We investors are frequently guilty of hearing only what we want to hear. The justification often being “that doesn’t apply to me.” Or my other favorite line, “Oh, I don’t do that.” In my previous blog — a tribute to William J. O’Neil, — I said that in the near future I’d share my specific takeaways from all his seminars I attended and his books I read. I absorbed this material from O’Neil over many decades, and in reviewing my extensive notes, I freely admit to paraphrasing his insights.

As with so many instances in life, O’Neil may have implied one lesson and I inferred something slightly different. Nevertheless, this is my collection of useful investing essentials that all of us need to remember and that all novices must adopt sooner rather than later. Not just for the betterment of our own portfolios, but for the crucial responsibility of passing the investment management baton to the next generation. Without this baton pass, your legacy dies. That may sound brutal, but it’s entirely truthful.

1. SUCCESSFUL INVESTING CAN BE LEARNED

This is a fact, and I’ll offer you proof. The Market Wizard, Richard Dennis, set out to prove this point by making a wager with his business partner. He won! He proved it could be done to the tune of $175 million. You should read Wikipedia’s biography of Dennis. He turned $1,600 into $350 million and then famously taught his system to a small group of investing recruits who he labeled “the Turtles.” In five years, his novice Turtle investors produced an aggregate profit of $175 million. The conclusion? Yes, you can learn to be a consistently profitable investor, too. 

2. START EARLY — DON’T PUT OFF INVESTING

In my over 25 years teaching investors, I consistently heard the same regret over and over again, “gosh, if only I had started investing sooner.” Be it Buffett, O’Neil or Bogle, they all applaud the magic of compounding and preach the gospel of starting early. You’ve all seen the seemingly unbelievable numbers. Young people who start investing almost certainly will be able to retire in their fifties. And even for those of you already 50, investing $15,000 annually and letting it grow at a reasonable market rate of 8% will reap a nest egg of $440,000 by the time you’re 65. But my God — do the math if you start at 25 years old! I’d present you with the number, but you probably wouldn’t believe me. Remember the importance of the baton pass. Teach young people to start investing early. Don’t be like 64 year-old Ned, a former student of mine who said he’d just begun doing some financial planning and discovered he could retire by 65 — but only for 45 minutes. Make it happen before you end up like him! Stop waiting for inspiration as all you are doing is feeding your procrastination.

3. THE WORLD’S GREATEST HOBBY WILL REWARD YOU

I began investing as a young man and then continued through my entire career as an entrepreneur. It began as a hobby — albeit a serious hobby. At the time, my assets were managed by a professional firm. When I transitioned to making my hobby a full-time avocation, I had already been a very serious student of investing for many years. Unlike some lazier novice investors who flame out early and quickly ( for some that may be a blessing in disguise) I continued to grow and succeed by bumping, grinding and persevering. If we commit ourselves to do what needs to be done and thereby grow as investors, the market will reward us as long as we’re willing to apply ourselves. The University of Wall Street will extract its tuition, but graduation pays immense dividends. It’s worth it! Investing Hell is reserved for “middle earth” which is where mediocrity resides. Far too many investors are by their own design sentenced to a life of investing mediocrity. Embrace this wonderful hobby! I believe author and professor Stephen R.Covey puts it nicely. “Sow a thought, and you reap an act; sow an act, and you reap a habit; sow a character, and you reap a destiny.” As an investor, growth is an obligation. The alternative is not financially attractive. Make the commitment.

4. THE METHODOLOGY OF POTHOLES

It might seem counterintuitive at first. It’s not what a novice investor wants to hear, but you’ll have far far more assets in your pocket over the long term if you first focus on what you should NOT do as an investor instead of trying to find the Holy Grail of stock trading methodologies. Once again, take heed of what Buffett and other Marker Wizards have advised. They will tell you that you can indeed outperform the market and actually possess mediocre investing skills — but there’s the big if — if you avoid falling into the most common potholes and don’t make all the usual mistakes and blunders that investors are prone to do over and over again. The reality is that the Methodology of Potholes will trump the Methodology of Investing, so to speak!

