2/24/2023F Nasdaq falls to its 200-m.a. line but lighter volume shows uncertainty.
2/24/2023F Uptrend under Pressure. Nasdaq falls to its 200-m.a. line but lighter volume shows uncertainty.
THE MARKET’s MESSAGE: Nasdaq & S&P500 50-day line are holding close to 200-day lines clearly showing an extended sideways period.
The Nasdaq and S&P500 have fallen over the last 3 weeks.
Step back and look at the Nasdaq, S&P500, and DJIA over the last 3 years.
If you just look at the arrow I have inserted on the chart, you might think it didn’t make a difference which index you invested in. They all ended at just about the same price. And you would be right if you are a “buy and hold” investor.
But if you followed the guidance in this newsletter to go short in February 2020, and then went long soon after the upward reversal, etc., you would have made money on both legs.
The 2022 downtrend was trickier and we were sitting out in cash for much of that period. And I haven’t calculated the total returns over the full three years since the February 2020 downtrend, but I know following the Armchair Investor newsletter suggestions certainly put you in a much wealthier position (and thank you, to all of you who sent me congratulations and reports of your own successes following the Armchair Investor ideas!)
I suspect your next questions is…”What do we do now?
To answer that question, look back at the 3-index chart above. And let me expand on the recent market action… The period from the all-time high on November 22, 2021 to last Friday has been a tough ride. Markets tend to FALL faster than the RISE! And a safe place to be can be in cash after a trend reverses --- even if the reversed trend has not been named, yet.
Look at the Nasdaq daily chart below. Do you see the recent reversal? That was the first time in over a year that the Nasdaq rose above its 200-day moving average line. And it is very close to falling back below. I remind you that cash maybe the most comfortable position until a new Uptrend takes back control.
Friday was a loser day for all 3 major indexes. But the lighter volume indicates widespread uncertainty about the recent drops.
It is NOT hard to see the shift in the market on the next two table. The first, the MARKET FACTORS, COUNTS & RATINGS list shows the remnants of the prior strong Uptrend with the 7 Accumulation days versus the 4 Distribution days. But when you look at the following table, you will see the shift that occurred over the last month.
Note the concentration of RED boxes on the next table showing a growing slowdown after the recent period of rising days. (also shown on the table below.)
Five of the last six trading days were RED days. The sixth day was a "no change" day. You can certainly see the shift in the Uptrend to hesitancy (or worse.)
Reminder: Be careful – a stock, index or ETF that typically out-performs in a rising market, will also fall faster in a downtrending market.
>>>NOTE: I do not recommend the QQQ as a “buy-and-hold-forever”position.
You can use the market trend identified in this newsletter to get in and out of the QQQ. That strategy has typically generated extra returns compared to just holding the QQQ. But I do not know any investor who bought in at the bottoms and sold out at the tops of any rising market. We can only see the tops and bottoms in the “rear-view mirror!” after they have happened.
I like to hold the QQQ in an uptrend and go to cash in a downtrend unless I am very confident the downtrend has legs.
If the downtrend is strong and occurs after a nice runup, I watch for it to start to fall faster than the QQQ during that downtrend and jump in an inverse ETF to turn those drops into gains.
I do not know how to get in at the bottom, nor out at the top. I just get closer than most.
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Thank you for sending in investing questions
Here is a question from Vicky C….. “How does the QQQ compare to the Nasdaq? And how can I use the QQQ to improve my returns?”
ANSWER: Great questions, Vickie. Since the QQQ is a fund (basket) made up of the 100 largest, non-financial stocks in the Nasdaq, it does perform much like the Nasdaq ,,,, with one important difference. The QQQ has, historically, out-performed the Nasdaq – sometime by a little, sometimes by more. (those financial stocks tend to lag the rising markets.)
I’ll happily take the extra growth of the QQQ since the start of the pandemic recovery from the $164.93 low in March of 2000 to today’s$291.85 on 2/24/2023)!
· QQQ grew77.0% ($164.93 to $291.85 last Friday.)
Remember, I do not know how to get in at the bottom and out at the top. I just usually get closer than most.
If you had sold the QQQ after it started to fail in November 2021, you could have retained more of the rise. But that can be tricky when we didn’t know we had already seen the top.
How you ever used the Armchair Investor signal given in this newsletter, you would have earned a very nice return during the pandemic market.
>>>WILL THE RECENT RISE IN THE QQQ KEEP RISING? Sorry! I certainly do not know the future. I know the QQQ and all stocks with continue in the direction they are going, until........ they don't!
>>>HOW CLOSE IS THE Nasdaq TO THE QQQ FUND?
I have laid them both on the same chart. What is your answer?
Reminder: Be careful – a stock, index or ETF that typically out-performs in a rising market, will usually also fall faster in a downtrending market.
>>>NOTE: I do not recommend the QQQ as a “buy-and-hold-forever”position.
You can use the market trend identified in this newsletter to get in and out of the QQQ. That strategy has typically generated extra returns compared to just holding the QQQ. But I do not know any investor who bought in at the bottoms and sold out at the tops of any rising market. We can only see the tops and bottoms in the “rear-view mirror!” after they have happened.
I like to hold the QQQ in an uptrend and go to cash in a downtrend unless I am very confident the downtrend has legs.
If the downtrend is strong and occurs after a nice run-up, I watch for it to start to fall faster than the QQQ during that downtrend and jump in an inverse ETF to turn those drops into gains.
I do not know how to get in at the bottom, nor out at the top. I just get closer than most.
To my Readers: What questions do you have about the information in this newsletter?You might wonder where I get the data. Or how do I use it in my daily investing.
Send your questions to:
Wishing you, "Many Happy Returns!"
Charlotte Hudgin
Editor, The Armchair Investor
(214) 995-6702
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