Daily Market News - 4th Nov 2021

It’s A Bull Market Ya Know

Ok, hear me out.

We know the market’s been on a rocket ship the last few weeks, I’m assuming those of you who like to buy up trends have done pretty well.

The major indices are all breaking out, everyone’s euphorically bullish during this 4th Quarter… I’m bullish, actually let me rephrase, I’m VERY bullish, but what would need to happen for me to think about getting defensive?

Let me quickly put a few charts to you…

S&P500 Seasonality Chart

The 4th Quarter is historically very bullish (as the below chart shows), the charts are supporting a bullish thesis, I’m bullish, my portfolio is 100% bullish and I expect to have a great end of the year, but what if.

This is the game I play.

I need to consider the other side of the coin because I have 100s of clients and members who rely on it.

Consumer Discretionary vs Staples

The ratio between Consumer Discretionary and Staples is an important part of of my work, put simply, if the ratio is breaking out, the market is bullish… it was 1 of the main reasons I wasn’t having a meltdown in September and remained bullish in the face of all the mainstream financial media calling for things like crashes and corrections. It’s a good gauge of market health.

Many of you will have seen the chart over the last few weeks, but I want to draw your attention to the extreme levels of momentum… when the market is flying, many get caught up in the euphoria and start to buy market tops, the chart help to keep things data driven.

If this ratio reaches extreme readings with RSI, for me it’s time to start thinking about down side risk as it’s a good signal for short term market tops.

Technology (QQQ)

We’re currently seeing Tech rip higher, of course, it’s been incredible the last few weeks, I have no plans to sell my Tech holdings… but what if… what if we start to see extreme readings with RSI again?

Historically it’s a precursor to broader declines, so I’ll keep an eye on this.

S&P500 (SPY)

We’re breaking out to All Time Highs, this is a characteristic of an uptrend… but what if we see a short term market pull back and we put in a failed break out?

That’s the risk for me.

Again.

I’m not overthinking it, I’m just aware of what would need to happen for my bullish thesis to fall apart.

In Summary

We’re bullish, lets not over think it too much, I’m still finding the best stocks in the best sectors for my clients and members, but I’m aware of what needs to happen because it’s an approach that’s helped me get defensive ahead of every major market drop in the last 5yrs.

Don’t take my word for that, I’ve included below the analysis provided to our clients and members on the 22nd February 2020. No hindsight indicators here.

If you’re in the process of learning about Technical Analysis and how to read the market, you might get something from it.

I’m told it’s very very good.

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