12/29/22H DOWNTREND.. Nasdaq Falls to within 4% of Pre-Pandemic High

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12/29/22H  DOWNTREND..   Nasdaq Falls to within 4% of Pre-Pandemic High

THE MARKET’s MESSAGE:  Market confirms it is in DOWNTREND (CORRECTION)

After hitting a 2 ½ year low, the Nasdaq is now 35% below its all-time high in December of last year. What is this market’s message? It is important to look at both the price and volume to understand its message.

I suggest you jump down to the 20-day Nasdaq table near the end of this newsletter. In that table you will see only 3 accumulation days in the last 20 trading days (days where the market bought the stocks in the Nasdaq as shown in the rising prices and higher volume.)

Confirming the current down-trending market, the Nasdaq closed at a 2+ year low today, and just slightly (3.8%) above its pre-pandemic high.

But what’s really important is the current momentum (refer to the following chart): 4 down weeks in a row! And including this partial week, the Nasdaq has closed at the bottom of 3 of the last 4 down weeks. I am not counting on the market to stop dropping in the near future just because it “round tripped” to the February 2020 high. (See the blue horizontal line on this weekly Nasdaq chart.) But many of us are hoping this is the low for the moment.

Yes, the Nasdaq and S&P500 popped up on Thursday with higher volume (according to the MarketSmith.investors.composite) giving both indexes accumulation days.

You may have noted that the NYSEvolume is different on the Investors.com site compared to the MarketSmith.investors.com site. Confused? Note the differences have to do with when the volume collection is cut off and what sources (secondary markets) are included. It’s easy to agree on the closing price – the closing bell rings at 4 p.m. and the last order that hits by 4 p.m. is the closing price.  But volume is allowed to dribble in through the computer systems for quite a while. What you can count on is the collection process is consistent day-to-day but it does create different numbers based on whose counting and what they are including.  

Let’s look at the Nasdaq pricebars on its weekly chart. Although the Nasdaq has popped off its low this week, I note that it did dip below the prior week’s close.  But Friday may show another rising day and would, therefore, close up for the week.  I would consider a Friday closing price a slightly positive statement that might foretell the start of a new Uptrend. (I have my fingers crossed!)

What does this price action mean? The market seems to have absorbed the extra money that entered the market as so many people invested their separation packages (and more)!  But it might also mean that most of them have not ended up ahead.

I hope you were not one of the buy and hold losers. (You weren’t if you followed this newsletter’s information!)

>>>> This newsletter was invented to ensure you did not have to lose all your up trend gains. Stay tuned for a 3 year look-back at the market during the pandemic.

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Only 1 trading day left in 2022. Good luck!

YOU MAY WANT TO USE THIS TIME TO REVIEW YOUR WINNERS AND LOSERS OF 2022.

·      What lessons have you learned? (Write them down!)

·      What did you try that didn’twork? And Why? (Write that down, too!)

·      What new strategies did you try that worked or didn't work? (ditto)

If you’d like to share these insights (all kept anonymous)                    

I will read all the comments and will pick a few interesting questions/suggestions to share with the readers of this newsletter over the next week.

Let’s look at the day's market activity.

The Accumulation/Distribution table below shows the 2 weeks of selling the top rated stocks as the market continued its decline. The count of stocks with A or B ratings has fallen from 59% 2 weeks ago, to 39% today (a 33% drop!)

Take a look at all the RED and YELLOW boxes in the MARKET FACTOR TABLE below.

The only GREEN ratings (showing strength) refer to the indexes that did not close at their new lows (which is very rare.) BUT LOOK HOW CLOSE THE NASDAQ IS COMPARED TO ITS RECENT LOWS.

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>>>> On the MARKET ACTION OVER THE LAST 20 DAYS table below, theNasdaq had only three accumulation days (when price and volume roseshowing serious buying action) in the last 4 WEEKS.

I’m not sure the market has much more than the occasional (very occasional) accumulation day in it right now. It is in a slow sell-off. Perhaps it is slow so you won’t notice!  

NOTE on the MARKET ACTION table::

A RED highlighted index Price indicates a NEW LOW  during the previous 20 days.

A GREEN highlighted index Price indicates a NEW HIGH  during the previous 20 days.  

Only 3 days that are colored green on the 20-day table below points to the weakness of this market.

>>>>>NOTICE the 7  red/orange highlighted Nasdaq prices in the last 20 days  – pointing out the Nasdaq’s steady drop.

A point for possible discussion: Are the market players holding the indexes down because this year is already a big dud and a few more flat/down days won’t significantly change the year’s total price action. By starting with lower indexes (caused by holding down the major stocks), next year could look even better, faster!

Note: The color of the Trend count column tells you what type of market we’re in:

·      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.

HOW CLOSE ARE THE  INDICES TO ALL-TIME HIGHS?

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Here isthe schedule of stock market holidays for 2023:

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STOCK WATCHING:  Send your suggestion on which stock to follow in this newsletter to editor@armchairinvestor.com.  

I am looking for just one stock at a time, for training purposes.

>>>>>>>>>>>>>>> 

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Wishing you and yours a happy and safe holiday season.

Charlotte Hudgin, The ArmchairInvestor,   (214)995-6702

www.ArmchairInvestor.com   (214)995-6702   editor@armchairinvestor.com

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