"In the end, only three things matter: how much you loved, how gently you lived, and how gracefully you let go of the things not meant for you." Jack Kornfield Nasdaq Charm: The above quote is relevant to the markets here in the last third of the sentence. Of course, there is no guarantee that the bear market action is over, but one has to be open-minded that their negative bias may be incorrect going forward. Below is the MONTHLY chart of the Nasdaq and with November ending this past Thursday and providing a MONTHLY candle, it suggests that a new "growth" phase could be upon us. At least good risk/reward exists with the CLOSE back above its upward-sloping 50-day SMA which has signaled the end of drawdowns three times prior dating back to 2016 after bullish MONTHLY candles were recorded. The range top to bottom for the Nasdaq in November was 12% and it CLOSED less than 25 handles from the highs. The bearish gravestone doji recorded in November 2021 warranted caution and could this November's hammer propose risk is back on? Time will tell.
Dog No More? The software names have been among some of the wobbliest in the tech sector. With one month left in 2022, many are looking to put the year in the rearview mirror. Will the space be hit with year-end tax selling and see further declines? Stocks down more than 70% YTD, not a typo, include TWLO ASAN and COIN. Other larger cap names that were pulled down with the overall weight are ADBE CRWD TEAM DOCU WDAY and INTU. Looking at the MONTHLY chart below of DDOG, could this name be looked at as a turnaround candidate? Of course, only PRICE will let us know but the round 70 level has been influential in the past and will likely continue to do so. Last month it traded with an intramonth low of 66.45 but CLOSED just below 76. In May 2021 it touched the number and went on to advance 7 consecutive months. If it can stay north of 70 perhaps 2023 will look kindly on this name. Its daily chart on Wednesday recorded a bullish engulfing candle, which also filled in a gap from the 11/9 session. The bulls song theme for 2023 could be "Who Let The Dogs Out." If the level fails to hold look out below.
Size Matters: As everyone looks to the direction of the greenback, interest rates, and crypto for signs of what the market may do next, could it be as simple as what the small caps do? Keep in mind this space tends to lead and remember how one of the most telegraphed breakouts in some time almost 1 year ago fell apart in rapid fashion. On the chart below one could see the very clean breakout above a flat base with the IWM jumping 6% the week ending 11/5/20. The saying goes "if it's obvious it's obviously WRONG" comes into play here. The ETF subsequently went on a 4-week losing streak falling by a combined 12%. It "led" in this situation too as the S&P 500 and Nasdaq did not start their descents until 3 weeks later (Dow fell roughly in line the same as the IWM). The point I am trying to make here is the IWM has been demonstrating some relative strength as the only of the 4 aforementioned benchmarks NOT to undercut their June lows. If they can break this string of lower highs that began at 220 to start 2022, could that be a sign that a real bottom is in, as they potentially "lead" to the upside here? A decisive CLOSING break above 190 next week could be the catalyst.
"If You Can Meet With Triumph And Disaster And Treat Those Two Impostors Just The Same" -Rudyard Kipling Monthly Nasdaq Confusion: That eloquent quote above hangs just above the entrance to the hallowed grounds at the All England Club at Wimbledon. It is meant to keep emotions in check, no matter what the outcome, on the tennis court at one of the most famous sporting venues under enormous pressure. Certainly, it could be applied to market participants who have tried to navigate this very difficult landscape recently. Huge highs and lows have occurred and in my opinion, it is not the healthiest of actions. Thursday the Nasdaq jumped 7.3% in very firm volume and give credit for Friday up another 2%. I was always taught that bottoms formed in a smooth, gradual fashion, not this wild volatile nature we are presently seeing. Perhaps it will end up being as simple as round number theory with the MONTHLY gravestone doji candle in November 2021 at 16000 as the top, and the spinning top candle at 10000 in October at the low. There is still 2 1/2 weeks left this month and a CLOSE above 11000 has to be viewed through a bullish lens. Call me skeptical but PRICE as always will let us know.
"Mixed emotions, buddy. Like Larry Wildman going off a cliff in my new Maserati." Gordon Gekko Clashing Signals: Unless one has been hiding underneath a rock there have been some glaring bifurcations among the major indexes. The obvious laggard has been technology, with the Nasdaq lower by 6% over the last one-month period. Easily the best of the bunch has been the old, stodgy Dow which has gained 7% (over the same time period the Russell 2000 is higher by 1% and the S&P 500 is UNCH). The Nasdaq is off 7 of the last 11 weeks, with three WEEKLY declines of 5% or more. In all this contrast even with the Dow's strength (although it still can not catapult above its 200-day SMA) investors must have mixed feelings. Typically the big, mature defensive names are the last to crack as market participants cling to what they perceive as "safety". Are these stocks ready to join the others in their misery? It has certainly helped there are just 6 tech stocks in the Dow currently (one is CRM and in August 2020 Exxon was removed from the Dow and Salesforce was added to the index. Total Returns since, Exxon +214%, Salesforce: -41% thanks Will). Very few of the 30 names have good long-term setups, perhaps some tactically so in my opinion cash overall is still king with some good trading opportunities.