5. SIMPLE BEATS COMPLEX

Many investors have multiple university degrees, high IQs, and very successful careers. Generally, they are cerebral folks who understand complex stuff. That’s why they’re attracted to the stock markets and investing in the first place. Here’s the conundrum — one that I was myself was guilty of initially. Increased complexity is inversely related to profits. Simplicity (within reason) produces profits and clobbers complexity in most instances. Steve Jobs had it absolutely correct when he said, “Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.” And you have to admit, Steve Jobs moved mountains. You can as well.

Till the next blog then, when I’ll present you investing essentials #6 through #10.

Trade well; trade with discipline!

Gatis Roze, MBA, CMT

StockMarketMastery.com

• Author, “Tensile Trading: The 10 Essential Stages of Stock Market Mastery” (Wiley, 2016)
• Developer of the “Stock Market Mastery” ChartPack for StockCharts members
• Presenter of the best-selling “Tensile Trading” DVD seminar
• Presenter of the “How to Master Your Asset Allocation Profile DVD” seminar

In addition to analyzing the stock market’s overall performance, running scans when the market opens and after it closes is a good routine to follow. It can reveal some market activities you may not have thought about.

It’s interesting to note how many stocks from the Energy sector made it to the StockCharts Technical Rank (SCTR) scan I run every morning. While equities are still trying to figure out which way to go, crude oil prices have risen steeply. And energy stocks are running higher along with it.

FIGURE 1: SCTR SCAN RESULTS. Many stocks that made it to the SCTR scan on September 12 were in the Energy sector. Chart source: StockCharts.com. For educational purposes.

One of the stocks that showed up on the scan is Chesapeake Energy (ticker symbol: CHK). If you extend the chart to display a year of data, you’ll see that the trend has been relatively slow and steady.

FIGURE 2: CHESAPEAKE ENERGY STOCK HAS BEEN TRENDING HIGHER SINCE JUNE. The stock has room for more of the upside move, although an increase in volume would be more confirming.Chart source: StockCharts.com (click chart for live version). For educational purposes.

The stock has been trending higher since June, and its SCTR score is above 70. The relative strength of CHK relative to the S&P 500 ($SPX) is climbing, although it’s still relatively weak. The stock still has some room for upside movement, and the company pays out dividends to shareholders.

Note: To know how much the company will likely pay in dividends, check out the Symbol Summary page under Member Tools.

Go through the charts of the stocks that made it to the SCTR scan and identify those that meet your trading criteria. Last week, Diamondback Energy (ticker symbol: FANG) was the featured stock in this blog. It’s still a scan candidate.

As long as the Energy sector continues to trend higher, it’s worth adding some energy stocks to your portfolio. There are two sides to the coin. One is that crude oil prices are on their way to reaching triple digits. The other is that if crude prices go much higher, demand pressures will come into play. Consumers will feel the pinch when they fill their gas tanks. Some analysts question whether there’s enough buying to push oil prices higher.

A good proxy for following crude oil prices is the United States Oil Fund (USO). The weekly chart below shows that price continues to rise. The first major resistance level would be at around the $90 level.

FIGURE 3: UNITED STATES OIL FUND (USO) IS A GOOD PROXY TO FOLLOW WTIC CRUDE OIL PRICES. After a steep fall in 2020, oil prices have recovered. How much higher will they go remains to be seen.Chart source: StockCharts.com (click on chart for live version). For educational purposes.

Trading Chesapeake Energy

Chesapeake Energy’s stock has been rising steadily since June, but, except for a couple of volume spikes in August, volume has been relatively average. You could take advantage of the rise in oil prices by adding CHK or any other energy stock you have identified. For CHK, look for an increase in volume, because you want to see some momentum behind it.

Watch the crude oil market via the futures ($WTIC) or USO. This will help you keep track of the energy market, which will help you decide whether you should reduce, add, or close your positions.

SCTR Crossing Scan

[country is US] and [sma(20,volume) > 100000] and [[SCTR.us.etf x 76] or [SCTR.large x 76] or [SCTR.us.etf x 78] or [SCTR.large x 78] or [SCTR.us.etf x 80] or [SCTR.large x 80]]

Credit goes to Greg Schnell, CMT, MFTA.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

SPX Monitoring Purposes: Short SPX on 9/1/23 at 4515.77; cover short 9/5/23 at 4496.83 = gain .43%.

