1/20/2023F UPTREND Nasdaq100 rose 2.7% Friday, hitting a new highfor 2023
THE MARKET’s MESSAGE: Market (QQQ) shows upward strength, +6.2% in 2023
Periodically, I check my market returns for the QQQ Strategy and my Buy & Hold position.
Here are the returns of these two strategies in the first 3weeks of 2023 showing the “wait for the market to go into Uptrend” signalr eturned the higher return although both were a nice gain for the first 3 weeksof 2023.
Buy & Hold:
Buying theQQQ at the close of 2022 and holding it.
Waiting in cash. Buyingthe QQQ at the open of the first day after a new market Uptrend is confirmed and holding it until the trend changes.
BUY & HOLD RETURNS:
The first return I track is the “Buy & Hold” plan. You probably have some friends who just buy and hold the QQQ. And over time, this strategy has paid off much better than buyingthe S&P500 or the DJIA (but not every year.)
Here are the “Buy & Hold” 10-years of returns for theQQQ, S&P500 and DJIA as of 1/22/2023. It’s not hard to see why I like this trend-followingstrategy.
Why don’t I Iist the whole Nasdaq in the table above? Tworeasons:
1. Investors cannot invest in the wholelist of more than 2500 stocks traded on the Nasdaq exchange. It is not offeredbecause no fund is willing to create and manage that huge portfolio. (Managingthat portfolio would be a torturous assignment.)
2. Since the Nasdaq typicallyunderperforms the QQQ in rising years, who would prefer investing in it?
The QQQ is an ETF (Exchange Traded Fund) that holds the 100largest stocks traded on the Nasdaq but without the typically slower-movingfinancials like banks and other investing companies.
Here is the 10-year chart of the QQQ compared to the fullNasdaq (thank you MarketSmith.) The QQQ outperformed the indexes everyuptrending year. And even with the 2022 downtrend, it earned +322.73% over theprior 10 years. That gain is still more than twice the return of the leisurelyS&P500 and the DJIA. And by the way….
If you followed the Armchair Investor newsletter, you didnot get hit with the full QQQ drop. In fact, you were only hit will about halfof it. After 10-years of out-performingthe other funds, you walked away from 2022 with a big total win!
Friday was good news for the Nasdaq. Afterthe Nasdaq’s 7th rising day on Tuesday (a rare consecutive runup length)and 2 days of pullbacks, the major index continued its rise on Friday, closing up 0.7% for the week.
Wednesday’s 1.2% pullback was not asurprise. Thursday’s second drop in a row tookthe Nasdaq just below its 50-day line.
· After 7 rising days (some of which were quite significant), the second down day is notmuch more than a minor divot in the road.
· Another point that made the dip less of a problem andmore of just a minor annoyance was the lower volume on this seconddown day. Is the 2-day drop already losing steam?
Turn to theACCUMULATION/DISTRIBUTION table below. The 2% change (dropping the count of A +B stocks) holds the high 55% A+B count – a sign of serious buying.
· Whatwas going down, went up.
· Andwhat was going up was down Thursday.
NOTE in the ACCUMULATION/DISTRIBUTION table below theBIG GAINS in the stocks with “As + Bs” growth – That’s an 13% increase in A andB rated stocks in just 2 weeks holding over the last week.
Notethe mediocre ratings in the MARKET FACTORS table below.
· The number of accumulation days is the same count as the distribution days.
· TheRising/Falling stock ratio is 1.1, just about even.
· Andnote all of the major indexes have mediocre “C” ratings.
BOTTOM LINE:This market has NOT made up its mind whether it has hit the bottom or willcontinue lower. The Federal Reserve’scomments, congress’s actions about the deficit and adding more (expensive)funding to help in the recovery all play into the outlook for the economy.
There is not much to sayabout the big picture of the current market except it has a lot of ground tocover before the market hits new high territory.
STOCK WATCHING: Send your suggestion on which stocks to followin this newsletter. I am looking forjust one stock at a time, for training purposes.
Wishing you, “Many Happy Returns.”
CharlotteHudgin, The Armchair Investor, (214)995-6702