February 23, 2022

The Nasdaq slightly undercut the January lows today, bringing its loss to 19.6% since the November top. This compares with the S&P 500's decline of 12.4%.

The chart below compares the volume on this comedown vs. the January low. This reduced volume is normally what would create the conditions for a positive test of a prior low. It is somewhat curious that volume did not pick up today on this test of a widely-watched prior low. This tells us there is a certain amount of complacency.

The market may be moving on the uptick in inflation that would be expected if Russia removes from the market the oil it normally sells to Europe. The higher inflation goes, the more likely the Fed will overshoot with its tightening campaign, sending the economy into recession.

On the bright side, growth stocks can be expected to lead the next bull market. They are already the most beaten-up segment.

In the meantime, we must remain patient and give the market a chance for a contra-trend rally. There is no interest in longing the cyclicals on this next rally. I am skeptical that any of these, such as the oils, shippers, metal ores, and fertilizers, would offer attractive reward-to-risk ratios, though this can always change.

Instead, the rally would give the market a chance to work off its extreme oversold condition so that the table might be set for another short-selling campaign.

In Thursday's video, we will look at one market segment that is not set up currently, but merits our attention nonetheless.

In summation, cash is king.

Kevin Marder

Trading Lessons
Introduction to the service (38:00)
Money management and risk management (20:27)
Bread and butter pullback (11:10)
Bread and butter pullback: Pt II (15:09)
Bread and butter pullback: Pt III (31:48)
Bread and butter pullback: Pt IV (30:16)
System R
Short-selling video (25:53)
Wyckoff spring setup (2:30) 
5-minute breakup test (8:01)