-tech stocks. Investors have to follow what’s working, rather than stick to techs at all times.|

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11/29/24 - Friday was a half day and market performed well while interest rates eased. Indexes are above 21dma and have been.

Mike Webster says this (paraphrased)

Naz low has been above the 21dma for 5 days, as part of the “Market School” project, Mike, Justin and Charles Harris determined/decided that every time your low closes above the 21dma for 5 days and you close up for the day (the 5th day?) , then that is another “buy signal” (extra credit, gold star, etc.) They use that to counter balance a distribution day. SPY is currently in same position and closed at a new high. Mike said “this would be a day you would be increasing exposure if you are not already up to your eyeballs in stock”