Protecting the Nest Egg – May 17, 2021

The S&P 500, the Dow and the Nasdaq all closed lower. The Dow was the least damaged, with the Nasdaq underperforming again. The normal breadth indicators finally broke on the Nasdaq. The SSI indicators are still a little weak, as the faster indicators are at 50% or less after dipping sharply and bouncing to close the week. The Nasdaq probably needs to join the party to turn these up.

I am watching financials to see how they behave here. On this market bounce, we really need tech to join the party. Tech, semi’s and discretionary continue to be the weakest areas. The newsletter below shows a number of commonly watched charts hanging on in last gasp territory. Tesla’s down $200 since the slide started. Gulp!

I mentioned last week that I remain concerned about the Nasdaq weakness, but at this point it just seems a strong rotation rather than outright selling. We actually saw more weakness this week as numerous charts pushed lower to start the week. Stock market indexes don’t usually have church spire tops like the lumber chart has this week. But as tech investors continued to get their hands punished by pushing the buy button, it gets harder to remain positive.

Some signals started to show up in utilities, while the high-flying commodities did take a break after last week’s euphoria. Having the Staples sector lead this week, is not that promising either.

Summary: Some weakness started to invade the charts like the short-term SSI indicators were suggesting. This week, I have laid out the strength indicators in way more detail. I have 5 charts that will be part of the regular newsletter now due to the number of requests for more information. As the SSI’s all turned up to end the week, I am buying a few stocks and continue a large position in energy. But I couldn’t be more aware about the potential for downside pressure with the weakness in the McClellan oscillators laid out in the video this week. Tight stops will be key.

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