Answers to your stock market questions - Stockscores Perspectives for Oct 1 2024
Stockscores Foundation for the week ending October 1, 2024
In this week's issue:
In This Week’s Issue:
- Market Outlook – Short Term Pullback a Buying Opportunity?
- This Week’s Market Minutes video – Stock Investors Lose for these 3 Reasons
- Trader Training – Answers to Your Stock Market Questions
- Strategy – Stockscores Market Scan
Market Outlook – Short Term Pullback a Buying Opportunity?
The markets have upward momentum with the Toronto Stock Exchange leading the way on the power of the gold and interest rate sensitive stocks. The large cap stocks are strong in the US but there does seem to be a rotation out of the biggest tech names and into the broader market. As we start the fourth quarter, a short term pullback to the long term upward trend line does seem likely. Uncertainty around the US Presidential election will likely bring volatility. Look for opportunities to buy strong stocks on pullback breaks or smaller cap stocks on reversals of long term downward trends. Focus on stocks that are showing rising bottoms and have Sentiment Stockscores of 50 or higher. Active traders should focus on low float, very abnormal stocks as these have been making huge gains that tend to fizzle out after a few days. That means, do not stick around for long, just in and out for the quick upward trends.
This Week’s Market Minutes Video – Stock Investors Lose for these 3 Reasons
Most investors fail to consistently beat the stock market but outsized profits are possible for those who focus on three key elements. In this video, I highlight three mistakes to avoid and help your performance in the stock market. Then I analyze the SPY, QQQ, IWM, T.XIU, GLD, USO, UUP, GBTC, VXX and TLT charts for my short and long term outlook. Finally, a look at the trade of the week on SERV.
Click here to watch this week's video on YouTube
https://youtu.be/MmqSwEN_By4
Commentary – Answers to Your Stock Market Questions
Traders and investors have may questions.
How will the strikes by port workers affect the stock market? How will Apple’s new iPhone affect the stock? Will the US election improve ad revenue at META? How will Uranium prices be affected by the immense need for electricity from Artificial Intelligence?
People tend to fall into a trap when considering these questions. They try to be smart.
If you are a normal person, you probably fall into the group who tries to be smart. It is normal to rationalize questions about your investments. It feels better to buy a stock when you have a well thought out reason that you believe in.
There is a problem with this approach. The stock market will always be smarter than you. Do you think you could win a game of trivia against 10 opponents? How about 100? 1000?
Even if you are a true trivia master, it is unlikely that you could beat a large group of people because, collectively, they will have more knowledge that just one.
Now, consider that the stock market represents the collective opinion of not 1000s of people but millions. Perhaps even billions.
Some of those people have $1000 in the market but there are also decision makers who make billion-dollar decisions that can have a noticeable effect on stock prices.
Instead of trying to be smart, you can instead just listen to what the market’s opinion is based on what people are doing with their money.
This requires learning how to interpret trading activity to get a translation of the market’s language. By looking at trading activity, you can see what the collection of stock market buyers and sellers are thinking and doing.
I am often asked by investors what I think about a stock, a market or some macro event. My answer, typically, is that it does not matter what I think. I do not know more, nor am I smarter, than the community of millions of investors casting their vote in the stock market.
I can read market activity well though, having practiced the skill for 35+ years. The market seems concerned about the port strikes as there is weakness today as the strike has commenced. Uranium stocks have been going up for a few weeks and seem to be benefitting from the anticipated need for nuclear energy. META shares have been outperforming many large tech companies, presumably on high ad spending for the US Presidential election. Apple investors seem unenthusiastic about the new iPhone.
I don’t know anything, at least not of great value about the inner workings of stocks and economics. I trust those who do and simply read their message by looking at stock charts. I use the simplest techniques possible, avoiding confusing indicators or bizarre theories. I often joke, but it is actually quite sincere, that if you can draw a straight line with a ruler, you can read a stock chart.
Since these techniques are visual, I am going to do some webinars later in October to show how to interpret the market’s message. They are free to attend, and I will email an electronic copy of my book to everyone who attends. You can register at this page:
Click here to go to the Stockscores Events page
https://www.stockscores.com/trader-training/upcoming-events/
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This week, I ran a Market Scan for stocks up 3%, with a Sentiment Stockscore of at least 50 and trading at least 10,000 times. I inspected the charts for turnaround setups, stocks making breaks up from a rising bottom after recently breaking a downward trend. Here are two names for longer term position trades.
1. ABEVABEV was in a downward trend from the middle of 2023 but is now breaking its downward trend line from a rising bottom on the weekly chart. This is a good long term turnaround chart for a position trade over the next few months. Resistance at $3
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2. HAINHAIN has been stable for the past 6 months after a long downward trend was broken. It may take time to develop but the stock is more likely to go up than down in the months ahead.
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