SPX & NQ - optimism is back

SP:SPX   S&P 500 Index
We had a rather treacherous 2.5 months of corrections since both SPX and NQ hit their peaks in July, resulting in a 50% and nearly 38% fib retracements respectively of both indices' major AB upswing in (Mar - Jul).

SPX breached its H&S neckline briefly before finding support near major support zone (comprising 200day MA, Horizontal support, VWAP, 50% fib retracement) around 4200. Nasdaq fared slightly better and did not breach its H&S support, but teetered on the brink for days before the bulls finally won as it staged a sharp rebound last Friday.

Market breath is still mixed with Nasdaq100 leading the pack with 61% of the stocks above their 200day MA (ticker: NDTH), followed by S&P500 with only 40% of the stocks above their 200day MA (ticker: S5TH) and finally, Russell200 is weak with only 31% of its stocks above their 200day MA (ticker: R2TH).

With such mixed market breaths, stock picking skills is paramount.

While there are still a lot of strong/resilient counters out there (GOOG, META, AFL, ANET, APP, BAH, CLS, CRWD, LLY, VRT, ZS etc), there are also a lot of very weak counters that are now sweeping their (major or range) bottoms (CL, DIS, DOCU, DG, EL, RH etc). Plus many in between trying to breakup from their bases but with mixed results.

As of now, the last quarter could more bullish than not, and , and knowing when to exit or sit tight. Market participation is still rather weak at the moment and volatility appears to be the new game for this high inflation era. Hence it could still be challenging to find the right stocks at the right time (entry and exit).

Momentum/swing traders would prefer the strong stocks that continue to break higher after each retracement. The longer term investors might be more interested to do some bottom fishing (however, may risk picking a stock could remain at the bottom for a long time due to serious near term fundamental damage). For myself (swing trader), I would prefer to at least choose a stock that has broken up from a base, or to swing in and out of a strong stock.
The extreme volatility means I could be swing in and out more often than I would have prefered. And money management rules (stop loss etc) must be adhered to (easier said than done!)

This is just my own analysis and opinion for discussion and is NOT a trade advice. Kindly do your own due diligence and trade according to your own risk tolerance and don't forget that money management (ie trailing stop loss and position sizing) is (probably the most) important!
Take care and Good Luck!

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