It is the direction that counts. The Inflation trajectory is now heading south and everyone seems excited. Here are some stocks that look interesting.
Daily Dose
Price Action Observations Oct 24
The market observations as of today
Economy and the stock market brace for “Hard Landing”
Nothing seems to be going right for the market. S&P 500 broke down below 3900 and now seems to be headed towards June lows. The market saw steep declines last week with S&P 500 losing 4.7% in the week, the Dow Jones Industrial Average fell 4.1%, and the Nasdaq Composite tumbled 5.5%. This is how Year to Date YTD performances look like:
- S&P 500 is down 19.25%,
- Dow Jones is down 15.75% whereas
- NASDAQ is down 28%
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Things are falling apart again
Just when you thought that the US market has turned the corner, everything is falling apart. It has become so scary that few have started predicting complete collapse as if that has not happened yet. S&P 500 is now down 18.5% YTD whereas NASDAQ is down 27% YTD. Sometimes, you wonder when will this misery end.
There’s a tremendous amount of negativity in the market at the moment. The fear is too visible. Even small rallies are getting sold into. Today, the S&P 500 index declined 0.4%; Nasdaq lost 0.7% while the small-cap Russell 2000 gave up 0.9%.
Hawkish Surprise – Panic and Opportunities
The market hates surprises. There was an assumption that inflation has cooled down on recession worries and the US Central Bank would go on a pause to ensure growth does not suffer beyond a point. But the US Fed Chairman Jerome Powell came out with an extremely hawkish statement and indicated that the US Central Bank would like to kill inflation before worrying about economic growth. It means more rate hikes and the US Fed would not be in any hurry to bring it down. This was enough to spark a dramatic sell-off on Friday. Today the market saw some recovery from the lows but here’s how the individual stocks discussed over the last few weeks stand.
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The Opportunity Market
There is a beautiful saying: Focus on what the market is doing and not what it should be doing. Also, Focus on money management and risk management. The market believes the economy may be turning a corner. And at this point in time, instead of intellectualizing and debating, focus on the pocket of opportunities and develop trading plans to make up for all the damage market did over the last 10 months. Here are some interesting price action stories.
The Midcap Momentum Market
Investor confidence is high. There is a belief that the inflation problem is behind us for time being. The US market continues to march higher. After a long time, you can build stories around stocks and sectors. The stock-specific bull market is for real and lots of stocks are making real big moves. Here are the stocks and trades that look interesting in the midcap space.
Oil Stocks are making move again
Have Tech stocks peaked? It’s hard to tell but the way Tech stocks have sold off from highs is going to make traders nervous but there is something interesting happening today. Lots of Oil and Gas stocks have made the decisive move after a long time (SWN +8%) and one stock post earnings looks very attractive.
Midcap Momentum Market
In the financial market, feelings don’t count. How I feel what the market will do does not matter. What matters is what the market is doing right now. Nobody can dispute that trades are working. Now nobody knows how long this will last. The pain is still fresh in everyone’s memory and China noise is making people nervous. But having followed the market for years, one thing I have learned – is never to let your feeling come your way of following your trading process. Just do what you see on the screen i.e. follow your methodology and risk management practices. Here’s how the midcap end of the market (stocks with a market cap in the band of $2 billion to $10 billion) doing: trades, opportunities, and interesting stocks.
Large Cap Momentum Market
The market disappointed so much in 1HCY2022 that the last few weeks have come as a big relief for Long only investors/traders. There is follow-through buying happening despite concerns around the US-China conflict. You must be wondering what has changed. It’s traders’ enthusiasm and some +ve newsflow like cool off in commodity prices and new legislation. The three themes driving the market right now:
- Inflation Reduction Act Bill of 2022
- Chips Act
- Earnings Surprise
Here’s how some of the well-traded large-cap stocks behaved over the last six weeks. The list will help you understand how trades unfolded, where the opportunities are and how should one keep an eye on potential opportunities and risks. This is a 3 part weekend series. This blog only covers Large cap stocks i.e. stocks with a market cap of more than $10 billion. The trading ideas here are suitable for investors who want to invest in stable steady companies.