A market that was wildly overbought came to its senses Wednesday on word of the worst inflation reading since '90. Growth shares in particular were hit hard, with the Nasdaq off about twice that of the S&P 500.
Ark Innovation ETF (ARKK), a proxy for aggressive growth issues, fell 3.34%, while our average Watch List stock was off 4.20%.
As previously discussed, higher inflation and interest rates will almost always impact growth stocks the most.
Coming into Wednesday, it was difficult to find anything attractive enough technically to merit our participation. The thin Focus Lists have reflected this.
At this juncture, the Nasdaq has lagged the S&P for four days running. This, as well as the selling in growth, is viewed as normal for a market beginning to be concerned that higher inflation readings may not be transitory.
From last Friday's peak to today's low, the retracement was 27% of the five-week advance. A normal retracement would be at least 33%.
As is usually the case, positions put on just before the averages pull back stand a fair chance of being stop-outs themselves. We will be on the lookout for the issues that bounce back to new-high ground first like tennis balls. These may result in pullback entries.
The following are believed to be the most attractive opportunities in the $13+ market for our strategy of speculation.
In summation, it is logical to expect the Nasdaq to pull back following a unidirectional move of 17 wins in 19 days. We will be watching for possible pullback entries if this occurs. In the meantime, there is virtually nothing providing us with an attractive entrance.
Introduction to the service video (38:00)
Money management and risk management video (20:27)
Bread and butter pullback video (11:10)
Bread and butter pullback: Pt II video (15:09)
Bread and butter pullback: Pt III video (31:48)
Bread and butter pullback: Pt IV video (30:16)
Short-selling video (25:53)