Are Stock Traders Ready To Jump Back In?

After the prior week’s solid week of selling stocks tried to stabilize last week but many of the bulls especially the dip buyers were disappointed. Overall, the stock market seemed ready to rally at the start of the week even though there were no clear signs of a market bottom.

The main concerns last week were the earnings from NVDA and the Jackson Hole comments from Fed Chair Powell. NVDA beat on earnings and revenues by a wide margin after Wednesday’s close as revenue was up over 100% from a year ago. The after-hours surge was met with selling Thursday as after opening at $502.16 it rallied another 50 cents before closing at $471.63 down over 6% from the open and just barely higher for the day.

There was quite a different reaction in May after another amazing report as it closed up over 24% the next day. It did not help that on Wednesday’s regular session the Spyder Trust (SPY
PY

SPY
0 has just rebounded back to the converging 50-day MA and 20-day EMA. SPY reversed lower on Thursday closing down 1.35%.

The Nasdaq 100 led the markets last week up 1.7% with the SPDR Gold Shares not far behind as it was up 1.3%. The S&P 500 was up just 0.80% as it gave up ground Friday in reaction to Powell’s comments that rates still may have to be raised. The Dow Jones Utility Average was up 0.5% but is down 8.8% year-to-day (YTD).

Minor declines in the Dow Jones Transportation Average and the iShares Russell 2000 as they were down 0.6% and 0.4% respectively. For the week the NYSE A/D numbers were slightly negative with 1584 issues declining and 1464 declining. On the NASDAQ
NDAQ

NDAQ
the A/D ratio was about the same but the New High and New Low numbers were weaker.

Ever since the key reversal on July 27^th and the selling in reaction to the CPI report the market seems to have reacted more negatively to news that was either positive or neutral. That is a switch from what happened in the spring when the buyers seemed to step in even if the numbers were not as strong as hoped.

The Spyder Trust (SPY) has spent the last two weeks as it has been testing the 20-week EMA at $432.97 which is starting to flatten out. A move above the two-week high at $448.11 would be a positive sign. If the resistance at $451.70 is also overcome it should confirm that the recent correction is over. The weekly starc+ band is at $467.11.

The weekly S&P 500 Advance/Decline line was a bit higher last week but is still below its WMA. A close above it this week would be positive. The record new high in late June (point d) was a sign that the SPY will eventually make a new high. The daily A/D line is also below its WMA but could turn positive with a day of strong A/D numbers.

Even though the Invesco QQQ
QQQ
Trust (QQQ) closed at $364.02 and well below the week’s high at $372.74 the overall action was positive. A strong move above last week’s high will suggest the uptrend in the QQQ has resumed. The weekly starc+ band is at $396.77 which is 8.9% above Friday’s close. The 20-week EMA at $353.07 is good support.

The weekly Nasdaq 100 A/D reversed to positive last week closing back above its WMA Another higher weekly close is needed to confirm but this is typically a bullish setup and the former downtrend, line b, has been tested. The relative performance (RS) has also closed back above its WMA as the daily RS stayed stronger than expected during the correction.

Last week the S&P Growth Index ($IGX) was up 1.40% while the S&P Growth Index ($IVX) was only up 0.20%. This has caused the ratio of growth/value to rise sharply and break its downtrend, line a, as growth is still the leading value as it has been since the start of the year.

The negative divergence from the MACD-His at the start of the summer indicated that value stocks might be ready to take back their leadership position. If the ratio continues to move higher for the next few weeks this becomes less likely. The weekly ratio of iShares Russell 2000 Growth (IWF
IWF
) to the iShares Russell 2000 Value (IWD
IWD
) also rose last week but does not look as positive for growth.

The technical outlook for Nasdaq 100 largest stocks was 87.5% positive on July 24^th before the late July high. This was based on the 3_DTS signals that are calculated over three days. As I explained in “The New Nasdaq 100 List To Watch” the Dynamic Trailing Stop (DTS) adapts and learns with each closing value for each time frame which is colored green for positive or red for negative.

Based on last Friday’s close only 37.5% are now positive with new (bright green) WK_DTS and 3_DTS signals in NVDA. TSLA also flipped positive on the DTS after previously turning green on the 4_Hr and 1_HR DTS. Both TSLA and MSFT were also able to close last week above their Q_PIV. AAPL is improving and is only negative now based on the 3_DTS and WK_DTS.

As the tech shares corrected from their high, there was a progression of red on the table from the shorter time frames to the 3_DTS and WK_DTS. Now I am looking for a reversal from negative to positive that may now be taking place. I will be looking for positive 1_HR and then 4 HR_DTS on MSFT, AMZN, META, and GOOGL I will be posting updates on the table this week on Twitter.

Many traders are worried that stocks will even be weaker in September but many measures of sentiment like the AAII survey and put/call ratios indicate that the bearish sentiment is already quite high. As of last week, only a third of investors surveyed think stocks will be higher in the six months. Over 67 % think stocks will be flat or lower but I still favor the bull case.