Gain since 12/20/22: 15.93%.

Monitoring Purposes GOLD: Long GDX on 10/9/20 at 40.78.

Today’s trading tested the gap of 9/6 on lighter volume, suggesting the gap has resistance and the market could stall near current levels. Option expiration week, which is this week, leans bullish. The bottom window is the 10-day average of the TRIN, which stands at .99; readings near 1.20 and higher are bullish. This low of a 10-day TRIN suggests market may not have enough panic to push higher. The next window higher is the VIX with a reading of 13.79; readings below 17 lean bullish. The market is not giving a clear signal. SPY could drop back to support near 444 and, if panic is present, could start a rally; if not present, the 444 SPY support may fail. Not a clear signal, so we will stay neutral for now.

Join me on TFNN.com Tuesday 3:30 Eastern; Thursday 3:20 Eastern, Tune in!

Last Thursday, we presented the SPX/VIX ratio, which leaned bullish (see last Thursday’s report). The bottom window in the chart above is the 5-day average of the TRIN, and the next window higher is the 10-day average of the TRIN. When the 5-day TRIN reaches 1.50 and 10-day TRIN reaches 1.20, a market low is near. The blue lines show when both 5- and 10-day TRIN reach bullish levels, and the red lines show only when the 10-day TRIN reaches bullish levels. Currently, both 5- and 10-day TRINS are not near bullish levels. The TRIN closes help to identify panic, and panic forms near lows in the market. Right now, the TRIN readings are not near levels where a worthwhile low is forming. There can be short term bounces, but a lasting low has not formed yet according to the TRIN indicators.

The bottom window is the 18-day average of the Up Down Volume percent, and the next window higher is the 18-day average of the Advance/Decline percent (both for GDX). This chart looks at the shorter timeframe, where signals can last as little as a week to as long as several months. The chart on last Thursday’s report for GDX looked at the big picture, where signals last years. Currently, both indicators closed above -10 and on a buy signal, and as long both indicators remain above -10, the buy signal will continue. We also have these indicators on a 50-day average, which looks at the intermediate-term where signals can last several months. These indicator trigger buy signals when both close above “0”; currently, both are coming in near -2 range and may kick in a buy signal in the coming days.

Tim Ord,

Editor

www.ord-oracle.com. Book release “The Secret Science of Price and Volume” by Timothy Ord, buy at www.Amazon.com.

Signals are provided as general information only and are not investment recommendations. You are responsible for your own investment decisions. Past performance does not guarantee future performance. Opinions are based on historical research and data believed reliable; there is no guarantee results will be profitable. Not responsible for errors or omissions. I may invest in the vehicles mentioned above.

The S&P 500 SPDR bounced the last three weeks, but we did not see an improvement in breadth. Weak breadth is also reflected in performance for mid-caps and small-caps, which are lagging. Even so, SPY and QQQ are in short-term uptrends and I am watching the tech sector for clues.

Breadth is Not Keeping Pace with the Bounce – Plus MDY, IWM and XLK

These charts were part of Tuesday morning’s Chart Trader report at TrendInvestorPro. The first chart shows the S&P 500 with the red vertical line marking August 18th. The index is up 2.8% since date. The first indicator window shows SPX %Above 200-day SMA moving sideways since this move (red shading). There was no improvement during the bounce. The second window shows SPX %Above 50-day SMA also moving sideways and remaining below 50%.

The next chart shows SPY, the S&P MidCap 400 SPDR (MDY) and the Russell 2000 ETF (IWM) since January 2023. SPY exceeded its February high and is currently around 7.5% above this high. MDY and IWM failed at the February high and are currently around 5% below this high. Small-caps and mid-caps are not the place to be.

Large-cap techs are the place to be. QQQ and XLK are leading the market and helping the large-cap weighted S&P 500 (SPY). The next chart shows XLK with a breakout in late August and short-term uptrend (blue dashed lines). At this point, traders must decide what it would take to prove this bullish stance wrong.

