Special Bulletin: October 28, 2021

Autumn 2021: Stocks Rise as Leaves Fall

Stocks started autumn out on a weak note in September, acting like leaves, by falling below their key moving averages and triggering a brief correction. While the leaves continued to lose their grip and fall throughout October, stocks actually reversed and regained their grip rising to all-time highs.

Two weeks ago in this blog we stated how the market’s character had improved and that it was at a major technical moment. “The S&P500 & Nasdaq are attempting to move back over their 50-day moving averages this week, which has caused our signal to change back to yellow. The stock market is at a major technical moment as it will either play out to be a “Subpeak/Nathan Short” failure or power ahead to new highs in the very near future.”

Indeed, new highs came and did so in less than 2 weeks.

On Monday of this week, Oct. 25th, our Current Market Outlook was upgraded to “Market in an Uptrend” with a green light. As of Monday, our “Core Four” stood with 2 green and 2 yellow lights (see top of page) with the VIX (tiebreaker) casting the deciding vote and pushing our light to green.

Since the tone of the stock market improved after the October 14th follow-through day, we have gradually increased our equity exposure in our growth strategies. Having said that, the current risk/reward ratio for investing in growth stocks and the general stock market indexes still sports higher than normal risk. We are prepared to quickly move back to a defensive position if warranted.

Be on your guard tomorrow. The market will likely react sharply to the earnings releases from Apple and Amazon, among others, as we forge through the “peak week” of earnings season. Maybe the leaves won’t be the only things falling.

Keep your eyes on the horizon: along with the release of other key economic data next week, the Federal Reserve will announce its decision on tapering. In the immediate future, this will add to investor uncertainty.

What to do now? By now your watch list should have been built and have been acted upon in the recent rally. In the days ahead, be quick to cut losers or lock in smart gains if the key indexes break down below their 50-day mav’s on heavy volume. Continue monitoring the US 10-year note rate as a “taper tantrum” tell in response to the Fed’s decision.

Have a Triumphant day! ®