FOMC, Earnings & Delta: Weekly Nifty 9

Every week, Finom Group (for who I am employed) constructs a weekly Research Report for investors. The following materials are excerpts from our weekly Research Report. Our goal is to deliver and touch upon all disciplines of investing/trading paradigms such as technicals, fundamentals, and quantitative studies. Enjoy!

Research Report Excerpt #1

Year-end gets nearer with each passing week. Month-end is always a good time to review one’s goals for the year and possibly look at where you proved successful in the first half of the year and where opportunities have popped up for potential course correction. When you’ve mastered the exercise of monthly, quarterly and bi-annual review, I’d also suggest incorporating some of Bob Farrell’s market-wise Market Rules, as shown below:

Research Report Excerpt #2

Year 2 of new bull markets, human behavior tends to elicit greater price volatility and a bigger drawdown for the S&P 5000.

By the numbers: The S&P 500 bottomed on March 23, 2020, which means we’re 4 months into year 2 of the bull market.

  • Since 1945, the average bull market saw a max drawdown, or its largest peak-to-trough sell-off, of ~10% during year 2, according to BMO Capital Markets.
  • These drawdowns ranged from down 5.1% to 16%.
  • Since March 23, 2021, the S&P has seen a max drawdown of just 4.2%.

Research Report Excerpt #3

To finish the trading week, S&P 500 breadth did improve greatly from the previous week. A key barometer of the interim breadth trend or health of the interim trend comes from understanding the % of stocks trading above their 50-DMA, which rose back above 50% this past week.

Unfortunately, the % of stocks trading above their 50-DMA is not meaningfully above 50%, which does denote underlying price sensitivity and vulnerability going forward. Essentially, investors should remain on their “toes”, vigilant but not fearful. The Nasdaq % of stocks above their 50-DMA remains under 50%, and at 35%, even more vulnerable to sudden selling pressure.

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