3/21/2023T The Nasdaq was UP 1.6% Tuesday for an Accumulation day!
THE MARKET’S MESSAGE: Market says, ”Additional bank failures would predict a dangerous future!”
Be sure to pay attention to the Federal Reserve’s comments 2 p.m. east coast time Wednesday. And now, I have more important news on my mind.
>>>>>How does a Downtrend (which the market is in right now) turn into an Uptrend? With a 3-step pattern:
· Day 1: The Nasdaq or the S&P500 closes higher than the day before. Because a price rise on this single day is not uncommon, you will not see me get excited about a day 1 rise in this newsletter. Every downtrend has occasional rising days, thus,by itself the first up day is barely noteworthy.
We had an attempted rally day signaled on 3/1 and you might have noticed I did not even mention it. There are usually many single rising days during a downtrending period. So day 1 is just a yawner. And you should note Monday, 3/13 was a new “attempted rally.” (Yawn)
· Days 2 – 3: The index moves sideways or higher, never undercutting the day 1 low, even intraday. The market’s “Attempted Rally” continues (now I will be more interested.)
· On Day 4 or later: The index has another rising day - a Follow-through day – when it rises at least 1 1/2% and has strong volume. >>>>> This Follow-Through Day signals the start of a new Uptrend. Hurray! You should buy a position in the QQQ and could buy partial positions in 1 or 2 stocks.
A final note: The sooner the F-T day occurs, the stronger the signal. E.g. a day 4 F-T day is stronger than a day 7, which is stronger than a day 10….
A final note: Many day 1, 2 or 3 rallies do not turn into new Uptrend!
Avoid the temptation to jump in early (before the Follow-through day.) If you aren’tsure, please visit this newsletter. And be assured, If the close of the market’s day signals a new Uptrend, you will see a SHORT and VERY CLEAR newsletter from me simply telling you the day was a Follow-through day and a new Uptrend has been signaled. You can start lining up your first couple of stocks to buy at the next market open.
If you are paying attention before the market day closes, you can jump in a little early if the volume is there (which never gets smaller during the day) and the index is holding at an appropriate rise ( see above).
>>>>The Federal Reserve will meet for a second day Wednesday and will decide what to do with the Fed Funds rate. It isnot uncommon that the market gets quiet on Tuesday and Wednesday before theirmeeting ends. STAY TUNED! The Fed’sWednesday announcement could excite the market and create a Follow-Through day.Get ready to buy a position in at least one new stock or ETF if an Uptrend issignaled!
Call me if you have any questions.. Charlotte (214) 995- 6702.
Refer to the next table, MARKET ACTION (Nasdaq) OVER LAST 20 DAYS for this note….
Why is the market diagnosis still DOWNTREND when the market rose 4 of the last 5 days? The answer is VOLUME! In fact, in the last 11 trading days, only one day had price and volume that was “consistent” with an Uptrend.
Look at the rightmost column. In the last 11 days ….. there were 8 days “consistent with” a Downtrend but only 1 day was “consistent with” an Uptrend. YES, there were 5 days of those 11 days I am talking about that had rising prices.
But how many of those rising days had higher volume? (look for yellow volume days.)
NOT A ONE!…. None…. Zero…..Zip..
That tells you the market was not really interested in adding to their portfolios during the last week.
On the MARKETFACTORS, COUNTS & RATINGS table below, the ”Type of Day” boxes.(rightmost column) of UPTREND are white showing the market’s hesitation to take action until they hear what action the Federal Reserve will take – about 2 p.m.Wednesday
>>>>> When you look at the last 4 weeks of the ACCUMULATION/DISTRIBUTION RATINGS table BELOW, what do you see happening to the number of “A” and “B” rated stocks? (the stocks that are being bought.)
>>>> Look at therightmost column labeled “As + Bs.”
The rising stocks (with A or B ratings) continue to disappear, dropping from an exciting 51% 4 weeks ago to a mediocre 31% today.
>>>>That drop points at a lot of selling of the best rated stocks over the last month.
The four weeks of disappearance of the top rated stocks would only happen if the institutional investors wanted to slip out with recent profits in hand.
Why would the professional investors sell off their best stocks so consistently? It is likely they see bad news coming.
Are you holding onto stocks that you like in spite of their weak chart action? Notme! Cash is always a safe alternative.But note this recent broad rotation (past highly rated stocks being sold and underrated stocks being bought,)
>>>>>>>>>>>>> PLEASE READ THE FOLLOWING NOTE >>>>>
NOTE: A long time ago, (after paying for this lesson multiple times…..) I finally learned two important lessons:
1. I am NOT smarter than the market. And,
2. The market does not care about my “fine” opinion.
When I see the institutional investors selling hard (as shown by the drop of ”A” and “B” rated stocks), I am happy to step out of the market by selling my QQQ position.
NOTE: If you have individual stocks or ETFs that are holding up well, you certainly can hold them. But please keep a tight rein on them.
Remember: Stocks usually fall faster than they rise!
Wishing you, “Many Happy Returns.”
Charlotte Hudgin, The Armchair Investor, (214)995-6702