I haven’t talked about the S&P 500 much lately, because I think its easier now to make money going long in foreign markets, commodities and precious metals. My philosophy is to focus on beating the performance of the S&P 500, to build wealth without worries over time, instead of trying to get rich quick in crypto and taking big risks as most people on social media have for the past few years advocated, as that is what gets people’s attention and so is what the algorithms want to feed people. Now that we are in a bear market we are seeing how those risky plays end in disaster. Crypto players are getting killed and the smart people who got involved in virtual crypto coins are selling what they can, leaving that mess behind forever to buy real things.
The S&P 500 has been in a bear market all year, but is now having a bear market rally that is likely to continue. It had a big punch up in the past few weeks and looks most likely to drift a bit during this holiday week, which historically sees volume completely vanish from the markets. Here is a chart of the S&P 500.
There is a confluence of resistance now at the 4100 area of the S&P 500. As you can see from the above chart, that is where a downtrend line connecting the highs of March and August ends up, while the 200-day moving average for the S&P 500 is at 4067 and the 50% retracement point of the January peak and October low is sitting around 4156.
It is easy to imagine the market getting into the S&P 500 4100-4156 area before the end of this year.
If you are looking to play the rally here are a few stocks inside the S&P 500 that have constructive chart patterns.
SCHW is consolidating around the 80-75 area now.
JCI is vastly outperforming the S&P 500, trading above its 200-day moving average. It also appears to be pausing around 65 area.
GM now has an interesting chart pattern with resistance around $41.50.
One thing to do is to AVOID stocks lagging the S&P 500 as they are in danger of dumping hard when the averages have mere pullbacks and act as millstones in an account. Many of the fad big cap tech stocks are doing just that. Notice, for instance, TSLA.
TSLA made a new 52-week low on Friday. If one bought it a few weeks ago to play the stock market rally one is underwater on the trade.
Another stock to avoid is GOOG.
As you can see the GOOG : SPX relative strength ratio is in decline. Even though GOOG has bounced this month, it is still badly lagging the market. Bounces are not enough to get excited about. If a stock bounces and still lags the averages it’s still a bad stock.
Be safe this week if you are traveling!
If you are able to see young family members during gatherings and they still talk about crypto tell them to sell, get out, and move on.
Now, just maybe, finally, they are ready for real help in the markets, able to take it seriously and move beyond the casino mentality taught to them by the apps and gurus. To make them feel better you could point out that millions of Robinhood traders have wiped out this year, so if they are still in the game they are doing better than most.
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-Mike
