Market Health Tracking

1/27/25 - Chinese Black Swan Spotted On Wall Street.

DeepSeek released a powerful artificial intelligence program that it claims cost just $5.6 million to build, marking a possible paradigm shift from the massive levels of investment by technology industry giants in energy and AI infrastructure.

This freaked out shareholders of AI hardware and energy supplier companies, cause panic selling and 15-30% losses in big names. On the flip side of the coin, enterprise software firms that integrate AI were lifted with hopes of cheaper AI that will improve the bottom lines (e.g. CRM, NOW, HUBS) Others like META and SPOT made nice moves up as money rotated quickly.

The Naz finished down 3.1% at 19,341, marking its biggest drop in a single session since the 3.6% plunge suffered on Dec. 18 and also finished below its 50-day line for the first time in just over a week.

Gains in non-tech areas helped buffer the S&P 500’s slide as the large-cap index fell 1.5%. The Russell 2000 lost 1%, or only a third of the Nasdaq’s decline. And the 30-stock Dow Jones Industrial Average rallied nearly 0.7%. Volume was up on major markets resulting in a new distribution day, that replaced one that dropped due to age today.

The S&P managed to stay above the 6000 mark, but the naz finished near the lows of the day.

The yield on the benchmark 10-year bond yield fell nearly 10 basis points to 4.52%. That was the lowest close since 4.49% on Dec. 18.

This was painful for some investors, and some found out the hard way that triple leverage and daily single-stock ETFs (2x) can crush your portfolio pretty fast.

This is NOT 2007! There is no systemic disintegration of the economy and the markets. Banks will not go under.

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Don’t think anyone is really thinking that. Futures aren’t bad. But wait!! Powell is up to bat tomorrow and Wednesday. Will he have more athletes tongue?? Is his foot still stuck in his mouth?? That worries me more, at least for the short run. I’m a bull looking for the best play. Sometimes that’s a call credit spread.

Lakedog

1/29/25 - Calm trading with inside days.

The S&P 500 and Nasdaq finished 0.5% lower, as their trading ranges held inside the prior day’s highs and lows (inside day). That’s a sign volatility is returning to normal after Monday’s rout in AI-related stocks. The Nasdaq and S&P 500 held above their 50-day moving average. Both indexes also avoided a distribution day because volume fell on the Nasdaq as well as the New York Stock Exchange.
○ The Nasdaq 100 index, down 0.2%, also held above its 50-day line. The Russell 2000 small-cap index lost less than 0.3% but has met resistance at the 50-day moving average. The S&P MidCap 400 index lost 0.4% and closed slightly below its 50-day average.
○ Despite the stock market’s weakness Wednesday, a few high-rated stocks extended a trend of breakouts from proper bases
○ Stocks traded lower Wednesday morning and fell some more when the Fed released its policy statement at 2 p.m. ET. Yet, the major indexes came off session lows as Fed Chair Jerome Powell spoke to reporters.
○ Fed holds, things look good, will remain data driven.

“The glide path is still in favor of a soft landing. However, the uncertainty around tariffs and labor supply will keep the Fed on its toes,” Sonola said. “Inflation and inflation expectations cannot be taken for granted, and a Fed that preaches data dependence will be reluctant to front-run ever-changing policy. It’s looking more like a wait-and-see Fed.”

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1/30/25 -

SPY closes above 50dma for fourth day, with the low of the last 3 days staying above it. Naz closes above 50dma for third day, with one day low above and maybe today’s low above it or on it. Volume below average recently.

I am seeing a number of gap ups and breakouts on good earnings.

1/31/25 - market starts the day up, but sharply reverses at 1:20 PM. Was that the news on tariffs going into effect tomorrow? S&P still above 21dma, but Naz stops right on it. But both still above 50dma.

Volume on Naz was higher, so we should see another distribution day.
Finishing below the 21dma on the Monday close will be a sign of weakness.

Update:
Can you guess when tariffs were announced Friday.