The dashed lines show a possible rising flag (bearish pattern). XLK is testing the flag line after a decline last week. There is also the big surge on August 29th (Marubozu candlestick). I am using the low of this candlestick to mark support at 169. A close below 169 would erase this big gain and clearly break flag support. Such a move would be bearish.

Check out the Chart Trader report at TrendInvestorPro for more details. Tuesday’s report updated levels for SPY and QQQ, highlighted TLT and covered yield spreads. We also provided some analysis and setups for ITB, SOXX, PPA and five stocks. Click here for immediate access. 

Click here it learn about the TIP Indicator Edge Plugin for StockCharts ACP.  

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In this week’s edition of The DecisionPoint Trading Room, Carl reviews the markets and shares the new DecisionPoint BIAS assessment list. Erin concentrates on Technology (XLK) and Utilities (XLU). Technology is only sector holding a bullish bias in the intermediate and long terms, will that hold up? Utilities are making a move and building internal strength.

This video was originally recorded on September 11, 2023. Click this link to watch on YouTube.

New episodes of The DecisionPoint Trading Room premiere on the StockCharts TV YouTube channel on Mondays. Past videos will be available to watch here. Sign up to attend the trading room live Mondays at 12pm ET by clicking here!

First of all for those who are awaiting a new episode of Sector Spotlight. I have just arrived at the Stockcharts.com office in Redmond, WA and the airline did not allow me to record a video while in the air 😉

I am going to try to squeeze a fresh episode of SSL in this week but not sure which day it will be, so stay tuned. I will be joining Dave Keller at the Final Bar on Wednesday 13th. I will also be recording a new episode of Charting Forward this week together with Tom Bowley, Mish Schneider, and Dave hosting. So plenty of studio time ahead of me.

Weekly Sector Rotation

The Relative Rotation Graph at the start of this week shows three important sectors inside the weakening quadrant. Consumer Discretionary (11%), Technology (28%), and Communication Services (8%). Together these sectors represent 47% of the total market capitalization of the S&P 500.

All three have gone through a relative setback over the last 5-10 weeks but looking at their current tails, it looks like they are leveling off in terms of JdK RS-Momentum with enough room left inside the weakening quadrant to curl back up and start a new rotation back up towards leading.

Daily Rotation

Zooming in on the daily version of this RRG reveals that all three of these sectors are improving rapidly at the moment.

XLK is already well inside the leading quadrant and still moving higher on the RS-Ratio scale while slightly losing some relative momentum.

XLY has just crossed into the leading quadrant and started to accelerate. This can be concluded from the increasing distance between the nodes on the RRG-Tail (RRG-Velocity). The weekly tail on XLY needs the most work as it is still on a negative RRG-Heading but this rapid improvement on the daily is encouraging.

And finally XLC. On the daily RRG, the tail turned back up aggressively in the last week and that improvement is now accelerating, resulting in a higher RRG-Velocity as well just like XLY. This turn should fuel the further improvement for XLC on the weekly RRG.

Information Technology

Since mid-June, XLK has been testing the area around the all-time high, which was set back in 2021 but so far there has not been a clear upward break. However, the upward trend coming out of the 2022 low is still fully intact and the market tested and confirmed this rising channel a few weeks back with a new higher low. All in all, things are still looking good from a price perspective. A rise above 180 would be the final confirmation and most likely the trigger for a new acceleration higher.

Relative strength moved sideways after its initial break above the late 2021 high. As a result, both RRG-Lines dropped back with RS-Momentum sinking below 100, pushing the tail into the weakening quadrant. A continued improvement of relative strength on the daily time frame will be needed to fuel this improvement on the weekly RRG and really push things forward upward.

Consumer Discretionary

On the price chart of XLY, a rising channel is starting to become more and more visible. The rising support line emerging out of the late 2022 low just got more reliable with a new touch point a few weeks ago. There is some medium resistance to be expected around the level of the most recent high, just shy of 178. Once that can be taken out more important resistance will come in sight around 187.50. All in all the outlook for price is pretty good.

