Timing is Everything
Midweek Market Update June 7, 2023
The Markets
As a follow-up to last week’s article titled Something For Everyone, today let’s take a look at a market that has Something For Every Timeframe.
The Bull Case
Back in early April, this list showed a few things that would be indicative of bullish action which could lead to continued strength.
We have the first three checkmarks, which probably carry twice as much weight as the last two. The market is gathering strength and moving higher.
For the last several weeks the need for rotation has been a focus. And for the last several days we’ve been getting exactly that.
The Nasdaq and Tech leaders have seen some profit-taking and are resolving the extension while SP 500 stocks are resting and holding mostly flat. Meanwhile, the small-cap stocks have been going crazy.
This is precisely the type of action we want to see if we’re looking for more strength. Breadth has been improving by other measures as well.
More stocks from more sectors have been breaking out and moving higher.
The equal weight indexes (RSP and QQEW) are healthier and have been breaking out.
The percentage of SPX 500 stocks above the 50 and 200-day moving averages is holding up
Small caps are incredibly strong with IWM moving in nearly a 9% range from low to high over the last seven days
And it’s showing a fantastic improvement in relative strength when compared to SPY and QQQ
The Bear Case
The first thing to point out is that none of the following points are incredibly bearish. They are more like issues that need to be resolved. Some of which are already happening.
As pointed out above, the extension in Nasdaq and leading Tech stocks are getting some resolution now as QQQ trades back to its 8-day moving average.
To look further ahead, consider this seasonality analysis from Jeff Hirsch and the Stock Trader’s Almanac which points to a correction over the next several weeks or months.
The blue line represents all Pre-Election years. The Purple line is 2023. Things are potentially ahead of schedule compared to the average outcome. But each case shows a resumption of the uptrend later in the year. An outcome that is also supported by information shared in this post.
Pair this with Larry William’s Cycle Analysis and we have a clear idea of the possibilities for a pullback in the coming days and weeks. Larry is a wiz with cycle work. And this video, published yesterday (very timely), explains his ideas and analysis very clearly. Well worth the twenty-eight minutes.
Lastly, we have FOMC next week. Will they raise rates again? Or can they pause? It’s a tough call this time as there’s a compelling case to be made for both sides.
On the ‘raise’ side we have an incredibly strong market, coupled with very strong employment.
On the ‘pause’ side we have a commercial real estate market that is reportedly in shambles. The story this week is that a major firm voluntarily defaulted on their debts, surrendering their San Francisco properties back to the lender. Apparently, this is not an isolated incident either.
The Charts
SPY - High and tight consolidation. Still very bullish action.
QQQ - Getting the rest we’ve been expecting and is nearing the 8-day. Still bullish action.
IWM - Incredibly strong move. Nearly a +9% range over the last 7 days. Back over the March ‘20 anchored VWAP. And barely budged from highs today while the rest of the market sold off sharply.
DIA - Significant improvement here as it consolidates above all the key MAs.
The Closing Bell
The markets are strong. But there is reason to be cautious in the short term.
Watch the charts. Manage risk. We’ll see what’s next.
The Disclosures
***This is NOT financial advice. NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.
Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”) a SEC registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.
Statements in this article represent the opinions of that person only and do not necessarily reflect the opinions of T3TG or any other person associated with T3TG.
It is possible that Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual or it may reflect some other consideration. Readers of this article should take this into account when evaluating the information provided or the opinions being expressed.
All investments are subject to the risk of loss, which you should consider in making any investment decisions. Readers of this article should consult with their financial advisors, attorneys, accountants, or other qualified investors prior to making any investment decision.
POSITION DISCLOSURE
June 2, 2023, 4:00 PM
Long: UVIX, TSLA0609P220
Short:
Options symbols are denoted as follows:
Ticker, Date, Call/Put, Strike Price
Example: VXX1218C30 = VXX 12/18 Call with a $30 strike