In this past Weekend’s Video, I discussed how I was expecting a normal visit to the 50-day moving average over the next few weeks. Well, because the market is on steroids and things seem to move much faster these days, we saw the Nasdaq Composite drop to its 50-day today, the Nasdaq 100 bounce of its 10-week, and the S&P 500 also bounce off its 10-week. When this happened, I decided to put some of my cash to work.
A common question I get is: “How do you decide what to buy?” It’s a combination of many factors: 1) Stocks that are showing great relative strength. For example, UCTT and VECO were green on the day with the Nasdaq Composite down over 900 points during today’s session. 2) Stocks that are near support. For example, MU found support near its 21-day and SPHR found support near its 50-day. 3) Another factor is unusual options activity, as MRVL has seen tons of put writing recently. In other words, all of this is not easy and it’s not an exact science. It involves interpreting what is happening in real-time, being flexible, being nimble, and being able to make decisions.
Another phrase I used several times recently is that “defensive doesn’t mean bearish.” Especially because the amount of bearishness that occurred after Friday’s decline was shocking. For example, it was the highest volume of Index put buying in the HISTORY OF THE MARKET last Friday. This is why I can’t get overly bearish when sentiment turns so negative so quickly. There were other bullish statistics which I found over the past few days, and I will share them in tomorrow’s MidWeek Video.
Overall, I am still expecting June to be a volatile month, but I wanted to give you a quick update because the market found support today at key levels. Thank you.