We are getting into a market where you need to be careful.
There are a lot of calls to buy the dip and a lot of recklessness on social media. If you have not been through a bear market before, the learning curve is steep.
That makes it more important than ever to do the work. Get a good understanding of where money is flowing, how to play defense, and where to look for spots on offense.
But the number one job is to stay alive.
Table of Contents
Market Overview - Correction confirmed, 200-day test, follow-through day hunt.
Sectors - Where money is hiding and where it is leaving.
Ready List - Six names to watch this week.
Watch List - Longer universe of names on the radar.
Avoid List - Three names that need time and space.
Sentiment & Positioning - COT analysis and Fear & Greed.
Closing Thoughts.
Trend & Exposure (QQQ)
Short-term trend: Downtrend
Intermediate-term trend: Downtrend
Long-term trend: Uptrend/Neutral (The Qs are sitting right on the 200-day. That can shift either way from here.)
Ghost Alpha exposure: 0 to 5%. Full disclosure: I am short the QQQ.
How we trade these names. This is not financial advice. Be sure to do your own research. Managing risk should always be your priority, and that means never blindly buying into names you see on a newsletter. Build your system and follow your rules.
Market Overview
The Qs are in a correction. There is no question about that.
The only question is whether this turns into a longer-term bear market, with the long-term trend turning down, or a normal intermediate correction that finds support. We do not guess. We watch.
I went short because the Qs were running up against the 50-day and struggling to cross that resistance. Combined with the action from the leaders, it made sense. So far that has been the right call. We will see what happens.
Leadership is breaking down. Fortinet, Google, and ServiceNow had big gap downs. That, combined with the index action, is what gave me the confidence to go short with a half-sized position.
Now we are testing the 200-day, and it is make or break for the market. There has been a lot of pressure and negative reaction to earnings.
We will see how the market reacts to this sell-off.
We will get bounces. The biggest up days in stock market history are in bear markets.
You cannot flip your hat around and say you are going to be short everything and make money. It is far more difficult than that.
This is where trend following dominates, in uptrends and downtrends alike, because the moving averages guide us. The declining 10-day, 21-day, and 50-day are our guide as the market moves lower. They are also our guide when it attempts rallies and how it closes around them. The 21-day and 50-day matter most to start.
FOMO is your worst enemy in these markets.
Stay patient and wait for the market to confirm. You can lose a lot of money and confidence trying and failing, trying and failing, trying and failing.
