3/24/2023F Nasdaq ends Friday with partial recovery, (+0.3%) but Volume is Light.

3/24/2023F Nasdaq ends Friday with partial recovery, (+0.3%)  but Volume is Light.  

THE MARKET’S MESSAGE:  Market says, ”Higher Federal Reserve Interest Rates will give Negative impact to Individual Investors.”

Please note, the Buy & Hold return of Thursday newsletter was NOT updated. Is was 136.3%. Friday added another 0.4% to bring it to 16.7%. Yes, I also am frustrated with this market. As you go through today’s lesson, you will see what is wrong with the recent 2-week rise.

But before we jump into the stock market….

Hey, guys. Want to have some fun? The Wall Street Journal is offering an online subscription to their online newspaper for $1 a week! Wow!

One thing I really like about the WSJ is that most of their articles are set up so subscribers can listen to the them. The voice is a very pleasant female voice -- clear and not at all “hum drum.”  I usually just start on the first article and let it roll through while I walk my 2 times around our lake (a 2 mile hike.) You could listen on the way to work, over the lunch hour or whenever you find it convenient.  ot interested in one of the articles? Just hit skip. I believe this offer disappears in 2 weeks.

Here is a question to see if you have been paying attention to the strength of this market:

How many “accumulation” days has the Nasdaq had in the last 16 trading days?  (If you can’t wait to hear the answer, jump ahead to the “MARKET ACTION (Nasdaq) OVER LAST 20 DAYS” table.)

Yes, I agree with you if you said, “Ouch!”

Today,let’s look at the Nasdaq’s recent market action. Note the RS (relative strength) line. Compare the RS line to the price movement…… What is your conclusion? Stay with me…

QUICK INVESTOR QUIZ !

The chart below is the Nasdaq Daily chart of closing prices at the top, volume at the bottom and an RS line in the middle showing how the Nasdaq is growing or falling more or less than the S&P500. ..>>> What is the RS line telling you

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The chart above is the Nasdaq Daily chart of closing prices at the top, volume at the bottom and an RS line in the middle showing how the Nasdaq is growing or falling compared to the S&P500. ‘s dissect the RS Line.

I’ll start you out with the first part of the RS as it rises from January 1 till the start of February.

1)   In the January section, the rising RS line tells you the Nasdaq rose faster than the S&P500.

What does the flat section of the RS tell you?

2)   How can RS line be flat while the Nasdaq price is clearly dropping?

Because the Nasdaq and S&P500 dropped at approximately the same rate of loss.

And when the RS is rising in the third section, what do you now know?

3)   Why is the RS line is again rising faster than the S&P500!

Because the S&P500 has historically just not risen or fallen as much as the Nasdaq(which I like because I understand the Nasdaq usually has the greater gains and losses and can parlay that knowledge into bigger returns.!

FYI: The MarketSmith RS line is usually set up to compare the index or stock on the chart with the  moves to the S&P500.  If I set it to another index or stock, I will make that clear! (and why!)

TO SUMMARIZE: The flat part of the RS line tells you that the S&P500 is dropping just as much as the Nasdaq is dropping during this period.

4)   Why is the RS line rising over the last 2weeks?

Because the Nasdaq is rising faster than the S&P500 over this period.

Both are rising in the first 5 weeks of this chart, but the Nasdaq (the black line) is rising faster so the RS is rising.  Here is a composite of the Nasdaq and the S&P500 moves.

On the NASDAQ’s MARKET ACTION OVER LAST 20 DAYS table below, there are TWO glimmers of green (uptrend)…. In the last 8 days, 4  days rose (were UP, GREEN) and only three were red (Down) --- shown in the table above.

Plus the NASDAQ JUST KEEPS CHUGGING HIGHER – IT HAS A B+ RATING compared to the D+ for the S&P500 and the D- for the DJIA!

Look closer at the Nasdaq daily chart.  

I hope these examples give you a stronger idea of what the RS line does and its value in understanding your investment environment.

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On the MARKET FACTORS, COUNTS & RATINGS table below, notice the weaknesses revealed in:

       The Downtrend count is Day 10. That's 2 weeks in a downtrend.

>>>>>What do you think it means that there are only 2 Accumulation days and 4 distribution days in the whole last 4 weeks?

Charlotte’s answer to “What do you think it means that there are only 2 Accumulation days and 4 distribution days in the whole last 4 weeks?”  I chalk it up to market indecision – waiting for the Fed’s rate change announcement last Wednesday. But I have a feeling their is something more..... Any ideas? Call me,..... let's talk.

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PLEASE NOTE: The Nasdaq is definitely the recent winner compared to the S&P500 and the DJIA.

>>>>> The Nasdaq remains a B+ rated index, while the S&P500 and DJIA are weaker Ds.

BUT BE VERY CLEAR, THOSE “D” ratings do not mean that there are not some great buys in the non-Nasdaq stocks.  Just choose carefully.  

Here is the most important “tell” as of Friday – the As + Bs have dropped 21% in just the last 4weeks:  52% 4 weeks ago down to 31% on Friday.  That tells me there is some serious selling going on.  Not panicked, but consistent. Are the institutional players trying to quietly sneak out of town ?

ARE YOU HOLDING ONTO STOCKS THAT YOU LIKE IN SPITE OF THEIR WEEK CHART ACTION? Not me!  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 >>>>>  

A long time ago, (after paying for this lesson multiple times…..)  I finally learned two important messages:

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!

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The Wall Street Journal Investing Competition articleis posted below.

Wishing you, “Many Happy Returns.”

CharlotteHudgin, The Armchair Investor,  (214)995-6702

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

2023ACI NEWSLETTER sent via WEBFLOW

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