The Long Overdue Pullback Hits Wall Street

Facebook
Twitter
LinkedIn

 

Week In Review: The Long Overdue Pullback Hits Wall Street

The long overdue pullback finally hit Wall Street as the major indices pulled back from some of the most overbought levels I’ve seen since the 1999-2000! Thankfully, we didn’t panic and instead we had a plan and traded our plan which is exactly what we are supposed to do. I wouldn’t be surprised to see a steeper 5-15% pullback unfold over the next few weeks as we approach the election. For now, the next (important) level of support to watch is the 50 DMA line and as long as the major indices remain above that level then the bulls remain in clear control. 

Monday-Wednesday’s Action:

Stocks rallied nicely on Monday which was the last trading day in August. August was a very strong month for the stock market as the S&P 500 surged over 7%, making August the strongest month since April 2020. In fact, there were only a handful of down days for the entire month. Separately, Apple did its 4 for 1 split and Tesla did its 5 for 1 split on Monday. On Tuesday, the market continued to race higher helping the S&P 500 and the Nasdaq both hit new record highs. The huge winner was Zoom (ZM) as the stock vaulted 40% after smashing numbers last quarter! Stocks rallied sharply on Wednesday as the lagging areas of the market got a strong boost as money flowed out of some of the stronger areas.

Thursday & Friday Action:

Stocks fell hard on Thursday as many of the overbought and over extended tech stocks finally pulled back. For weeks, I’ve been saying that the market is extremely overbought and way overdue to pullback and that’s exactly what is happening. For now, this is a normal pullback, but I want to see how the market reacts near support (it’s moving averages). Before Friday’s open, the government said non-farm payrolls rose by 1.37 million in August and the unemployment rate fell to 8.4% as the U.S. economy continued to recover.

Market Outlook: Flood The System With Liquidity 
Global governments and global central banks stepped in with massive rate cuts and other “aid” packages to help “stimulate” both Main Street and Wall Street. So far, it is working as intended. As long as March’s lows hold, the market will likely move sideways to higher. On the other hand, if March’s lows are breached, then look out below. As always, keep your losses small and never argue with the tape.

Do You Know The Most Under-Valued Stocks In The Market?
 Our Members Do. Take a FREE TRIAL – CheapBargainStocks.com

Facebook
Twitter
LinkedIn

Here are more articles you may like

Claim Your Free Guide Today

Give us your email and we will give you the tools to change your life. 

FREE 7 DAY EMAIL COURSE

Learn about Early Entry Points & much more...

© ChartYourTrade | Contact us: website@chartyourtrade.com

Disclaimer: All communication from ChartYourTrade is general in nature and for educational and general informational purposes only. Under no circumstance should it be considered personalized investment advice. All our work is general in nature and not specific to any one person. All the information on this site and/or that originates from us, or any of our partners or affiliates, is for educational and informational purposes only and is NOT a recommendation to buy or sell anything. To avoid any conflicts of interest, we do not have a working relationship with any of the companies mentioned in our work. Furthermore, we may have a long, short, or no position in any, or all, of the names that appear in our work and they may change at any time without notice. Investing and trading in capital markets or using margin carries a high level of risk and may not be suitable for all investors. Leverage can work against you as well as for you. Before you decide to invest or trade in capital markets you should carefully consider your investment objectives, level of experience, and risk appetite, among other factors. The possibility exists that you could sustain a loss of some, all, or more of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with capital markets, investing/trading, and seek specific investment advice from an independent financial advisor and other professionals. Remember all the information we provide is for educational and general informational purposes only and is subject to change without notice.

Charts and Data are courtesy of MarketSmith Incorporated. Join MarketSmith here.

Terms of Service