Tug Of War Continues:
Markets are certainly stuck in a tug of war here. One concern is the amount of time the benchmarks and leaders are taking to resume their uptrends. Prior selloffs/corrections were erased with rapid V shaped recoveries. That does not seem to be happening currently. Looking at the Nasdaq the more time it spends underneath its 50 day SMA, although it is still rising, is a concern too. But the bulls have some ammunition in their pocket as well. The trend is, on a very simplistic basis, often seen as higher if the index is above its 200 day SMA, and the slope of that line. Until it is definitively broken, give the bulls the benefit of the doubt. From a rhetoric standpoint I did see headlines that the S&P dividend yield is now above the 30 year Treasury yield. As it is being portrayed as a negative, I will take the other side, as there seems to be fewer and fewer places to put hard earned capital to work. It should continue to flow into equities, and more specifically domestic.
Unwanted New Issue?
With no lack of recent IPOs coming to the market, many market prognosticators have wondered where capital was going to come from to weather the supply. They spoke of it as a bearish development, and also new names coming public with decelerating profits. They include UBER and LYFT, and also names getting ready to beginning trading like Peloton and WeWork. I am strictly a technician so I am not to familiar with the fundamentals, but I would guess SONO, and the chart below, did not have the best financials. The charts complexion, even though it still trades 37% off most recent 52 week highs, is looking a bit better. It has taken its time rounding out its bottom and looks ready to perhaps start a nice run higher.
Examples:
We have an always be big proponents of CLOSING prices, and on top of that never front running an idea. It may seem like a good idea to get in a bit early to attempt to capture a bit more return, but it is a frivolous pursuit. A good example of that is that chart below of WUBA, and how it appeared in our 8/27 Technology Note. This name is mored in a strong downtrend, down more than 30% from most recent 52 week highs, and that is with todays robust advance of nearly 4%. It has carved out a bearish descending triangle pattern that has a pivot at the very round 50 number, and anyone who tried to be cute and waited patiently for PRICE confirmation paid a heavy toll. It may still breakdown, but remain on the sidelines until it breaks and CLOSES below the suggested entry.