• T. Livingston

Nasdaq Follows Through

Here in New York, the weather is starting to get warmer. People are out and about on this Memorial Day weekend as the temperatures start to rise. But what about the market? Are things heating up or are we headed for much lower prices? Let's take a look at the current market conditions.


Sentiment

Sentiment got extremely bearish this Spring. AAII Bulls reached some immensely low readings, which is a good sign from a contrarian point of view. In addition, the 20-day EMA for the Put/Call ratio has reached some elevated levels. These are both good signs. The VIX, however, has not spiked to the extreme levels that I would like to see. We still have not had the type of panic we did in early 2020 or in prior bear markets.







Indexes

The Nasdaq Composite staged a William O'Neil style "Follow-Through Day" this week. Accumulation on the indexes are always a good sign, especially if we don't see distribution come into the market in the subsequent sessions. The S&P 500 is also rallying off its' recent lows. IWM and IWO also saw some nice moves this week with IWO seeing some nice accumulation come in.




Individual Stocks

I've been starting to see some stock setups this week, mostly in oil names, but also in defensive names like NOC and LMT, as well as in shipping names like ZIM. LNTH also broke out this week and so far is acting well. I have not, however, seen an extremely broad round of stock participation like we saw in 2020 as the market soared higher. So where does this all leave us?

I personally have taken some "probing" buys as Jesse Livermore would call them. I own LNTH, ZIM, and am watching NOC and LMT for potential buy points. However, at this point, I am only 25% invested, and I am in no rush to get aggressive. This was a mistake I made when I first started trading. The market would be oversold and I'd plow in thinking I had caught the bottom. This type of mindset leads to "booms and busts" that can potentially destroy a trader both financially and psychologically. Instead, it is better to take things slowly and to only add positions as things start to heat up. It is also important to note that the summer months are notorious for trading. It is very possible that we may chop around until the 2022 mid-term elections as the market digests inflation, interest rates, and the war in Ukraine. If we have indeed bottomed, I do not believe we will see a v-shaped rally like we did in 2020 because that rally was based on enormous FED stimulus. I'd actually like to see some difficult trading in the summer. This would spike the VIX and ultimately lead to a major market bottom. Either way, my main concern is to listen to the market rather than trying to impose my forecasts or anticipations onto it. I am content to take things slowly and one step at a time until the market tells me it's time to step on the gas.


Risk right. Sit tight.


To learn more about swing trading strategies, stock market trading, and how to trade cryptocurrencies, visit my course page.


YouTube Channel


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 post 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 blog or the associated Twitter and Instagram feeds. The stock or stocks presented are not to be considered a recommendation to buy any stock or stocks. 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