EB Daily Market Report - Quick Update - Tuesday, June 28, 2022

I've had several members ask me to inform them when I think the S&P 500 will head back down.  I plan to write a "normal" Daily Market Report (DMR) later today, but I just wanted to pass along a few things early today.

First, historical trends support higher prices as we head into earnings season.  But I use historical tendencies as a secondary indicator.  I don't like to base my investing/trading decisions on tendencies.  I put all the evidence on the table and then decide what I believe presents the best reward to risk trade.  If I can't decide, then I tend to stay in cash.  That's my "trading" personality.  From a longer-term "investing" perspective, I have said all along that I believe we're in a cyclical bear market and a SECULAR BULL MARKET.  Based on the evidence at hand, I believe we bottomed a couple weeks ago.  It's quite possible we could see a double bottom (retest in 3600s), but it's just as likely that we won't.

I fully invested two weeks ago, including heavy positions in growth areas of the market for reasons I explained at that time.  I also was leveraged in the QLD (ETF that tracks the growth-oriented NASDAQ 100 2x).  After the significant rise the past two weeks and weakening of many of my sustainability ratios, I've taken short-term profits in all individual stocks that I bought two weeks ago.  I also have "de-levered", meaning that I have taken profits in the QLD and reinvested those proceeds in the QQQ (1x ETF that tracks NASDAQ 100).  After a quick 8-9% move higher in the NASDAQ, I didn't want to risk the profits made these past two weeks.

Earlier today, the S&P 500 was at 3945.  If we continue to sell off today and close back beneath the 20-day EMA, currently at 3895, and on or near our low of the day, I'd expect to see sellers get more aggressive.  My plan will be to add individual growth stocks when they test their now-rising 20-day EMAs with closing stops below that key moving average.  Zoom (ZM) and Upwork (UPWK) are two stocks that I find particularly attractive, but they've run quite a bit off their bottoms.  A test of their respective 20-day EMAs might work well for entry.

We still have to negotiate the summer months, which rarely witness the S&P 500 go straight up.  I think we'll have opportunities to trade throughout the summer, but my focus now will be exclusively on the long side, until proven wrong.  I will not short - that's just not my style once I begin to believe a bottom has been carved out.

Back with more later today.

Tom