Here's Why the Market Is at a Critical Juncture
Let's see where we are in the aftermath of Friday's 'violent' move. My focus is on one area — and it's not where everybody else's is right now. Plus, a look at Meta, gold, RH and more!
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The Market
In my view, Friday showed us how vulnerable the market is to a correction. When you get proper corrections along the way — think rolling hills — the pullbacks are more gentle and not so disruptive. When you don’t get them, they are violent and feel more like you’re driving off a cliff.
I find us at a critical juncture because very few charts broke their uptrend lines, most held their 50-day moving average lines, so it’s hard to say Friday did much damage. Oh sure, there will be those who cry that we gave back a month of performance in a day but see that first paragraph above.
So why is it so critical? Because everyone is focused on the semis and AI. And crypto. But I have my eyes on the banks/financials.
For several weeks I have been focused on the banks and the financials. We began with something so innocuous as the ratings agencies (Moody’s (MCO) , for example) and then it was the asset managers. Then it was the regional banks; keep in mind they did not manage to get over the summer highs in the recent runup.
Now the money center banks are coming into support around $140 just as they report earnings. I think the banks bounce from this support area. The question is if they bounce and form a head-and-shoulders top, by which I mean a rally cannot get back over $146-ish.
For the most part we saw some short-term positives and some more intermediate-term concerning issues. Most of the concerning issues were reviewed on Thursday evening so I won’t go over them again. Many of those issues are not cleared up in one harsh down day.
Was there panic? I suppose a little bit. Like the (QQQ) s traded 90 million shares. The VIX is definitely getting jumpy. But the put/call ratio didn’t even get over 1.0. We did not even get 90% of the volume on the downside.
It was hard to find charts where the 50-day moving average lines were broken —except the banks. And that is why I will focus on them and their action/reaction this week.
Insert qqq here.
New Ideas
My new friend Meta (META) did not take out last week’s low. I would prefer if it stayed that way.
Today’s Indicator
The new lows expanded to the most since April on the NYSE.
Q&A/Reader’s Feedback
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Nintendo (NTDOY) looks like a top to me. I would suspect it bounces off $18-19 though because there is support there. For the time being if NTDOY cannot get back over $21 I would view this as a stock building a top. For now that $18-19 area better hold.
Zeta Global (ZETA) met its measured target from that base when it tagged $21-22. If it gets down to that $16 area in a few weeks then it will have filled the gap and found support so I would take a look at it again there and see how it looks.
PepsiCo (PEP) has had a really good few days (finally!) and is still working on that head-and-shoulders bottom. It is hard for me to believe that the stock can break out and keep running right now, though. This is Pepsi, not some hot tech stock. So near there, that $152-155 area ought to give it a pause/pullback. But longer term if/when it gets through there my target would be back near that old high around $170-ish.
I do not have a spot I would buy SPDR Gold Shares (GLD) . I liked GLD back in August when it had gone sideways for months and a pattern had set up. Now there is no pattern, and there is also sentiment bordering on giddy. For the near term it probably doesn’t break that uptrend line but I need a pattern to set up, and it hasn’t done so. I still think GLD can use a correction.
RH (RH) has some light support at $170-ish but better at $150 (blue line). For the time being I expect the blue line to hold that area. If it doesn’t do so, then obviously that April spike low comes into play. But first let’s see if we get a little bounce from this $170 area and then if $150 can hold.
