Looking For A Bounce Now

It’s been a relatively volatile week in the markets, but nothing compared to Q1 and April. Here is what we know as the week comes to a close. The NASDAQ 100, which led the way down, forged its lowest price on September 21. The other four major stock market indices saw their lows on September 24.

That’s the first clue that something may be changing, at least in the very short-term, which is how trends begin. I don’t want to read too much into it just yet, although I altered some positions to include the NASDAQ 100 as a long, with the S&P 500 and/or Russell 2000 as hedges.

Below is the NASDAQ 100, so you can see the 14% correction, which is very much historically routine. I think the index could bounce a few hundred points and not upset the downtrend.

On the sector front, the technology sub sectors look similar to the NASDAQ 100. So do discretionary, biotech, transports, and homebuilders. Those are the areas which I will watch during the anticipated bounce. I wish high yield bonds hung in better, but that didn’t happen.

As I wrote about this week, stocks are supposed to bounce. In a still bullish world, the decline is over and new highs will be seen shortly. That is not my preferred scenario, but I am not arrogant enough to stay wrong for long and think I know better than the market. If I had my way, stocks would bounce for a few days or so, maybe longer, and then head down to new lows in mid to late October, but bottom well before the election.

Please see HC's full disclosure here.

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