A Possible "Good Start"

PUBLISHED Feb 5, 2023, 1:18:10 AM        SHARE

img
imgTom Hamilton

February 3, 2023 - A nice breakout of the trading range, but significant weakness was shown on Friday. There are a number of positive momentum and breath indicators out there but markets (very) rarely go up or down in a straight line. Thus I’m expecting a retracement back to around the 11492 price level (NASDAQ Composite Index). After a retracement we will have a much better idea of the true strength of a potential rally higher.

Earnings or potential earnings are what drives the stock market over the long term and this week was not a good one for US Tech companies. While Meta *(a.k.a. facebook) *had a good report, Google, Amazon and Apple did not. These companies did “OK” but gave poor earnings guidance going forward.

The US jobs report is one reason for providing the fuel for the past weeks market performance. The hope is for a “soft landing” and the FED helped that out with Powell indicating maybe only two more small rate increases this year. That’s all it took for the move higher with the FOMO (fear of missing out) bringing the quick surge higher. (“The Bottom Is In”) I doubt if it will last based on the rather modest volume during the week. This leads one to think that the price surge was driven more by the options market (covering options short positions) than by “real buying”.

The US Dollar dramatic move higher on Friday certainly did not help this market sustain the move. Next week should be interesting to see if there is a follow through of Bullish Dollar sentiment. (Note: Dollar higher is generally not Bullish for US stocks.) The Short Term Sector Strength table is shown attached –

So I’m getting more Bullish in the long term but expecting a correction in the short term, at least back to the breakout levels, perhaps lower. The economy remains strong but earnings will continue to be stressed.
And . . . the deficit crisis would really throw a major monkey wrench into the whole thing. Sad, but true. Have a good week. …………. Tom ……………….

Price chart by MetaStock; table by www.HighGrowthStock.com. Used with permission. More information at: www.Special-Risk.net .



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