The relative strength chart shows a nice re-test of old resistance as support when the most recent low was put into place at the level of the February relative high. On this weekly chart, the RRG lines are losing a bit of ground. But things seem to be turning around rapidly on the daily chart.

Communication Services

Out of the three mentioned sectors, XLC has already started its rotation back up toward the leading quadrant.

On the price chart, XLC continues to move nicely inside the boundaries of the rising channel that emerged out of the October 2022 low. The recent new higher low once again confirmed the validity of this channel.

Overhead resistance is now coming in around 70 where a horizontal level is lining up over the highs of March 2022 and July 2023 and two minor lows back in 2021. When the market can take out that barrier, another acceleration within the rising trend may be expected. The next target area is found near 72.50.

The rise in relative strength has slowed down slightly but the trend is still up. This slowdown caused the RRG-Lines to dip slightly but with RS-Momentum already back on the rise, things are shaping up for a renewed relative rally in XLC in the coming weeks.

With three important sectors, XLK, XLY, and XLC, ready to turn back up inside the weakening quadrant things seem to be shaping up positively for the market as a whole.

#StayAkert, –Julius

In this edition of StockCharts TV‘s The Final Bar, Dave recaps a big up day for TSLA and bearish engulfing pattern for energy stocks. He answers viewer questions on growth stocks during rising rate environment and shares two scans to identify potential opportunities during corrective periods.

This video originally premiered on September 11, 2023. Watch on our dedicated Final Bar page on StockCharts TV, or click this link to watch on YouTube.

New episodes of The Final Bar premiere every weekday afternoon LIVE at 4pm ET. You can view all previously recorded episodes at this link.

Every week, I am invited on Business First AM with Angela Miles to discuss the market and give a stock pick. This week, I covered TEVA, a stock I have talked about a few times and one, full disclosure, we are positioned in.

First, about the company:

Teva Pharmaceuticals is an international pharmaceutical company headquartered in Israel. Founded in 1901, Teva is one of the world’s largest generic drug manufacturers. The company specializes in the development, production, and marketing of a wide range of generic and specialty pharmaceutical products.

Teva’s generic drugs are typically less expensive alternatives to brand-name medications, which can help make healthcare more affordable for patients and healthcare systems. In addition to generics, Teva also develops and manufactures specialty pharmaceuticals, including drugs for conditions such as multiple sclerosis, respiratory diseases, and central nervous system disorders.

Challenges legally resolved:

The company has faced its share of challenges and controversies, including legal disputes related to generic drug pricing and allegations of anticompetitive behavior. However, one big development occurred when TEVA reached a deferred prosecution agreement (DPA) with the U.S. Department of Justice (DOJ) to settle the criminal price-fixing charges brought against Teva in 2020. Teva will pay a fine of $225 million over five years, with $22.5 million due each year from 2024 through 2027, and $135 million due in 2028.

The bad news is that this will impact on their bottom line. The good news is that the case is settled and done with.

The chart is fascinating. The resistance at 10.00 is clear on the daily chart. TEVA is one of the few instruments that has handily cleared its July 6-month calendar range high (green horizontal line). The 50-day moving average is about to cross or golden cross the 200-DMA and enter a bullish phase.

Since the earnings gap early August, price has consolidated. Our Leadership indicator shows TEVA beginning to outperform the SPY. Our Real Motion indicator, already in a bullish phase, is not quite at the early August high in momentum, so that is why we are waiting for a clearance of the price resistance at 10.00.

This is for educational purposes only. Trading comes with risk.

For more detailed trading information about our blended models, tools and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.

If you find it difficult to execute the MarketGauge strategies or would like to explore how we can do it for you, please email Ben Scheibe at Benny@MGAMLLC.com.

“I grew my money tree and so can you!” – Mish Schneider

Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth and a special bonus here.

Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish in the Media

Mish chats about sugar, geopolitics, social unrest and inflation in this video from CNBC Asia.

Mish talks inflation that could lead to recession on Singapore Breakfast Radio.

“It seems like everybody is cutting back their [oil] production to keep prices higher,” Mish says in this video from CMC Markets. She kicks off her commodities roundup with a look at US oil benchmark West Texas Intermediate (WTI) before moving on to natural gas and gold.

