The End of the Rally?
Hello everyone,
This is week 9 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 the indexes end the week on a sour note as Friday we saw distribution and the major indexes pulled back towards the 21 ema. We are below a declining 5 day MA
We remain above a rising 21 ema and 50 sma although below a declining 200 sma.
Daily chart of the QQQ:
We’ll have to wait and see if this is the end of the current rally. However, as long as we remain above a rising 21 ema I view some consolidation as constructive. As I mentioned last week we were historically extended from the 50 day.
However, If we see continued distribution and leadership stocks begin undercutting their 21emas and 50 smas that would indicate that we may need more time before the market is ready to fully get back into an uptrend.
Oil and Gas stocks showed strength on Friday, OXY in particular. Make sure to check out my full analysis of the stock here
OXY
SWAV continues to act well, ignoring the recent market action
A few other names such as CELH and ARRY look to be pulling back constructively.
The T2108 is back to 70 after reaching above 80.
NYSE % of stocks above their 40 day moving average:
The McClellan Oscillator is back to neutral levels:
We do not have to predict what will happen, simply watch to see if the market holds this trend and how individual stocks act.
Here is a list of strong stocks that I am watching closely among others.
ENPH
ARRY
ON
GFS
PLAB
CELH
SWAV
NBIX
LNTH
TH
BILL
OXY
EQT
Let me know your thoughts on these and any others you are watching in the comments below
Sentiment
Likely due to the weak close, my twitter survey was very negative.
The NAAIM decreased slightly to 60.
The Put-Call Ratio increased slightly into the end of the week.
IBD is currently in a confirmed uptrend
Stock Market Outlook
Overall my stock market outlook is still a tradable uptrend within a longer-term downtrend. However, the short-term trend is now down since we are below a declining 5 day MA.
Some consolidation for 1-2 weeks would set up some great charts. However, we do not want to see increasing clusters of distribution, and the individual leaders need to hold.
Remember that the most important thing at the end of the day is to watch the price and volume action of the stocks themselves as well as the indexes. Be ready for anything and manage risk.
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
Great post! Thanks.
Another sound update with lots of sage advice. Thank you!