Overview
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Update from Investors Business Daily
Index Breakdowns
Indicators/Breadth
Watchlist
Summary:
The first week of May is in the books and it did not disappoint- frustrating both the bulls and bears with wild, historic swings. There are very few bullish setups to get excited about. There are some interesting short opportunities, but being short is not easy. When it was all said and done for the week, little actually changed in terms of index price levels- Ed Carson from Investors Business Daily recaps the action:
“The stock market rally started off with solid gains that ended abruptly on Thursday, as the Nasdaq plunged 5% that day. The Dow Jones Industrial Average dipped 0.2% in last week's stock market trading. The S&P 500 index edged down 0.2%. The Nasdaq composite lost 1.5%. The small-cap Russell 2000 slumped 1.3%. The 10-year Treasury yield surged 24 basis points to 3.12%, with nearly all of that gain coming in a delayed reaction to Wednesday's Federal Reserve meeting. The 10-year yield is racing toward an 11-year high of 3.25% from October 2018. U.S. crude oil futures jumped 4.9% to $109.77 a barrel this past week.”
Ed touches on many points I want to write about also. Below he summarizes the markets currents:
“Arguably, the stock market could use another big shakeout to trigger capitulation selling. Fear gauges are near recent highs, but haven't blasted above 2022 peaks. The continued flows into ARKK and other growth funds also signal that "buy the dip" is still in force. New lows continue to dominate new highs, especially on the Nasdaq. Market breadth is grim. That's been a problem for the past year. But in 2022, Apple stock and other megacaps are no longer masking that underlying weakness. Commodity plays are still a bright spot, especially oil and gas names. Fertilizer names are trying to hold around their 50-day moving averages. Lithium plays are coming back into focus, while wood products and building materials look interesting. Meanwhile, health insurers continue to look strong as well as some drugmakers such as LLY stock, but the leadership in medicals has narrowed. “
Index, Indicators and Breadth
Indexes continue to break down across the board. QQQ is below important support levels as IWO and IWM appear to already be in break downs and resuming their downtrends. NAMO is not nearly as low as I would have expected and nowhere close to providing a bounce signal ( I like to see it below -60 at least for that). Advance/Decline line on the Nasdaq has made new lows, the new highs vs new lows of -1071 on Friday is a multi-month low and continues to show a difficult market to trade with only around 14% of the Nasdaq listed names trading above their 50 day moving average.
Takeaway: Poor price action, poor breadth, declining internals but not yet oversold enough to have me looking for a bounce equates to a time to be highly cautious!
Key Watchlist for Next Week
(Full Charts/notes on PDF on link and on Bullishgrowthstocks.com)
DLTR BMY LLY LNG LNTH Wheat Futures Crude Oil Futures
Chemours Company (CC)
CC broke out on heavy volume following their earnings report last week. This is interesting because another company that manufactures titanium dioxide, Valhi Inc (VHI), also moved into high ground on strong volume last week.
I will be doing a more in depth write on these two names and titanium dioxide this week, but I will be watching these two close to see how they perform early in the week.
Game Plan
I am late getting this posted, and as I finish it up at 4:30am on Monday Morning, index futures are heavily red with the /NQ (Nasdaq) down over 2% as of now. Again, this note is short because I don’t see much to do. I want to be very cautious and mostly in cash. This is a great time to work on your edge, keep your watchlists fresh, do research and preserve as much mental and financial capital as possible.