Mish talks her “Worst, Best, and Next” trades in this video from Business First AM.

Coming Up:

September 12: BNN Bloomberg & Charting Forward, StockCharts TV & Making Money with Charles Payne, Fox Business

September 13: Investing with IBD podcast & Futures Edge podcast with Bob Iaccino

October 29-31: The Money Show

ETF Summary

• S&P 500 (SPY): 440 support, 458 resistance.
• Russell 2000 (IWM) 185 pivotal.
• Dow (DIA): 347 pivotal.
• Nasdaq (QQQ): 363 support, and over 375 looks better.
• Regional Banks (KRE): Another modern family member struggling here under 44.
• Semiconductors (SMH): 150-161 range to watch.
• Transportation (IYT): Needs to get back over 247 to look healthier.
• Biotechnology (IBB): Compression between 124-130.
• Retail (XRT): 62.90 the July calendar range low broke down-along with IYT-2 negative signs.

Mish Schneider

MarketGauge.com

Director of Trading Research and Education

On this week’s edition of Moxie Indicator Minutes, TG presents a perfect example of what it is like being in the Moxie trading room, and the benefits the subscribers get from my trading methodology. TG was able to point out that AAPL was most likely going to pullback, and then it did, hard. It turns out it was based on news, but the charts spoke first, and Moxie subscribers were warned before the bell. Come check it out.

This video was originally broadcast on September 11, 2023. Click this link to watch on YouTube.

New episodes of Moxie Indicator Minutes premiere weekly on Fridays. Archived episodes of the show are available at this link.

In uncertain times, selective investors will outperform the indexes. We’re entering such a market where external events and seasonal forces combine to increase uncertainty.

Of course, much of the market’s insecurity can be placed at the Fed’s feet, considering the events which will take place on September 19 and 20 at the next FOMC meeting. Prior to the meeting, we will get the opportunity to respond to data points which presumably will affect the Fed’s decision.

Still, geopolitical events often extend into the corporate realm – think Apple (AAPL) and the oil market.

From a trading standpoint, it’s best to focus on each individual stock in portfolios separately while monitoring the effect of the market’s action into its price action, especially areas of the market where supply constraints and stable to rising demand favor producers.

Supply and Demand Ties Bonds, Mortgage Rates and Homebuilders

The big fear in bond land is that the Federal Reserve will continue to raise interest rates. The problem is that this fear changes with any news development. So if a number, say CPI, comes out that is seen as bullish, we see a drop in yields. On the other hand, if the PPI, which is usually received on the next day, is seen as bearish, yields climb — often to a greater degree than the drop the day before, when the news was “bullish.”

The result is bond yield volatility, which leads to bond trader indecision and then bleeds into stocks.

Nowhere is this relationship clearer than in the composite price chart, which relates the U.S. Ten Year Note (TNX) to the 30-year mortgage rate (Mortgage) and the S&P Homebuilders Sector Index (SPHB).

The recent rise in TNX led to a rise in mortgage rates, which led to selling in homebuilder stocks. On the other hand, as we’ve recently seen, even a short-term pullback in TNX has a beneficial effect on mortgages which then translates into better performance for homebuilders.

The reason for this nearly instantaneous response between these three metrics is quite simple: tight home supplies favor homebuilders. Thus, any improvement in bond yields works through the system rapidly and the market expects a burst in home buyers.

Stay smart on real estate and housing here.

China’s Apple Move Sparks Tech Contagion. Buy the Apple Dip?

The news that China is restricting the use of iPhones by its government workers hit Apple’s (AAPL) shares hard last week and spread throughout the technology sector. Technology stocks were already wobbly after news that China’s Huawei developed a new-generation phone based on a chip which the market had considered to be beyond China’s technological reach, due to U.S. sanctions on technology-sharing with Beijing.

The selling in Apple may be justified, given the potential for the company to lose a significant portion of its business due to the ban. But details are sketchy, and the stock fell but did not break long-term support. 

