In Tuesday’s weekly commentary I showed that the recent retreat for the market seems to be nothing more than the 7th test of the 50-day moving average this year, says Steve Reitmeister, editor of Reitmeister Total Return.
Meaning something that happens all the time and is no big deal. Indeed, even Friday ’s action was just another test of that level. And because there truly is no pressing reason for further downside, then I suspect stocks will bounce this week.
However, every now and then the market is due for a good housecleaning, which sweeps away complacency and excess. So that is why would review the two next important technical support levels:
4,327 = 100-Day Moving Average
4,102 = 200-Day Moving Average
I would be downright shocked for us to reach the 200-day moving average at this time. Just not enough truly worrisome news to push us down to that level. Thus, I suspect most investors would be very happy to buy any dip under 4,400 subduing any further downside pressure.
Reity, I thought you were a fundamental investor...so what’s with all the technical analysis and price action talk today?
Indeed, you are right. I am a FIRM believer that the fundamentals are the True North of investing and that stock prices will find their way there over time. But in the short run computers rule the day and they are more trained on concepts like momentum and technical analysis.
Therefore, if this downward move is not borne of a true shift in fundamentals, then it means that the action is technically driven. That is why my focus has turned to the technicals this week.
As for our portfolio we had a truly glorious +1.99% session last Wednesday more than 2X the S&P. To end the week, our losses were in line with the rough session for the S&P.
Gladly there were some standout performers like Group 1 Automotive Inc. (GPI), which is on a tremendous run of late from the $154.41 low on 9/7 to the $182.41 close on Friday. Plus, a shout out to Best Buy (BBY), ESS U.S.Global Jets ETF (JETS), and 20+ Year Treasury ProShares (TBT) for ending the day in the green.
It is events like GPI that prompts me to give more patience to other companies with equally good fundamentals, but price action has been tame.
No, that doesn’t mean infinite patience. But if they are not truly harming the portfolio then we can wait a few more beats for them to find their stride.
Learn more about Steve Reitmeister at StockNews.com.