MARKET MOOD: Red
The summary below is my interpretation of the data in the ‘Market Mood Log’ above:
Trends began to converge and move together last week across indexes and across timeframes. Sellers are in control across the board and the trend on the indices is headed down. Each of the indexes dropped over -6%. When everything starts moving in one direction, smoother trends can develop.
For weeks the data has been choppy but deteriorating towards the sellers. Now that the data is stacked in favor of the sellers, (trends mentioned above), distribution picking up, new lows dramatically outpacing new highs, nearly 0 quality bullish setups this week, and the bullish setups from last week getting smashed (only 6% of bullish ideas finished positive last week).
- Indices moving together and heading lower: The trend is down across the board on the daily and weekly timeframes. The NASDAQ and Russell 2000 started fresh downtrends on the monthly timeframe.
- New Lows are stacking up: The NASDAQ had -528 new lows last week. There haven’t been this many since 2020. New lows hit triple digits on the NYSE on Friday while new highs were in the single digits. This builds the case for sellers.
- Distribution remains high: Every time an old distribution falls off the count on the Dow, its adding a new one. The Dow also has 5 distribution days over the last 10 trading sessions. That’s a cluster and a sign of heavy selling. It’s a sign that the big mega caps are being sold off just as heavily as other stocks. Interestingly, distribution declined on the S&P 500. Don’t be fooled by this. The price action was still wide and loose and to the downside. Volume was heavy but not heavy enough to trigger a distribution day.
- There are 21 stocks total on the trade ideas list. The most interesting bullish setups that I came across are in gold and gold miners. See the focus list for detailed notes and comments on each. I found some potential short candidates as well. After last week’s sell off, if we get a relief rally of a day or two it could set up a quality area to short against.
- Open Trades: None. I sold my remaining shares of ARLP at breakeven. Glad I did as the sell off intensified Thursday and Friday.
HOW I’M PLAYING THIS HAND: Well timed short sales can work in this environment. Personally, I’ll be looking to ‘sell the rips’. Many stocks and ETFs broke down hard last week. In this kind of environment we can see relief rallies that move sharply to the upside but are short lived and roll over in a few days. I’ll be on the lookout for those and will take shorts as they come. I’m also considering plays in GLD (long term) and bullish swing trades in the gold miners. I’m keeping all trades small at this point. I’ll keep you posted on the trades I take in the action list and as always, will share everything ahead of time (and post about it on discord)
Checkout the charts of the indexes below.
MONTHLY CHARTS (indexes) Over all Direction = Sideways: https://www.tradingview.com/x/bhbqYJyY/
WEEKLY CHARTS (indexes) Over all Direction = Down: https://www.tradingview.com/x/t0ObUKxR/
DAILY CHARTS (indexes) Over all Direction = Down: https://www.tradingview.com/x/Xb6duJnE/
(on the lower right is FFTY, the ETF that tracks the IBD 50)
MARKET MOOD REVIEW
Elite Members go to Elite Training for this week’s topic Defining Your Edge (Stu). BONUS LESSON: Mark Minervini USIC 2021 Review (Mike)
Trade Ideas, setups for the week ahead and group discussion (Mike)