It’s a market of stocks, not a stock market. Trite?
I don’t think so.
You can lose a lot of money in the market even if the indices are at new highs and you don’t respect a stock's own “position.”
As long time subscribers to the Hit & Run Report have heard me say often, correlation kills.
That includes trying to correlate a stock treading water to a rising index.
How much money has been lost on calls in TSLA the last week by traders expecting it to follow through from its April 30 LROD/Expansion Pivot buy signal?
On April 30, TSLA left a Large Range Outside Up Day (LROD or Lightning Rod).
It was “charged” to go, but rolled over.
An Expansion Pivot buy signal is a move off the 50 day moving average on the largest range in the last 10 days.
The failure to follow through from the April 30 setup came closely on the heels of the April 21 LROD, also at the 50 day line.
One bar does not a trend make. These two strong bars in TSLA never elicited follow through. They are what I refer to as Pop Sickles.
You buy ‘em. They melt in your hand.
You buy ‘em and they can act like a sickle on your account.
You can’t stick around waiting for strength of the old time religion to reassert itself in a cult name if a set up fails.
It’s ok to guess wrong. It’s a sin to stay wrong.
How many one-day wonders and short term rallies have sucked players into the “new TSLA up-leg” syndrome?
Once a stock sees a Climax Run — even if it’s not in a technical downtrend — failed setups can go through capital like Pacman.
Trying to capture a new growth phase in these Shooting Stars can burn through your account quickly — especially if you’re using leverage on a former cult, marquee glamour like TSLA.
Same goes for recent leaders like TWLO, OKTA, CRWD, PTON and APPN to mention a few.
Last week in particular there were many failed up moves that Jackknifed back down. Names include AMD, FIVN, AVLR and SHOP (to scratch just the surface).
Rallies in former leaders are getting sold into with authority.
A slew of cyclicals and value stocks are getting bought as money seeks a place to hide.
This is because the mandate of money managers and funds is to put money to work.
They don’t just go to a majority cash position like you or I might.
Often, once these under-owned cyclicals and value names get exploited and plumped up, there is nowhere to run and nowhere to hide.
To see the SPX push to new all time highs with this kind of action beneath the hood is, in a word, remarkable.
Someone’s lying. Either many broken former leaders are going to turn the corner or the indices are living on borrowed time.
I’ve never seen a brave bull market led by steel stocks.
However, many former growth glamours have staunch overhead resistance now after severe declines. They will require basing before such resistance is overcome.
In sum, the SPX popped out of a 3 week trading range on Friday, following through from Thursday’s outside up day closing above the key 65 squared region of 4225.
It may follow through to 66 squared which is an harmonic off the 666 bear market low from 2009; however, time and price look like they converge in this region.
A daily SPX from last June shows 90 day/degree cycles.
The last important swing low was March 4, roughly 180 days/degrees from the September 2 peak.
90 days/degrees from March 4 is June 4.
As well, early June represents the top of a 1 year trend channel (green) as well as a Ghost Line (red) from the pivotal October impulse.
Breakage above a trend line (magenta) connecting the September/Feb peaks occurred on a gap around 4000 SPX.
This trendline ties to the 4100 region currently, which is where Phil D. Gap resides.
Losing a 3 point trendline (blue) from the March low now at 4200 implies a drop to Phil D. Gap at 4100.
Below that opens the door to the bottom of the trend channel at the 4000 region.
Failure back below Friday’s break-out could see a swift down-draft to the 4000 region (400 SPY).
Interestingly, May 9, aligns with 400 SPY.
The takeaway being that a drop to 400 SPY would square-out with Friday/Monday.
Purple is 400
Blue is May 9
If that scenario plays out, then the expectation is that the aforesaid early June cycle would define a low… or a return rally test of highs.
