Why are stocks going down?

JC Parets
January 27, 2022

Buying stocks below overhead supply has always been a bad idea for me.

I don't know about you, but it's usually been nothing but frustration in my experiences.

You see, that's when stocks go down in price. When they're being overwhelmed by selling pressure.

So as I've grown older I've gotten much better at avoiding situations where I own things below resistance.

Trust me, you go through it enough and you eventually stop.

The bottom line is this: If the Nasdaq100 is below 350, there's nothing to talk about from the long side.

Notice how the Nasdaq is already below its early October lows.

We've talked about how all of this could be a major problem.

The S&P500, with half the growth exposure vs the Nasdaq100, is still above those lows.

For now..

Do you believe the Nasdaq is a leading indicator here?

Or is the S&P500's exposure to the more value oriented sectors like Industrials and Financials (and even a little energy) going to keep holding it up.

What about the Russell2000? Do you think that's a leading indicator?

Because here's what that looks like:

Are these the types of charts you want to buy?

Do those looks like uptrends to you?

What about this one?

Below 41,000 is Bitcoin something you want to be long?

I don't see it.

What's the risk in Bitcoin? How low can it go?

Nothing surprises me anymore. I saw Crude Oil trade below zero a couple years ago. So don't tell me something can't happen.

I just know I don't want to be long BTC if its below 41,000.

Talk to me at 14,000.

And if things are really going to get nasty for risk assets, then you're likely to see these two lines heading to the upper right:

On a relative basis, we've seen some strength over the past two months in the more defensive areas of the stock market. They still appear to be in longer-term downtrends, but the strength the past quarter can't be denied.

Where it's been non-existent is outside of stocks. We've seen absolutely no bid from defensive assets like Yen, US Treasury Bonds or Gold.

So which is it?

Does the stock market have it right? Or does the macro have it right?

How about trade what's in front of you and don't over think it?

We'll continue to monitor the rotation. But don't be close minded in this environment. I'm open to a lot of possible outcomes.

Right now the 52wk high list consists of energy and missile defense contractors.

Can these two continue without the others? I think only for a short period. Eventually one's gotta give. That's my bet anyway.

We'll need to see some rotation in some other areas, otherwise, sellers are likely to remain in control.

Do you see it differently?

Let us know what you think!

JC

 

Filed Under: