Uncategorized, Weekly Update

Despite the Selling, the Market’s Uptrend Remains Intact … for Now

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Published November 23, 2018


A recent post from Ben Carlson seeks to put the furious selling of October/November (to date) in a broader context, noting that many of the stocks and sectors that are being unmercifully hammered by the bears were the ones who had enjoyed exceptional gains over the past couple of years. The net effect of the selling, therefore, is merely a rather dramatic digestion of gains rather than selling reminiscent of a change in market trend. Of course what the market trend is depends on your trading time-frame. On a day-by-day basis, the selling of the past six weeks has felt relentless. Looked at on a monthly basis, however, we see below that our focus Nasdaq 100 (QQQ) remains in a clear uptrend and has just returned to its trendline after wandering quite a ways above it. Over the past decade, this trendline has been a source of monthly support (as identified by the arrows). We are back to that line, once again seeking support (green arrow). We also note in the circled area that no trendline is perfect. The 2003-2007 rally would dip below the trendline only to recover in the following month or two.

QQQ on EMA 20 trendline

While the trendline will be broken at some point and a bear market will begin, as of now, the market’s uptrend continues. While the selling has been damaging to many leading stocks in the Nasdaq 100 (QQQ) index, these stocks are just giving back month’s (rather than year’s) worth of gains. They remain in the multi-year up-trends that have provided fuel for this bullish cycle. See below the same chart as above but focused on the past decade for Amazon and Apple – the uptrend remains … so far.

Amazon on EMA 20 trendline

Apple on EMA 20 trendline

Finally, here is a zoomed-in version of the Nasdaq 100 (QQQ) chart. The trend holds, for now:

QQQ on EMA 20 trendline

We would also note that, at least for now, midcap, equal-weight U.S., emerging market, and broad international indexes are holding gains, or at least breaking even for the month of November.

For those interested in more detail on the selling in markets, sectors, and leading individual stocks from Ben Carlson’s blog, go here: Surveying the Damage in Stocks

Market Update

Stock investors found themselves in the midst of another wave of selling this week. It’s now been almost eight weeks since the stock market registered its last new high reading. In that time, the S&P 500 has fallen -10% as fears of a global economic slowdown have become the prevailing narrative. The support that held some promise at the end of last week gave way quickly this week. Monday found stocks down -1.7% with the Nasdaq falling more than -3%. Apple (AAPL) and its suppliers have become the focus of recent selling activity as concerns over sliding production of iPhones has pummeled the group and given specifics to the global economic slowdown fears. Another -1.8% drop in stocks Tuesday with Apple giving up another -5% and oil prices, the other specific example of the global slowdown, falling -7%. A bit of a reprieve from the selling in light pre-holiday trading Wednesday. Stocks managed to hold on to only modest gains though with the S&P 500 up +0.3%. Oil prices tumbled further Friday to lead an abbreviated post-holiday session to more losses. Stocks slid -0.7% though the small-cap Russell 2000 index managed a breakeven day.

Another losing week for stocks as a -10% decline in oil prices (their 7th consecutive losing week) and a -10% loss in Apple shares pushed the market lower. The S&P 500 (SPY) fell -3.83% while the Nasdaq 100 (QQQ) lost -4.95%. The small-cap index (IWM) was down -2.67%. All stock indexes are revisiting their recent low points. Despite the selling in stocks, bonds made little change.

Warm wishes and until next week.