A few observations from this week’s price action:
1) I think we are near a tradeable low in the markets. I’m not saying it’s the low for the year, but I wouldn’t be surprised to see a countertrend rally over the next few weeks. I mentioned during yesterday’s MidWeek Video that I would start to nibble on the SPY (the S&P 500 ETF) when it got close to a 20% correction for the year. That level is approximately 3850 on the S&P 500 (depending on if you use the actual high or the closing high). When it got close to that area today, I took a 25% position in the SPY at 385.30 and I tweeted it out. I wouldn’t be surprised to see a countertrend move back near the 50-day moving average before meeting resistance (around 425-433).
2) Please keep in mind a few things: A) I’ve had a heavy cash position over the past few weeks, so I don’t consider having a 25% position in an oversold index ETF as being too aggressive (as always, do what works for you). B) There are almost no stocks setting up on my screens, so I like to use ETFs until stocks set up again. C) I think today’s low of 385.15 will hold over the near-term, but I am willing to add near 380 if we go lower.
3) Sentiment is getting very washed out. The CBOE Equity Only Put/Call ratio has not reached extremes, but it’s been consistently high. CNN Fear/Greed is at 6. NAAIM is at 24, the lowest reading since the pandemic lows. In addition, it seems like everyone’s miserable and calling for a 2008-2009 crash. The economy is strong and the banking system is solid, so we are nowhere near that scenario.
4) Stocks that are near buyable ranges include: DVN, OXY, MPC, and LLY. I might do a stock spotlight on CELH soon. I like how it held $40 on strong volume this week. It still needs to prove itself technically, but it’s an explosive growth story with strong potential as they continue to expand their distribution.
I will discuss all this further in Saturday’s Weekend Video.
Thank you,
Joe