12/16/22F Uptrend – Indexes tumble down. I am going to CASH AT Monday’s market open
THE MARKET’s MESSAGE: Warning! Market showing serious weakness.
Not only did the market drop everywhere I looked on Friday, but it fell on high volume.
Friday was a “triple witching” options expiration day (fourth and final of the year.) This means stock options, stock index futures and stock index options contract all expired together creating a high volume day even if not huge changes in prices. And these high volume days were also down days, therefore ALL THREE MAJOR INDEXES HAD DISTRIBUTION (sell-off) days.
But that was not the only bad news last week. The Nasdaq dropped 7.5% from its high on Tuesday. The S&P500 fell 6.1% from that Tuesday high, the DJIA fell 5.2% their Tuesday highs. That is not the reaction of a market that liked what it heard from the Fed.
I will not regret selling the QQQ Monday morning in this weak market.
Sometimes, CASH is the safest position. I will certainly sleep better knowing I have set up the sale of my QQQ position and will wait on the sidelines for now.
I was excited by the first 2 days last week as the market rose in expectation of a lower interest rate increase by the Fed. And Ijoined many who thought the Fed’s decline in the interest rate would be exciting news to the big market traders as well.. But the comments that go along with the Fed’s actions spooked the market and it fell 5% through Friday.
I show the previous 5-days of the week on Fridays. It shows the reversal from Monday’s and Tuesday’s rise to the “after the Fed announcement” drop.
Note the market’s change in top rated stocks over the last 2 weeks. In just 2 weeks, the sum of stocks with “A” and “B” ratings tumbled from 65% to 50%.
How close are the indices toall-time highs? Not so much!
Note all the RED and YELLOW boxes in the MARKET FACTOR TABLE below. The only GREEN boxes (showing strength) refer to the indexes not yet hitting new lows. BUT LOOK HOW CLOSE THE NASDAQ IS COMPARED TO ITS RECENT LOWS. When you see red, think the market is bleeding!
On the MARKET ACTION OVER THE LAST 20 DAYS table below, the Nasdaq had only two accumulation days (when price and volume rose showing serious buying action) in the last 3 weeks. I’m not sure the market has much more than the occasional (very occasional) accumulation day in it right now.
Note: A RED highlighted index Price indicates a NEW LOW during these 20 days.
A GREEN highlighted index Price indicates a NEW HIGH in these 20 days. Only 2 green days points to how weak this market it.
STOCK WATCHING: Send your suggestion on which stock to followin this newsletter. I am looking forjust one stock at a time, for training purposes.
Wishingyou and yours a happy and safe holiday season.
Charlotte Hudgin, The ArmchairInvestor, (214)995-6702