Market Update: The Trend is Our Friend
There's an old saying among traders that "the trend is your friend...until it ends."
In my opinion, it's a good phrase to keep in mind at a time like now.
I mean, I'm an optimist by nature - but also a contrarian and a realist. So there's a part of me that wonders "The market can't really go much lower than it is now, right? There is such a thing as being too bearish, and maybe I'm on the verge of crossing that line."
But the realist in me can't help but note how our old friend ARK Innovation ETF (ARKK) had a sharp downdraft last week. In past weeks, I've said many times "If you want to gauge where the market is going, short or long-term, just keep watching ARKK."
If the market really has the chutzpah to rally in a decently important way - turning bears into bulls at least for a few weeks or a few months, well then ARKK - as the largest non-index speculative ETF out there - has to move higher, right?
But what ARKK and other important charts of the major indexes are saying so far is that every big or little rally is an excuse to sell, not buy.
Meanwhile, the S&P 500 looks somewhat better. But that's because the index has a great many energy companies inside of it - which are helping to offset the poor-performing mega-cap tech stocks like Apple (AAPL) and Google (GOOG) which had their worst weekly losses in 2 years:
In fact, I'm very cautious about owning energy stocks here. It's the proverbial "crowded trade" much as Apple and Tesla were over the summer for many Wall Street traders.
The chart for oil certainly looks like it wants to break out, by anyone's standards:
Yes, there's some talk among China-watchers that Xi's braintrust may change their draconian COVID policies (talk which may or may not turn out to be true), which would seem likely to help underpin oil prices.
On the other hand, if a US economic recession is put into play - thanks to the Federal Reserve's interest rate policies - then it's hard to make a case that oil can really move that much higher.
And if oil prices move lower, the S&P 500's chart won't look so hot anymore.
So this is just my way of saying...be careful. Keep your overall portfolio risks low. If the markets are really so bearish and tightly wound that they're going to move higher in a sustained way...we'll see those possibilities show up in our charts soon enough.
But until that happens....the trend is our friend. And at least for the moment, it's still pointed lower, unfortunately.