Is the Market Rally Over?
Hello everyone,
This is week 10 of ∞ that I will be posting a written version of my stock market outlook.
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Last Week’s Action
Last week we saw continued negative action starting with a gap down on Monday, an attempted move up, then heavy distribution on Friday.
We are below a declining 5 day sma, 21 day ema, and 200 day sma. We are above a rising 50 day sma.
Daily chart of the QQQ:
We are currently in a long-term negative market and the short-term trend is down as well. I’ll be watching closely to see how the market reacts to the 50 sma area and how leadership stocks hold up.
The weekly and monthly charts show reversals.
OXY and energy names continued to hold up better than most.
CELH also pulled back but held the pivot of this stubby base
The McClellan Oscillator has pulled back sharply and is now closer to “oversold” levels.
Remember just because something is “oversold” based on an indicator, it does not mean it is okay to buy and hope. It can always become more oversold.
The T2108 - the % of stocks on the NYSE above their 40-day SMAs is back down to 54
Leadership
In terms of leadership themes I am focused on these:
Energy
Solar
Healthcare/Biotech
Lithium
Stocks I’m watching for next week:
ARRY CELH CF DQ ENPH EQT FSLR GFS KRTX NBIX ON OXY SWAV TH
Sentiment
My sentiment survey was very negative this past Friday
The NAAIM is declining but has some room to fall
The Put call ratio is actually declining which surprised me
IBD is currently at an uptrend under pressure.
Stock Market Outlook
My current view is also that this rally is under pressure. Select stocks are still holding up well so we shall have to see how things work out next week.
It would be constructive to see the market base out sideways but watch out if we see accelerated distribution.
Take it day by day and manage risk along the way.
Video
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
Richard, what are you holding if any? Thx
Thanks Richard, great content. I totally agree with the sentiment of staying patient as the market conditions are poor at present. Better times will come and we will be ready. The money is earned when the winds at your back.