Market Turbulence Creates Falling Stars
Simpler’s traders take a hard look at historical patterns to see where the market is going, how long to expect continuation in this environment, and how to find advantages in a wild market.
It was a rough day across the market today.
The Dow closed Thursday at 35,111.16 points to fall 1.45% (dropping 518.17 points on the day). The Nasdaq dropped to 13,889.43 points for a 3.66% rip down while the S&P 500 crumbled 2.4% to 4,479.43 points.
Pandemic-friendly stocks, including Amazon, Shopify, and Peloton, experienced a drop back to stagnant levels or previous lows. Technology “star” Facebook, now Meta, saw earnings that fell short of expectations as its stock price plunged. Meta revenue and a forecast miss sent the social media company shares down by as much as 24.3% in after-hours trading, causing a valuations drop of nearly $220 billion.
Ironic though it may be, Facebook blames the privacy settings of Apple – the company that propelled it forward in its infancy – for its dismal performance. By contrast, Google posted a strong quarter, thanks to advertising that uses Google’s search data to target ads.
Apple has rejoined the 21 exponential moving average (EMA) club and was the first of the major companies to close above this level. Google followed in its footsteps and did the same, even going so far as announcing a 20-1 stock split.
Technology stocks are in both bearish and bullish territories. And, quite simply, it is too soon to know if Facebook is in a buy-the-dip position or if innovation disruptors, such as TikTok, are taking its place.
There will be other tickers left crippled in the downward trending market. According to the historical charts, this downside is expected to extend over the next few months. This does, however, give traders the opportunity to short stocks that are falling back to previous price points.
The S&P 500, with support and an oversold confirmation, might be an easier place to get long and stay long. Other areas of interest, such as grocery store commodities, corn, soybeans, and food production, are showing signs they could be taking off as potential long trades.
How are traders to play in this volatile environment that seems unable to consolidate? While there are areas to hide out if needed, Simpler’s traders are focusing their efforts on trading short (while avoiding risk) or staying in cash.
A market correction due to upcoming Federal Reserve rate hikes is expected. The U.S. economy is also heading into a politically intense midterm election – where the market typically declines.
Even as these market influences play out almost simultaneously, Simpler’s traders anticipate a market rally followed by movement back into bullish territory.
As Simpler’s traders work through this unpredictable market, they turn to proven methods and strategies. These include charts and indicators that help traders recognize structure forming in the market. Indicators also allow traders to find the best points to enter and exit a turbulent market.
Methods, strategies, and tools enable Simpler’s traders to differentiate between stocks that have the potential for a bounce or a rebound and stocks that have simply burned out.