If you read our calls from last week to subscribers you saw we were expecting a greater likelihood for a down stock market. We also spelled out why we thought the market was moving so slowly. The market did end up down last week.
The following is some of what we called out to subscribers Sunday night.
Putin and Zelenskyy Closer To Agreement, Will The Market Care?
Markets look up right now pre-market, but not up huge. It should be noted that despite Russian President Vladimir Putin on Friday saying that they may be closer to Ukraine in negotiations, the market still traded lower thereafter.
That's a sign of good news + bad action = bearish.
When good news can't get the market up it tells you there may be a bigger force going the other way.
It means that the market isn't only trading on Russia-Ukraine. My guess is there's a big Fed hawk headwind also on markets. If (hopefully) the war is resolved, we'll then need to assess how the market reacts. You would think up big, but let's see. If Friday is a hint it may not be up big on good news. And if not, then the risk is setting up to the downside.
What Would Be NASDAQ QQQ Short Term Washout?
The bad action on Friday on good news tells me that the market can complete this short term downcycle to some sort of washout before we get another buying opportunity. I want to be patient although the potential positive news is a risk to staying too net short in the model portfolio. I'll probably think about properly positioning it a few more hundred times or so before the open.
Let's see how the market opens and more importantly how it closes. My guess though it continues to trade down for the near term until QQQ or SPY is oversold. QQQ I think is leading this market so I'll be watching that more carefully. Another 3-5% down from here I think would be a short term washout.
If you noticed QQQ have been down more and, as I write this, QQQ are up less. I think QQQ have been leading the market so that underperformance could be a hint of more near term downside.
Another hint to a market change is that TLT an ETF representing fixed income has been down in both up and down stock market tapes. That trend has changed because the Fed Chair Jay Powell and the Fed are no longer buying hand over fist. High rates leave the market more vulnerable as well.
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