Apple was already in a bit of a funk due to the general status of the tech market and, as I described above, fears that the Federal Reserve will raise interest rates again, further eroding consumer confidence. Given Apple’s global reach and its ability to manage through tough times, it’s more likely than the Fed is a more prescient issue than China’s ban on iPhones.

So is Apple a buy at these levels? Much depends on what happens in the next few days to weeks. If support holds and the stock can form a credible base, it may be worth considering once it rises above its 50-day moving average. On the other hand, there isn’t a whole lot of credible support until the $155-$160 area, so the intermediate term may be rocky for the stock.

The selling in Apple spilled into the technology sector. As usual, the Invesco QQQ Trust (QQQ) is a handy tool for monitoring tech stocks. And last week was no exception, as QQQ tumbled below its 50-day moving average. If there is a silver lining, it’s that it held above $370 and the important support level provided by the tree bar Volume-by-Price (VBP) cluster on the left of the chart. If QQQ breaks below that cluster, it would signal that the sellers are winning the battle and that a move to the 200-day moving average is likely to materialize.

I have an expanded review of what’s happening with AAPL, MSFT, NVDA, and TSLA here.

Oil Heats Up Some More as Wind Craters

Another sector where supply favors producers is crude oil, which continues to attract money while the wind power stocks are in freefall. Regular readers should not be surprised about the goings-on in the oil market, given my “Never Short a Dull Market” article way back in May, which predicted the current scenario as global oil supplies tighten.

Once again, this week’s U.S. EIA data confirmed the supply squeeze as oil supplies were drawn down by another 6 million barrels. The four-week total is now somewhere near a 40 million barrel deficit. As a result, WTIC moved higher and now faces a test at the $90 level.

The bullish action in oil is being aided by the collapse of the wind energy sector, where costs are skyrocketing and companies are stopping work on key projects unless governments increase subsidies.

The stock of sector bellwether Vestas Wind Systems (VWDRY) paints a woeful picture as key price support levels continue to give way to selling pressure. Moreover, the decline is occurring amidst an almost complete lack of short sellers (ADI is flattening) while On Balance Volume (OBV) is rolling over as hopeful dip buyers are heading for the exits.

The latest group of stocks to break out in the oil sector is the refiners. Sector bellwether Valero Energy (VLO) just moved above a key resistance level as money is starting to flow in (rising OBV) while short sellers scamper (rising ADI).

Things are happening fast. Oil, tech, housing, and bonds are all making their move. What’s your plan of action in this market? Join the smart money at Joe Duarte in the Money Options.com. You can have a look at my latest recommendations FREE with a two week trial subscription.

You can also review the supply demand balance in the oil market and what the future may hold here. And if you’re a Tesla fan, I’m reviewing some interesting developments in the stock, which you can review Free of charge here.

Breadth Recovery Stalls Again

The NYSE Advance Decline line (NYAD) is increasingly volatile. Two weeks ago, it was moving higher, but most recently it has been showing signs of weakness. All of which is making trading difficult while creating uncertainty and adding to the overall volatility of the market.

The Nasdaq 100 Index (NDX) is still deciding what to do. So far, it’s holding up above 15000, where there is a cluster of Volume-by-Price bars (VBP). Accumulation/Distribution (ADI) and On Balance Volume (OBV) are trying to stabilize.

The S&P 500 (SPX) is struggling between 4350 and 4600. There is a cluster of VBP bars, plus 20- and 50-day moving averages in the area, which means this will be an active trading range.  

VIX Remains Below 20

VIX remains subdued below the 20 area. This is still good news, but it has not had much of an effect on the market. A move above 20 would be very negative.

When the VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying, and it eventually leads to call buying, which causes market makers to hedge by buying stock index futures. This raises the odds of higher stock prices.

Liquidity Remains Stable

Liquidity is stable. The Secured Overnight Financing Rate (SOFR), which recently replaced the Eurodollar Index (XED) and is an approximate sign of the market’s liquidity, just broke to a new high in response to the Fed’s move. A move below 5.0 would be more bullish. A move above 5.5% would signal that monetary conditions are tightening beyond the Fed’s intentions. That would be very bearish.

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Joe Duarte

In The Money Options

Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

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