Sunday Night Weekly Recap, AUG 4, 2024

How was your weekend? Did you do anything fun? I went out with my hiking group Saturday morning and we did something different this time. Normally we hit the trails, out in nature to take in the whispers of babbling brooks, the scent of fresh air, and surround ourselves with all of the peace and tranquility that nature has to offer. This time we forwent that and sweltered around an asphalt jungle instead. The blistering sun never left us as it radiated relentlessly from the hardened black tar beneath our feet. If we needed another reminder as to where we were, the beeping horns serenading the blaring car stereos in the not so far distance served that purpose well. Sounds great in comparison doesn’t it? Yeah I didn’t think so either.

That’s how the markets feel right now, we went from “oh this is nice”, to “what the heck man?” I’ve said it a million times that pullbacks aren’t only normal but that they're healthy. This week has everyone wondering was Wednesday the shorts covering? Or was it a “Bull Trap”? If it was a Bull Trap, then history tells us that this downturns not over yet. Let’s take a look at that.

If anyone ever tells you with absoluteness that a stocks price is certain to go to X, run, run far and run fast. I don’t make promises that I can’t personally fulfill. This year with Options we had 2 historic Options expirations that were the only things close to slam dunks I’ve ever seen. NVDA and AMZN. Both were for the JUL 19 Expiration. Both hit their marks then both sold off, big time. Think “Take the money and run” not, “Oh I think I’ll wait and see what happens next”. It was the Options driving the price of both of those stocks, not stock buyers. Those Options were so off the charts that they created record numbers. Here at investingwithfaith.com we spoke about it through the entire way.

That was then, this is now. The current state of the market is “uncertainty and volatility” The S+P is way up over it’s 50 day moving average and so are many of it’s stocks. Tech? If you think it’s “bottomed” it’s like rolling the dice, putting it all on black, it’s a 50 / 50…….. Tech isn’t going anywhere, it’s the future, but is their more pain to be had in it’s stocks here? Only time will tell. Many of the stocks in Tech have broken south of their 20 EMA’s.

I’m not going to post any new stock symbols here tonight. The reason is we don’t know, we truly do not know if this downtrend is just getting some steam south, or if we pivot back north. We will have defensive names to play if this downtrend continues. What I am going to do is post charts of the SPY. That’s the ETF of the S+P 500. Take a look at them, the different time frames, where price is on the moving averages, where price is in comparison to past trendlines and channels. As traders we can always find bullish stocks, always, but as investors we need to be prudent…. There’s no greater truth in the the stock market than ”Capital Preservation beats Wealth Generation” That means if we lose all of our money we are out of the game. Right now we should be focused on risk reduction, then when the market proves itself, not like a giant day on Wednesday then sell off after, but a true trend emerges, then we can find new winners.

As we do every Sunday night I’m also posting the Heat Maps from the last week, the last 4 weeks and the last 12 weeks. If you have been following a while you most likely have recognized some big changes in them as well. Green is shrinking isn’t it? Be back in the morning with days Top 25 Up and Down Gaps.

Invest wisely, live charitably and be well

Brother Bill

Do you see the Price Gaps on the left and the right of the trendline? Those Gaps are significant. Look at the Volume bars down below both of them. That formation is known as an “Island Reversal” At the top of the trend like it is now it becomes a bearish pattern. Bulls need to defend the 530 area. Options traders have what’s known as a “Gamma Wall” at 530, or on the S+P it’s at 5,300. If that breaks all bets are off. 520 is the next support level. Below that we will be looking at the 505 area.