Bullish Index and Chaotic Stock market

We should respect the market for what it is and not what we want it to be. Here are the market observations for today

1. The market is broken. There is a huge disconnect between small-cap/mid-cap stocks and few select large caps driving the index. It is the slow painful decline in the majority of the stocks that are making lots of people very nervous about the future.
2. The Delta variant is having an impact on the real economy. US retail sales fell by 1.1% in July vs. the prior month. There is real concern about the economy right now. 
3. Why is the index not cracking? Because the economic picture continues to be mixed. Industrial Production exceeded market expectations and hiring continues to be strong. 
4. The Small-cap index ETF IWM has slipped to 200 dma. Will it find support or slip to 209 levels? The most important chart to watch now
5. Does the US Central Bank have a clear idea about what lies ahead when it comes to the economy? The market will get a clue today as Fed minute meetings slated to release this afternoon (2 p.m. EST).
6. In every phase, the market falls in love with a stock and they continue to inch higher despite all chaos. CLF is in a structural bull market with strong support at 100 dma. It’s up 30% from 100 dma. It has become a poster boy stock for Infrastructure Bill.
7. When a stock breaks out to a new high with a large candle, then one should buy without if and but. US Steel X is a buy now.
8. I regret not taking Moderna MRNA trade when it made a new high above $190. It doubled in 3 months.
9. It’s very difficult to trade when the market breadth is so bad. Every single day, there are more stocks declining than advancing. What’s worse, the stocks make a move for few days and then collapse which makes it harder to plan an exit.
10. No matter how bad the market is, there will be stocks that will make stunning moves. UPST Upstart gapped up at 160 on August 11 on strong earnings, and in just over a week the stock is up 37%. It seems the stock is not done yet.
11. When a stock gaps up on a strong earnings report, then it does surprise on the upside over the next 2-3 months time frame. Will LendingClub LC do the same? The stock was an attractive buy at 24. I recommended it back then
12. The Delta variant and its impact on the economy is having an impact on money flows in the stock market. After pumping in $57 billion in real economy sector ETFs in 1HCY2021, investors pulled out $7.2 billion whereas defensive saw an inflow of $3.6 billion in July. Health Care ETF XLV big winner.
13. Hmm. Pfizer has been a big winner since the middle of July. The stock is up 25% in over a month. Is the defensive money chasing Gilead Sciences GILD now? The Price Action screams buy.
14. Palantir made a big price action move post earnings and despite last few days of turbulence, the stock has done well to hold support. The stock is up 4.7% today.
15. I love when stocks make a new high and try to hold a certain level. If by the end of day today, AMD is able to hold 104 levels, then one can expect bullish price action in days to come. AMD Price Action.
16. One should be in harmony with the market. If large caps are doing well, then buy the large caps making a move. Should one buy Lowe’s?. Price Action says yes.
17. Can Lowe’s make a Target like a move? Here’s how Target rallied this year
18. Salesforce seems to have integrated Slack well. The stock is ready to run
19. One should never fight with the market. When the stock sells off with a gap down, then never hold it or buy it thinking there is a value. Just look at Alibaba stock price action – it gapped down to $280 in early Nov and now 10 months later, the stock is at 174.
20. I am not going to sugarcoat. This is a very hard market to trade even for supremely talented seasoned professionals. So, don’t lose heart, have patience and your time will come.

I will make more updates in the comments section for today. So keep looking

Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers