October 27, 2021

This is a brief report as there is nothing in the way of pattern setups to discuss.

Stocks are in a buy-the-rumor, sell-the-news reaction to the Q3 earnings reports. The documented tendency for the technology bellwethers to advance in the 1-2 week period ahead of their reports has played out according to the script.

It is logical to expect price to pull back to the yellow support area -- an area of previous congestion -- and form a handle, though this is just one of a few possible scenarios.

The NYSE advance-decline line narrowly missed confirming the S&P's recent high this week. It remains in a breadth divergence begun June 24 and bears watching as a longer-term signpost.

We are always interested in the unexpected. Since the market's historical tendency is for the November-January period to be the best such period in the year, it will be telling if a rally does not develop this time around. If so, then the market's underlying fiber may be weaker than most believe.

As noted in Sunday's report, "there are not scads and scads of stocks setting up, ready for breakout."

This provides us with valuable information, namely that large investors are still not entirely sold on this three-and-a-half week rally. This is believed to be a function of rising Treasury yields -- which are anathema to growth issues -- and a Fed perhaps on the verge of starting the taper of its bond buying program.

To be sure, there may be earnings-related jumps in Alphabet (GOOGL) and Microsoft (MSFT), but these are institutional must-owns which are not representative of the broader technology/growth segment. If large investors are going to own anything, these are the ones they are most comfortable with.

At the moment, numerous speculative growth stock glamours are in two-day pullbacks. It is preferred that such patterns show a good close prior to entry, but the current crop invariably shows poor closes. This matches what we see in the averages themselves. Thus, none of these are worthy of our consideration.

Our position in Direxion Tech Bull 3x ETF (TECL) has given us exposure to the broad technology sector instead of owning some of the bellwethers as we have done in the past.

On Holding (ONON), a Swiss shoe and apparel retailer, is an issue that is being monitored. It came public in September.

Progyny (PGNY) has drifted down to being 6% from the pivot and has been removed from the Focus List pending its upcoming earnings report.

Due to the dearth of pattern setups, there are no actionable issues on the Focus List.

In summation, a buy-the-rumor, sell-the-news reaction to the current crop of earnings reports has typified recent market action. Fresh-money buys are off the table at present due to a near-complete absence of pattern setups. Let's cool our heels for the moment and wait for new opportunities to present themselves.

Kevin Marder

Trading Lessons
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)
System R
Short-selling video (25:53)