The Shakedown 9/19/21

LAST WEEK, S&P 500 (-0.91%)

Monday:  +0.26%

Tuesday: -0.12%

Wednesday: +0.84%

Thursday: -0.16%

Friday: -1.29%

The market once again was met with some selling Friday as we continued to break down from all time highs the past two weeks. The selling could be due to mixed economic data along with some weakness in global markets. The labor market is showing signs its still on some shaky footing and investors are wondering when we're going to see this economic recovery truly take place. We were pretty overdue for a pullback so this is a completely healthy move lower out of the broad market. We're seeing the S&P break a support trendline that has been leading the market higher the past 7 months. Finally breaking below the trendline suggests this could be the beginning of a greater pullback.

Because the market is finally breaking this trendline to the downside, caution is warranted from a perspective of new buys. Looking around the market, I was surprised at how much relative strength I did see, but with market conditions the way they are right now, you have to have surgeon-like precision when operating in the market this week. You want to be especially picky about what stocks you buy when the market starts to experience some volatility. This is a very welcomed pull back in my eyes, as these times make the relatively string stocks out there so obvious. Which eventually leads us to the biggest winners of our year. So my plan is to largely wait the selling out and watch for a market turn to put on some risk, all the while keeping a close eye on the most relatively strong stocks.

The Federal Reserve meets this week which means we have a Fed day Wednesday. The mornings before these meetings are generally choppy before we get some fireworks at 2pm eastern when the meeting concludes. Investors will look to this meeting for clues on the Fed's imminent tapering schedule, which we've long said is the biggest risk to the market right now. Last week's selling could be the market looking ahead to this meeting for the Fed to announce some sort of taper schedule, although the weak economic data we've been seeing gives the Fed all the excuses in the world to kick the taper can down the road.

Overall I'm anticipating another low activity week from a trading standpoint. That can all change with a drop of a hat of course, depending on market action. But going into the week, we want to wait this selling out and not trade too hard when the market's at its most difficult. We want to ride the easy waves when they come. Eyes on that relative strength this week!

Earnings This Week

Click the above picture for a full list of the companies reporting this week




Semiconductors have been leading this market as we saw with last week's trade of the week TXN. AVGO is in the same boat as it hasn't flinched in this market weakness thanks to a worldwide semiconductor shortage. It recently broke a macro resistance level and has since turned that resistance to new support over the past 3 weeks. While the market was selling off the latter half of this week, AVGO has just been going sideways as buyers continue to show they're in control. Once the market stabilizes I'm looking for this one to explode and lead the market. Love the back to back inside days to end the week, watching 508-511 area for a potential entry.

Trigger: $508-511

Stop: $492.89

Target: $540-550+

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