Flush or Rally? What's Next

Hello everyone,

This is week 15 of ∞ that I will be posting a written version of my stock market outlook.

Make sure you are subscribed so that you don’t miss any future updates or educational articles.

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Last Week’s Action

Feels a bit like a broken record but once again the market closed the week negatively after drifting sideways early on.

We remain below all the key moving averages

Daily chart of the QQQ:

We closed just below the prior lows

The weekly chart shows a textbook Stage 4 Decline

The monthly chart shows that this correction could last quite a bit longer

The McClellan Oscillator rallied but closed the week in oversold territory

The T2108 - the % of stocks on the NYSE above their 40-day SMAs is just above 10%

Leadership

In terms of leadership, biotech remains thee strongest and we have seen oil and gas step up a bit. Solar has taken a bit of a hit although FSLR remains a focus.

Sentiment

We actually saw a slight decrease in bullishness although this remains high for making new YTD lows.

The NAAIM dropped significantly to 12 wednesday

The Put call ratio is just above 1 after spiking above 1.2

IBD is currently a market in correction

Stock Market Outlook

Another negative week. Thursday was a negative expectation breaker after we attempted to rally Wednesday. The FED continues to fun the show and we are in a downtrend.

Oil and Gas is a theme to watch as well as biotech. Otherwise cash is king as well as select short opportunities.

We remain “oversold” but remember that simple means that the market is very weak and we are in a persistent downtrend.

This is a great time to be studying and working on improving your system

Take it day by day and manage risk along the way.

What To Look For (Same game plan as the last few weeks)

When it is time for a new bull market we will see divergences as groups decouple from the indexes and show relative strength. Setups will proliferate your screens.

When the market is ready it will be obvious, and it may happen when the news and sentiment is the absolute worst.

The leaders in the next bull market will once again have the potential to quickly double and triple and they will likely be completely new names that are unfamiliar. Try not to become biased and focused on last cycle’s winners.

Follow the sector, industry group strength, and look for the strongest stocks coming out of these strongest areas. As the market bottoms these future winners will likely be completing bases and may even be making new 52-week or all-time highs.

Keep an eye out for turnaround plays with excellent earnings and sales growth as well as recent IPOs within the past 2 years forming out their first proper bases.

Have patience, preserve your mental and financial capital, and be ready. Stocks can shape up faster than we think.

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Have a great weekend!

Richard