Never Forget

September 12, 2021

Weekly Market Outlook

By Keith Schneider


blankThe market sold off this week as a result of the convergence of weak seasonals, poor momentum, eroding market internals, a very confusing message from the economic data, and a lack of clarity about what the Fed will do next.

Plus, don’t forget the fact that Apple (the highest weighted component of key US Equity Indexes) lost an important legal issue regarding its app store, killing its stock which was down -5% on Friday.

We have gone through an 11-month period without a 5% correction in the S&P 500.

It is about this time that you hear the repeated chants of “The Trend is Your Friend”, “Don’t Fight the Fed” and so many others. They help maintain the optimism that this great bull market will continue long into the future.

As we have pointed out recently, it is our belief that it is during these times that we need to exercise continued vigilance.

Since the beginning of our company 24 years ago, we have utilized our floor trading experience to develop our RMP (Risk Managed Process), which uses our proprietary indicators and algorithms to recognize market trends and manage risk in ways that most traders don’t.

These risk management techniques are integral to our long-term investment strategies’ success. If you are a follower of Mish’s Premium service, you will also note that her team never puts on a trade without stops and targets to manage risk as well.

This week alone, while the markets were in a downward, negative moves we were taking $ off the table, including hitting targets in several of our investment models.

However, we want you to remember that utilizing our investment models means following the signals based on the data, allowing the removal of personal bias, political beliefs, and emotions from your investments.

We are excited about company developments that will allow you to auto-trade strategies and unique portfolio blends sometime during the 4th quarter of this year. We will keep you posted on these major developments!

Our last note for this weekend, the 20th Anniversary of the 9-11 terror attacks is that we should honor and remember the many lives lost from this historical, abhorrent attack on the United States.

On a personal note, it was just a twist of fate that I’m here writing this as I changed my plans to pick up my dear friend Ari Jacobs and head to the Waters Convention (for wall street tech companies) being kicked off at the top of the WTC on 9/11. He went and never made it out. I miss you Ari and your sense of humor.

Our hearts are heavy, and we should use this weekend to reflect on the people we lost and the liberties that we enjoy as Americans to this day.

 

This week’s market highlights:

  • Risk Gauges remain Bullish despite a selloff in the major indices, but gauges could flip negative with very short notice
  • Real Motion shows momentum across all 4 indices are now all in Bear phases including the QQQ’s, while weekly momentum remains in Bull phases for the time being
  • Watch for support at the 50-DMA in QQQ, SPY and IWM, while DIA has already dipped below its 50-DMA to a new 60-day low
  • While the other major indices have positive TSI scores (Trend Strength Indicator), IWM is on the brink of a negative TSI for the first time since the beginning of the pandemic
  • Both the DIA and SPY have had 5 distribution days over the last two weeks, a clear indication of institutional selling and the market being in a defensive/risk-off mode
  • McLellan Oscillator has now flipped negative for SPY, another clear risk-off indication
  • The New Highs/Lows ratio for SPY has begun to rollover as it loses steam
  • Despite the selloff which hit both Growth (VUG) and Value (VTV) stocks, on a relative basis VUG is still outperforming both the SPY and VTV. Additionally, value closed under an important short-term swing point and its 50-DMA
  • Most of the Modern Family remains under pressure in terms of momentum and price; however, Semiconductors (SMH) and Biotech (IBB) both speculative sectors, are leading the 6 members based on strong market phases and trend strength scores (TSI)
  • Natural Gas (UNG) continues to defy gravity and is moving into extremely strong seasonals
  • Soft Commodities (DBA) failed to hold its 50-DMA but is subject now to some mean reversion after getting oversold
  • Gold (GLD) is under the 50-DMA with Real Motion hanging on, but could benefit from macropolitical shifts and changes in US Fed policy to tapering
  • Both Emerging Markets (EEM) and Developed Markets (EFA) continued to outperform US Equities
  • Long Bonds (TLT) remain stuck in a channel, waiting for more clarity from the Fed

This week's cryptocurrency highlights:

  • Bitcoin (BTC) hit resistance at $53,000 before falling to a daily low of $42,380 during Tuesday’s flash crash. Look for support at $44,750 this week, with expectations for increased retail buying upon a new golden cross.
    A golden cross is a technical pattern that describes the situation where the 50-day moving average crosses from below to above the 200-day moving average (DMA).
  • Ethereum (ETH) also took a hit on Tuesday, but it held support at both the 50-DMA and the $3,000 level
  • Solana (SOL) remained fairly unaffected by the crypto market drawdown this week. It never even breaking below its 10-DMA; consider buying below $200 for a longer-term play
  • Algorand (ALGO) saw a 7-day price increase of 67% after announcing a $300 million fund dedicated to encouraging app developers to innovate on their decentralized finance platform

Have a good investing week.


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