10/31/2022M UPTREND Market is quiet before Federal Reserve Interest Rate statements on Wednesday (FOMC 2pm, Fed Chair 2:30 pm)
THE MARKET’s MESSAGE: Market open slightly down waiting for Federal Reserve announcements mid-day on Wednesday.
Expect quiet markets for the next day and a half until mid-afternoon Wednesday. We are now waiting for the next Federal Reserve rate announcements on Wednesday, November 2, at 2 p.m. with the longer (and more interesting) explanation by the Fed Chair Powell at 2:30 p.m..
· The market expectation is a Fed rate increase of 0.75%.
· The Nasdaq fell 1% or more for 3 of the last 4 days. Luckily the 4th day was a large rise, s o the net of all 4 days was a 1.7% drop. That reaction to the expected Fed’s interest rate increase is not a surprise.
· Remember: It’s not just the Fed’s interest rate guidance that is important on Wednesday. The chair’s comments and future guidance has frequently send themarket in one direction or the other.
So there is not much to do as a market watcher except to wait for Wednesday’s announcements to get here. This could be a good time to review your watch list. When the Fed’s announcements are made, the market usually has an immediate reaction, followed the next day by a more deeply analyzed move.
The general consensus is that the rise will be 0.75%. Ouch! But if it slows down the inflation boom, it will be worth it.
My suggestion: Analyze each stock you own and each stock on your watch list without worrying about theFed’s comments. Then see how each stock is moved after the announcements. If the announcement is better or worse than expected, the market’s reaction will be more important. But what the market does immediately after the Fed’s statements is not always indicative of the market moves over the next few days.
I prefer to look at how the best (strongest) individual stocks react and keep those in my radar.
REPEATOF MY COMMENTS ABOUT THE NASDAQ’S GAINS/LOSSES THIS YEAR:
Does the Nasdaq’s larger drop for the year frustrate you? I’m with you on frustration with the Nasdaq’s losses this year. But then I look back and remember how much more the Nasdaq have made for me in the past….. Here is the 10-year comparison:
Because the Nasdaq has more than 2500stocks on that exchange and many are new issues that are not profitable, yet, the fact that the index outperforms the other two most of the time is amazing. Many are winners, some are highly volatile newbies. Some are struggling in the pandemic and the economic slowdown. The S&P500 and the DJIA (30 blue chips)each contain a basket of the better performing stocks in those defined categories.
But over time, the Nasdaq has outperformed bother the S&P500 and the DJIA. (returns are as of Friday,10/28/22.
· Nasdaq + 272.91%
· S&P500 + 176.25%
· DJIA + 150.92%
Be aware that no one knows how high or low the market is going. But I do know that over time, the Nasdaq continues to out-perform the other 2 major indexes.
BONUS: I buy the QQQ when I believe the market is in an Uptrend. We cannot buy the Nasdaq index (it contains more than 2500 stocks – no fund manager is willing to tackle that portfolio.) And why would you want the whole pot when the largest 100 stocks (without the typically slow-moving financials) have typically outperformed the whole Nasdaq. Over the last 10 years, those largest 100 non-financial Nasdaq stocks outperformed the whole Nasdaq :
· Nasdaq + 272.91%
· QQQ + 332.98%
My big concern for the current market is, "Have we found the bottom?”
If you are too uncomfortable with the current market, consider a small position in your trend-following holding.
DO YOU WANT TO IMPROVE YOUR INVESTING SKILLS (e.g. RETURNS)?
KEEP A JOURNAL OF YOUR TRADES.
Take the time to track your reasonsfor your purchases and sales.
>>>>>This step onlyreaps rewords with you actually write down your thoughtsas you are making the trade – NOT later.
I suggest you type it all in a document on your computer. If you do not get your current thoughts and feelings down as you execute a trade (or decide not to execute a trade), you are likely to have “revisionist memories” when you do get around to reviewing your recent trades.
· If the trade worked, you will write down how excited you are about the trade.
· If it doesn’t work, you will write down your reservations.
>>>>Friday’s and Today’s BIG LESSON:
NOTING YOUR THOUGHTS at the times of the trade ON WHY YOU DID (OR DID NOT DO) A TRADE will allow you to review them later to see what you missed.
I have never regretted writing down why I did or did not make a trade. But after some losses without documentation, I have wondered more than once, “Why the heck did was I thinking?
You own it to yourself and your family to document your stock moves. Even a quick scribble could turn your trading mistakes into future wins.
Wishing you, “Many Happy Returns,”
Charlotte Hudgin, The ArmchairInvestor
Notice on the next table (the price/volume action of the last 20 days), the Uptrend is holding up well. Expect small moves while waiting (with lower volume) for Wednesday’s Fed announcement
Do you have suggestions of how to enhance this nightly Armchair Investor Newsletter? Please send them to me at firstname.lastname@example.org.
OR… call me to discuss your ideas! I am always open to your creative input!
Wishing you, “Many Happy Returns,”
Charlotte Hudgin, the Armchair Investor, (214) 995-6702