Here is a note I sent to Educational Members on Monday, September 20th. Please keep in mind that I will not regularly update this blog with my current market thoughts. I am just trying to give people a feel for the type of detailed analysis I am providing with my educational product. If you are looking for regular real-time market analysis and stock idea generation, please visit the following link to sign up: https://joefahmy.com/investor-education
Many market participants are wondering if this is the beginning of a new leg down or just a shakeout within the overall uptrend? Of course, no one knows, but I am leaning towards a shakeout for the following reasons: 1) The majority of leading stocks sold off Monday on lighter volume and are still above their key moving averages. 2) I can’t see a Chinese company (Evergrande) that almost no one heard of 24 hours ago bringing down the entire stock market.
While I am certainly not complacent, I think this is part of the seasonally weak period that I’ve discussed in my videos for the past 4-6 weeks. The news cycle is miserable. There’s nothing fundamental to talk about because earnings season is over. Instead, the financial media is focused on interest rates, the Debt Ceiling, the Delta variant, and now a Chinese property developer that no one knows anything about. Meanwhile, many growth stocks are acting well. If you are too emotional, turn off the news (because it is there to scare you), and focus on price.
The biggest negative right now is that the Nasdaq Composite and S&P 500 gapped below their 50-day moving averages on Monday. One positive is that they recovered off their lows late in the session, and I would prefer to see how they finish the week before getting too cautious. Considering this new uncertainty, I can’t see the Fed saying anything hawkish in their Wednesday meeting. I’ve been saying that all along and this new development gives me even more confidence that they will not taper their bond buying until 2022.
Right before a stock or a market takes off, we tend to see shakeouts to “shake out” the weak hands. This happened with Brexit in early July 2016, and my instincts are telling me this is a very similar situation. Of course, if conditions get worse, I will adapt to what the market is telling me, but for now, I am sticking to what I have said for the past several weeks: Still expecting volatility over the near-term, but bullish into year-end.
One final note, I got 14 emails today during the day from members asking me what to do? Many questions were specific about individual stocks. Please keep in mind a few things: 1) I can’t give financial advice nor is this product to be considered as financial advice. 2) I am managing money during the day and can’t answer these specific questions. 3) I give many guidelines in my videos and encourage members to make their own decisions based on their overall investment objectives and timeframe. Trust me, this isn’t just some bullshit disclaimer. By encouraging members to make decisions, it will help you build your overall confidence, so you don’t have to ask these questions during volatile times.
For example, when you ask me if you should buy or sell, it is impossible to answer because there are too many variables involved. I don’t know your age? Your risk tolerance? Are you on margin? Are you in cash? Etc.
As I’ve said over and over, I was expecting volatility during this seasonally weak time. If you have a longer-term timeframe, then get strong entry points and deal with some volatility. If you are tactical and raised cash, I’m ok with nibbling on some light positions because I am still bullish into year-end. If you came into today on margin or with short-term options, then you need to do some post analysis as to why you were over-invested, especially when I’ve discussed this seasonally weak period several times. I’m not saying this to be difficult, and don’t beat yourself up, but try to make some adjustments and focus on making improvements. Again, this is just a reminder to be patient and protect your confidence until we get through this seasonally weak time.
Thank You,
Joe Fahmy
If you are interested in more content like this, please visit the link to my Educational Product: https://joefahmy.com/investor-education
I can be reached at: jfahmy@zorcapital.com
Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained in this video constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned in this video. The stocks presented are not to be considered a recommendation to buy any stock. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.