The market pushed down to new lows on Thursday, making a new market low for 2022. Frankly I though the previous lows were low enough, but hey, somebody wanted to buy at lower prices. After my article last week, the market dropped another 4% for the SPY and 5.5% for the QQQ.
The SPY 60-minute chart shows a huge reversal off the lows today.
Here is the QQQ. Down another 5.5% from last Friday to start the day, only to race to the upside and retrace the entire loss for the week. Whew, that was volatile!
As the market topped to start 2022, the total move down for the SPY was 26% at the lows on Thursday. This was a very wide ranging daily candle, but we did see a candle like this in late February. It was the low candle until late April but the buyers on that February candle were tested a week or two later as the market retested the lows. Buying the low in the market is hard work, but at least your stop can be relatively tight.
Looking at the total drop for the QQQ from the highs of November 2021 to October of this year, it’s been a trip. The technology heavy index was down a full 10% more than the SPY at the lows on Thursday, totalling a drop near 38%.
While the volume on the SPY above was significant, the volume on the QQQ was huge. Thursday marked the highest volume day in 5 months. It was also a double in volume from the prior day, so someone hit the buy button.
On TV today, a guest ranted about if you miss the top 20 biggest days in history you miss most of the upside. I’m paraphrasing but it was something like “See why you can’t sit out of the market? ”
Well, Thursday’s massive move from down 3% to up 3% would qualify as one of those days. Where did we get back to? Friday’s close. Conversely, if you felt your portfolio plummet 5.5% since Friday, what feels better? Sitting aside and waiting for entry? Now we are watching a rally that posted a massive amount of buyers showing up for work, perhaps signalling a low. Does that make more sense?
At Osprey Strategic, we focus on trying to find timely entries. In the newsletter two weeks ago, I mentioned I was getting more bullish but not buying yet. Last weekend I mentioned I was very bullish but waiting for a confirmation signal. Big bear markets are notorious for trying to suck us back in, only to roll back over. We’ve had some of those this year, but we have also had big wins.
You can find out more at OspreyStrategic.org and see the signals that we use to help us get into and out of the market. If you can avoid most of the downside and participate in the vast majority of the upside, it’s a lot easier to grow your account. Technical analysis involves the constant analysis of changes in the market and improving your odds of profitable investing.
Greg Schnell, CMT, MFTA