New Market Lows Incoming?

Hello everyone,

This is week 13 of ∞ that I will be posting a written version of my stock market outlook.

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Last Week’s Action

Last week, the market pulled bark sharply, undoing the positive moves during the short term rally

We are back below all the key moving averages

Daily chart of the QQQ:

We are also below the key level and are back in a short-term downtrend.

The weekly and monthly charts show the bigger picture

We had a negative outside week

Monthly we have a poor closing range.

The McClellan Oscillator is back to the bottom of the neutral range and rallied friday.

The T2108 - the % of stocks on the NYSE above their 40-day SMAs is down to 23%

Leadership

In terms of leadership themes I remain focused on these areas:

• Solar

• Healthcare/Biotech

• IPOs

Sentiment

We saw a drop in my twitter survey.

The NAAIM is still low at 33.

The Put call ratio is just below 1

IBD is currently a market in correction

Stock Market Outlook

Last week reaffirmed how difficult trading within a bear market can be. The market reacted extremely negatively to news and erased the positive action from the previous week.

Breadth and leadership breadth remains poor. However, remember that this can change quickly.

We are now below all the moving averages and all trends are down. The market needs to make a stand otherwise we could revisit or undercut the previous lows. Remember how that predicting what will happen is not necessary. Just keep monitoring leadership and setups, that will let you know when the market is ready

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