Yes, Friday’s sell off is set to continue Monday morning as futures are down as of 10:30…

Dow Jones futures tumbled 1.4% vs. fair value. S&P 500 futures dived 1.95% and Nasdaq 100 futures plunged 2.5%

Nothing technical that happened Friday really matters now. Above 50dma stuff will be eliminated unless cooler heads prevail before Monday. Maybe at noon Canada waives the white flag and the market bounces, or maybe they, MX and China stick by their tiit-for-tat promises.

Here is Webby’s wisdom from the video (that I did not finish yet)

○ In event periods like this (e.g. 9/11), you can expect about 6 months of volatile moves. You can also expect the moves will start to get smaller as people get use to the news events.

○ Webby “will dial my positions sizes back, spreading out more with groups that is, don’t be concentrated in a single group like AI. your expectations should be lower on Monday”

○ Around the 15m market of video, Webby steps through the 1987 crash, and then the COVID crash. A good segment to watch.

○ Used GEV as an example of a bounce off the bottom. It is just making it back to a 50% retracement and Webby says you need to see it hold above 50% retracement before you have confidence.

Me:
Fasten your seatbelts, its going to be a bumpy ride.

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2/3/2025 - Opposite day

Friday started hot and reversed down. Monday started down and reversed up.

The reality of tariffs was a blow to the gut for the morning markets. Later, Mexico made some promises and Trump put up a 30-day delay. Afterhours, Trump and Trudeau came to an agreement and those tariffs were delayed a month. This caused the Dow Jones futures rose 0.5% vs. fair value, while S&P 500 futures gained 0.6%. Tech-heavy Nasdaq 100 futures climbed 0.8% vs. fair value after the tariff news.

Nasdaq composite fell as much as 2.5% but ended the day just 1.2% lower. Although the reversal was encouraging, the Nasdaq still closed below its 50dma. The S&P 500’s reversal was better. The index narrowed its loss to 0.8% and finished the day just above its 50-day line. Small caps got whacked, down 1.3% and farther below its 50dma.

Distribution day #8 was added to the Naz count (due to increased volume) and the S&P remained at 5 days. This is getting to a dicey level. Recommended exposure remains at 60-80% thanks to the upside reversal. But they hint you may want to be closer to 60%

In my view, Trump’s approach to negotiation is to cause chaos, that that is tough for the markets. He does not bother to negotiate for a while before he drops the tariff hammer, he drops the hammer and then lets people come to him. Like it or not, it is a very interesting change from the months and years of negotiations that go on when everyone “plays by the rules”. Seems like the markets need to expect this for months to come. He will be encouraged by his recent success and keep doing it.

On Tuesday, it will be a good sign if the stock market can follow up Monday’s positive reversal with at least modest gains.

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2/4/25 - Basketball season and the markets rebound.

Yesterday the market started coming back when Mexico kowtowed to Trump, the markets reversed. Afterhours Canada also came to an agreement and the tariffs were delayed a month. The futures rose. Today the markets had a nice bump up and closed at their highs.

Naz closed above 50dma. S&P stayed above 50 and moved above 21dma. IWM small caps still below 50dma.

IBD

Headed into Tuesday, the Nasdaq composite showed eight distribution days, with five of those days showing declines of at least 0.9%. Of the S&P 500’s five distribution days, three showed declines of at least 1.1%…

The stock market rally remains in a trading range, with the Nasdaq especially choppy, just above the 50-day line…

Investors should be cautious about new buys in this environment. Early entries are especially useful in choppy markets. Avoid being too concentrated in a particular sector or theme.

2/6/25: Decent day.
S&P and NAZ finished above 50dmas for third day in a row. S&P low above it last two days and Naz low above it for first time today. Russell was rejected by 50dma.

Labor Department’s January jobs report come out Fri AM.

IBD words of wisdom…

It’s important to monitor positions that are acting out of character and sell any stocks that trigger sell rules, like a sharp break of the 10-week moving average.

Fourth-quarter earnings season is in full swing, which can lead to big gap-downs, so ensure you have a sufficient profit cushion to withstand those potential declines. On the upside, take at least some profits at the 20%-25% profit level. That’s a sure way of compounding gains over the long term.

