• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock Hopeful Market Breadth Signs Emerge; Smart Money Flows into New Sectors, Watch QQQ and NVDA
Stock

Hopeful Market Breadth Signs Emerge; Smart Money Flows into New Sectors, Watch QQQ and NVDA

by August 27, 2023
by August 27, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

After all the drama over the preceding days, the takeaways from Mr. Powell’s Jackson Hole speech were ultimately pretty straightforward:

Even though the Fed will be data-dependent on its future interest rate decisions, the data, until proven otherwise, says inflation remains a problem;And that means that there may be more rate hikes.

Stocks got the message and delivered a relief rally. The market’s breadth improved, while asset rotation was evident.

Housing Sector Feels the Bond Market’s Pinch

I remain long-term bullish on homebuilders and expect a major buying opportunity in the sector will eventually materialize. But for now, patience is required.

Last week in this space, I noted: “We may have seen the top in the housing stocks, although the jury is still out on this. I’ve been bullish on homebuilders for quite a long time, but, unless something improves quickly, the best days for this group may be behind us.”

Regular readers might have been surprised about my change in viewpoint, given my long-term bullish stance on the homebuilders. As I’ve stated here multiple times, the sector has one big long term positive going for it; tight housing supplies. But the short-term looks choppy.

Again, I want to be clear on this. The long-term trend for the homebuilders (SPHB) remains up. The S&P Homebuilders Sector Index (SPHB) is trading well above its 200-day moving average. Yet the macro effects of higher bond yields and their reflection in higher mortgage rates will likely weigh on the homebuilder stocks for the intermediate-term.

The composite chart of the homebuilder sector vs. mortgage rates (Mortgage) and the U.S. Ten Year Note yield (TNX) shows the nearly perfect relationship between the three indicators, as SPHB rolled over when TNX crossed above 4% and the average mortgage rate first approached 7%. 

Apartment REITs Are Attracting Smart Money

Certainly, things could change, but, for now, the smart money is flowing away from homebuilders into the apartment rental REIT sector as tight housing supplies, the ongoing migration to the sunbelt, and stable-to-lower rents are not changing but interest rates are pushing buyers to the sidelines.

So, while homebuilder stocks sagged after Mr. Powell’s speech, the iShares Residential Real Estate ETF (REZ) held above its recent bottom. Note the bullish uptick in On Balance Volume (OBV) indicating that stealthy smart money is moving in.

Another important area of the market to watch is the tech sector, especially the AI stocks. The market initially rallied on Nvidia’s (NVDA) bullish earnings and outlook, but pulled back as the good news about AI could well be factored in. Note the emerging downslope in Accumulation/Distribution and the flattening-out of On Balance Volume (OBV) for NVDA. These are signs that short sellers are building positions (ADI) and sellers are overtaking buyers (OBV).

On the other hand, the Invesco QQQ Trust (QQQ) may have made a short-term bottom, which will be worth watching. Certainly, a sustained recovery in tech will bode well for stocks.

Finally, as I’ve noted here over the last few weeks, despite the notion that the global economy is slowing, energy stocks continue to attract money. One of the brightest spots is that oil exploration as evidenced in the shares of the iShares U.S. Oil Exploration and Production ETF (IEO).

The ETF has entered an orderly consolidation pattern between the $94 and $98 price points. ADI and OBV are off their bottoms and may weaken in the short term. But for now, if the 50-day moving average holds, this looks like a pause that refreshes.

Do you own energy or tech stocks? What’s your plan of action with the homebuilders?  Join the smart money at Joe Duarte in the Money Options.com. You can have a look at my latest recommendations FREE with a two-week trial subscription. You can also get the latest big picture news and analysis on real estate here.

Hopeful Signs Emerge; Fingers Crossed

The worst may be over in the short-term for stocks. The New York Stock Exchange Advance Decline line seems to have bottomed out after its RSI indicator hit the 30 area. Hopefully it will stick.

Nevertheless, NYAD remained below its 20-day and 50-day moving averages; thus, it could still roll over and perhaps still test the 200-day moving averages.

The Nasdaq 100 Index (NDX) is now negotiating a trading range between 14500 and 15250 with its 50-day moving average offering overhead resistance. Accumulation/Distribution (ADI) and On Balance Volume (OBV) may have bottomed out.

The S&P 500 (SPX) remained below 4500, but above 4350, where it found support twice last week. It is also below its 20-day and its 50-day moving averages. But both ADI and OBV may be bottoming out.

Again, VIX Remains Below 20

VIX has been a bright point in the market for the last couple of weeks as it’s failed to rally above the 20 area. This is good news as a move above 20 would be very negative as it would signal that the big money is finally throwing in the towel on the uptrend.

When the VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying, and it eventually leads to call buying, which causes market makers to hedge by buying stock index futures. This raises the odds of higher stock prices.

Liquidity Remains Stable

Liquidity is stable, but, again, may not remain so for long if the current fall in stock prices accelerates. The Secured Overnight Financing Rate (SOFR), which recently replaced the Eurodollar Index (XED), but is an approximate sign of the market’s liquidity just broke to a new high in response to the Fed’s move. A move below 5.0 would be more bullish. A move above 5.5% would signal that monetary conditions are tightening beyond the Fed’s intentions. That would be very bearish.

To get the latest information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options

Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit https://joeduarteinthemoneyoptions.com/secure/order_email.asp.

You Might Also Like
  • Intermediate-Term Participation Levels Are Very Overbought, and They Are Weak Long-Term
  • The Bull Case–Why We’re Likely to See Stocks Move Higher
  • Three ROCs can be Better than One
  • Welcome to the Tom and Jerry Markets
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Week Ahead: Corrective Undertone To Persist So Long As Nifty Below These Levels; These Sectors To Stay Resilient
next post
Trump lawyer calls for Special Counsel Jack Smith to be investigated, says charges are all ‘theatrics’

You may also like

Tech Stocks Plunge: What This Means for Investors

November 16, 2024

This is GOOD STUFF: A Bullish Engulfing Pattern for Semiconductors!

August 14, 2023

The SPY Knocks on the Door of Resistance

January 29, 2023

Growth Stocks are PLUNGING Now? Blame Fitch Downgrade!

August 3, 2023

GNG TV: Enough Leadership for Bull Market After October Lows?

January 19, 2023

New PMO Crossover BUY Signals Across All Major Indexes

November 4, 2023

What’s Next for QQQ: Super Bullish to Super Bearish

July 1, 2023

Find Aggressive Entry Opportunities & Tradeable Trends with Multi-Timeframe Charts

December 14, 2023

Chart and Trend Signals Align for Datadog

June 24, 2023

Unleash the Power of BPI: The Key to Boosting Your...

February 20, 2025

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025
    • NBA star Russell Westbrook launches AI-enabled funeral planning startup

      May 7, 2025
    • Use This Multi-Timeframe MACD Signal for Precision Trades

      May 7, 2025
    • Judge allows lawsuit over Burger King’s Whopper ads to move forward

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,630 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,185 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,064)
    • Investing (538)
    • Stock (2,529)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against...

      May 7, 2025
    • NBA star Russell Westbrook launches AI-enabled funeral planning startup

      May 7, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,064)
    • Investing (538)
    • Stock (2,529)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Why This Latest Bull Market Advance...

    February 4, 2024

    Energy Stocks in the Spotlight: A...

    September 6, 2023

    Market Breadth Gains Momentum; Don’t Fight...

    December 21, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here