Stock and Index Trading Patterns |
Written by Rob Goldman |
Good afternoon! We have never done this before but we chucked our original version of The Goldman Guide after the market activity this morning as we discovered some valuable trading patterns. What do they portend? STOCK AND INDEX PATTERNSWell, this is a first. We saw global markets getting pummeled overnight and our own market getting clobbered this morning so we trashed the original version of the Guide and instead have drafted this abridged, new one, which is why it is being released a few hours later than usual. Panic has really hit the market. It is no joke. To make matters worse, the media is really stepping up its game to stoke the fires by manufacturing new reasons why stocks will collapse, since the tried and true issues have become tired and ineffective. I may not know much, but I do know this. Our failed foreign policies are having an effect on the market, but not in a sustained way. For months, when stocks have tanked due to political or economic issues abroad, they bounce right back. We are seeing it again today. All of you short term traders out there can take advantage of these moves by using short term trading vehicles (like NYSE—TVIX). I suspect that this scenario will continue, unless we break below technical support levels on the S&P 500. Speaking of support levels, 2 weeks ago, our Guide headline was "Small Caps Screwed in September". The death cross (50 and 200 DMA crossings) were obvious triggers and the Russell 2000 is down over 6% from its intra-month high. The chart below confirms the fact that despite the declines experienced in recent months, real support did not truly fall apart until recently, after a strong 5+ year run. This narrow channel range between resistance and support is not exactly comforting in the long run, but may not yet signal the commencement of a long term bearish trend. Stock Resurgence?![]() The chart to the left certainly is not pretty. But, the recent trading stats may make you feel better. Right now, we are in the middle of the 52-week range of the Russell. Importantly, each time we have reached the 1200 mark (about 85 points higher from here) the index has collapsed only to rise later. This happened twice in March and once in July and occurred again this month after hitting the 1180 mark. Granted, support on a technical basis is gone and fundamentals are not the best. But, with volume declines and waning interest comes opportunity. We have broken down below the 10% bear market level for small caps multiple times this year and if that is achieved again (around the 1090 mark), we would begin to dip our toes back in. The bottom line is that for all of the longer term talk, reasonable 2015 P/E valuations and seasonality could play a role in a meaningful bounce in small caps in the next 1-3 months. It just requires a little patience and perhaps a greater focus on big caps until the near term declines are largely complete. The current narrow channel in big caps seems to confirm this tactic. Looking Ahead![]() As noted above, in the short term, the broader market S&P 500 is in a narrow rising channel, denoting likely less volatility which means that TVIX holding periods, as referenced earlier, are getting even shorter. Still nervous? the core-satellite approach of simply holding a large cap index appears to be the best fit right now. Also, make sure you read our "Stock Market Survival Guide", published 2 months ago in response to our generally negative short term bias. Have a great week! Launched in May 2010, The Goldman Guide is a free weekly publication of Goldman Small Cap Research and is written by Founder Rob Goldman with contributions from the GSCR contributor team. This non-sponsored investment newsletter seeks to provide investors with market, economic, political and equity-specific insights via an action-oriented, straight to the point approach. No companies mentioned in this newsletter are current sponsored research clients of the Company or its parent, unless noted, With rare exceptions, all companies or investment ideas mentioned in this publication are publicly traded stocks listed either on the NYSE or the NASDAQ. Goldman Small Cap Research members and contributors' bios, certifications, and experience can be found on our website: www.goldmanresearch.com . Disclaimer This newsletter was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces non-sponsored and sponsored (paid) investment research. Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co. The Firm's non-sponsored research publications category, Select Research, reflects the Firm's internally generated stock ideas, along with economic, industry and market outlooks. In virtually all cases, stocks mentioned in Select Research offerings are listed on the NYSE or the NASDAQ. Publications in this category include the weekly newsletter The Goldman Guide, daily Market Monitor blogs, Special Reports, and premium products such as The 30-30 Report. Goldman Small Cap Research analysts are neither long nor short stocks mentioned in this newsletter. Opportunity Research reports, updates and Microcap Hot Topics articles reflect sponsored (paid) research but can also include non-sponsored micro cap research ideas that typically carry greater risks than those stocks covered in Select Research category. It is important to note that while we may track performance separately, we utilize many of the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company's individual disclosures for each engagement, which can be found in company-specific Opportunity Research reports, updates and articles. Goldman Small Cap Research has not been compensated for any content in this issue. All information contained in this newsletter and in our reports were provided by the companies mentioned via news releases, filings, and their websites or generated from our own due diligence. Economic, market data and charts are provided by a variety of sources and are cited upon publication. Stock performance data is derived from Yahoo! Finance. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, other firms, or other financial news outlets. Goldman Small Cap Research relied solely upon information provided by companies through filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report, update, article, blog, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed. This newsletter does not take into account the investment objectives, financial situation, or particular needs of any particular person. This newsletter does not provide all information material to an investor's decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the FINRA or with any state securities regulatory authority. ALL INFORMATION IN THIS REPORT OR NEWSLETTER IS PROVIDED "AS IS" WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION. For more information, visit our Disclaimer: www.goldmanresearch.com. |