The Fed’s interest rate hikes continue to be a serious headwind for growth and today’s CPI number did not help. The current test of the 50-day moving averages appears to be subject to failure at today’s open. That failure (to hold the 50-day moving average on the S&P500 at the open specifically) coupled with a move under the S&P’s 09/09 low of 4,022.94 has caused our Current Market Outlook to be downgraded to “Market in a Correction” with a red light. (SPX @ 4021.56 at 9:35am) Our “Core Four” (see top of page) shows 1 green and 3 red lights with the VIX casting the tie-breaking vote by moving back above its 50-day mav.
On a technical basis, this morning’s “gap down” dive by both the Nasdaq and the S&P500 below their respective 50-day AND 21-day moving averages (mav’s) constitutes a sell signal pattern called a “negative double cross” or NDC. It is important to note that historically when a NDC comes so quickly after a positive double cross (PDC) stock market weakness tends to grow.
Perhaps the market will catch itself by the end of the day and reverse back above the aforementioned mav’s. If so, then stock market conditions would have changed significantly for the better and our signal would have to also. But the odds of that are slim.
A potential bigger picture “higher low” pattern still exists and would only be invalidated by a move under the lows of 09/06. In our opinion, if an investor wanted to hold to a positive view of the stock market, then they must demand that the popular indexes move back above their 50-day mav’s on big volume immediately. Again, the odds of that are slim, but still possible. In the meantime, the most current technical development is negative and we are adjusting portfolios in accordance with that action.
Just 4 days ago we wrote, “but from a possibly negative technical viewpoint there is a chance that a shorter-term upside-down “cup with handle” pattern is developing and that it could lead to an immediate sharp drop. If that is the case, we would likely know it within the next 2 – 5 days, and this bounce to the 50-day mav area would then prove to be just a handle in that negative upside-down cup pattern. In other words, if this rally attempt above the 50-day is a bear trap (a fakeout) then it will likely fail right away. Next weeks economic news could be the catalyst. As always, practice disciplined risk management.”
With that technical statement in mind, our C.M.O. signal has been downgraded to red this morning.
Game plan: Draw a line in the sand on the amount of loss you are willing to withstand in each position you hold. We advise keeping losses small- you can always buy back later if (when) conditions improve. In other words, adhere to your STOPs! Study the 50-day moving averages of the S&P 500 and the Nasdaq to see if they fail to hold by the end of this week. Reminder: September & October are often not friendly to investors.
Note: You can learn more about The Triumphant Core Four risk management system by clicking here.
Have a Triumphant day! ®
The information in this article is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. Not to be used as legal or tax advice. ©2022 Triumphant Portfolio Management, LLC.
Where Are Woodward and Bernstein When We Need Them? This article was written by Newt