1/5/2023 DOWNTREND. Major indices all take a serious dive.
THE MARKET’s MESSAGE: Market confirms it remains in DOWNTREND
One way you can go short (that is to make money while the market is falling) is to buy an inverse fund like the PSQ – Proshares ShortQs.
The PSQ fund is designed to move opposite to what the QQQ (Nasdaq 100) fund is doing – and it does a nice job meeting its task. Overthe last year, the QQQ lost 31.9% while the PSQ (the inverse QQQ ETF) gained 33.8%, Yes, sometimes the inverse will do a little better than the QQQ, andsometimes not. Since you are not shorting the QQQ in this case (you are buying a fund long that is designed to earn close to the inverse (opposite) of what the QQQ does. On the chart below, note the two funds (QQQ and PSQ) are very close to mirror images of each other.
In a market downtrend, owning an inverse ETF may be a way to turn a falling market into a rising return. Please check with your broker. Some have restrictions on inverse ETFs in retirement accounts (although I don’t understand why.)
If you have a portfolio of individual stocks, this could be a good time to review them and consider which deserve to be let go and which might be growing.
NOTE: You usually do not have to hold a falling investment, but please check with your broker about their rules about inverse ETFs. As a minimum safety step, you can move losing positions into cash.
You may want to copy this next table into your market history notes.
Starting 5 weeks ago, the stock market got sicker as the stocks with A or B ratings dropped from 58% of all stocks to 42%. Last week, there was a small 4% rise in A + B stocks.
The market fell significantly on Thursday showing up as most of the ratings are red or orange – showing significant weakness.
The market continued to fall lower over the last 4 days.
Note: The color of the Trend count column boxes, telling you what type of market we’re in (redfor Downtrend).: confirming the market is in correction.
· Green = Uptrend
· Yellow = Uptrend under pressure
· Red = Downtrend
Not surprising: The major indexes are well below their all-time highs of about a year ago as shown below.
Note the large number of days that closed at NEW LOWS (red highlighted prices) over these 20 days. This is what a DOWNTREND looks like. On Wall Street this period is frequently defined in red to represent the blood in the street
STOCK WATCHING: Send your suggestion on which stock to follow in this newsletter. I am looking for just one stock at a time, for training purposes.
Wishing you and yours a happy and safe holiday season.
Charlotte Hudgin, The Armchair Investor, (214)995-6702