The stock market rally is showing some positive action, especially among leaders. But with the market still in a range and subject to headline swings, investors shouldn’t get too excited.

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2/7/25 Third Friday Downside Reversal…

○ The Nasdaq composite opened higher, but ended Friday down 1.4% and suffered a weekly decline of 0.5%. It ended the day back below its 50-day moving average, a disappointment after it retook the benchmark on Tuesday. The tech-heavy index is now up just 1.1% for the year so far.
○ The S&P 500 suffered a daily drop of 1%, but managed to hold above its 50-day line and its 21-day exponential moving average. The benchmark index surrendered just 0.2% for the week and is up 2.5% in 2025.
○ Small caps were also bitten by the bears, with the Russell 2000 ending the session down 1.2%
○ Investor’s Business Daily is holding its recommended exposure level at the 60%-to-80% level for now due to the S&P 500 holding above its 50-day line.
○ The stock market remains choppy and headline driven. It’s one of the most challenging environments for active investors. There’s enough strength to lure traders in and enough weakness to shake them out.
○ While daily charts are useful to identifying specific buy points, it helps to have a longer-term perspective. Use weekly charts to avoid getting too giddy or glum about the market or individual stocks.
Reddit (RDDT), and Leaderboard stocks HubSpot (HUBS) and AppLovin (APP) are among the noteworthy firms reporting next week. HOOD, SHOP, DASH
○ Look at the red/blue volume bars on Naz chart. Most of the red (down) volume bars are higher than the blue vol bars.

Friday Video with Webby
○ Webby is seeing a trend of downside reversals on Friday. Last two were followed by a bad Monday (starting with a gap down), so what this time?
○ Webby points out that on the previous two Mondays, Naz gapped down below 50dma, and that makes you expect the market will keep going lower, but that fact that it didn’t is a sign of strength. (I will note that last week we went down on weekend tariff announcements and then they were delayed 30 days, so a rebound seems very normal to me).
○ This has been a chop-fest, so Swing Trader is “very light in the market” (only 4 50% positions) and Webby “put on the brakes in a big way” (he is a very active trader)
○ It would be “normal and natural” to go lower.
○ SPY looks better, holding at 600 level and low still above 50dma. And, if SPY gets above Friday’s high and that $609.07 high of the base, then Webby would be ready to “punch the gas”. It is ok to “turn on a dime. Bill was very flexible”
Financials are one of the best-looking areas out there.
META seems to be a place where institutions are hiding out.
○ Webby still watching UAL as a high-tight-flag.
EXPE strong gap up on earnings. Don’t buy here, wait for it to consolidate for a week or two and give you something to trade against. A shakeout with upside reversal would be perfect using the lows of that day. Market too weak to take a chance now. Travel in general is doing well.
IOT: forming a base. This is the area where we would typically see a handle form. Very solid sales growth and EPS growth looks good too.
○ Webby admits he is a “Debbie downer today” because the markets can’t stay above their 21dma.
○ The Webby RSI confirms the obvious, we are in a “chop zone”

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2/12/25 - Upside reversal and big earnings pops after hours.

The CPI numbers came out hot and dragged the market down while lifting interest rates. But the bulls work up and created a nice upside reversal day by closing.

The S&P 500, down 1.1% in the early going, failed to streak into the plus column. But it closed down nearly 0.3%. the S&P 500 also refused to pierce 6,000, perhaps a psychological level in the stock market today. It touched the 50dma, but then reversed up and closed above it.

The Naz turned an early loss of more than 1.2% into a tiny 6-point gain, or up less than 0.1%. More important than the gain, obviously, is the way in which the tech-clad index climbed bullishly off its intraday low and closed close to session highs. It also managed to close just above the 50dma.

Big earnings moves up: APP +29%, BROS +25%, Hood +15%, and down: TTD -23%, RDDT -13%. I wonder if APP is stealing business from TTD (digital ads). UPST up 32% after earnings release in the morning.

PPI Thursday before market open

CyberArk Software (CYBR), Datadog (DDOG), Howmet Aerospace (HWM), SharkNinja (SN) and Deere (DE) are due early Thursday.

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