Stocks are up on bad news? Now what?
October 14, 2022
Knox Ridley
Portfolio Manager
Weekly Broad Stock Market Levels
Last week we pointed out the importance of the U.S. Dollar and how it is breaking global markets. The higher the dollar goes, the more we see global inflation rise. This led to the Bank of England reversing course with inflation high, and now we are seeing various European countries follow this trend. With China and Japan, now, as net sellers of our debt, who will step in and buy treasuries? Rates will have to go up to find buyers and with the US debt load at elevated levels, there isn’t much room before the FED likely has to step in.
This week, we look at how the US dollar made a lower high, while the broad market made a lower low. This divergence, along with many other stocks and markets not following the S&P 500 lower, had us on high alert for a market reversal. We may go down one more level, but the extremes we are seeing both sentiment and selling pressure rival what we saw in March of 2009. Eventually, there is no one left to sell, which we believe could be playing out right now.
We think a year-end stock market bounce is underway. As a result, we took off half of our hedge when the S&P 500 was below 3500 and went on a buying spree this morning, where we bought 2 semiconductor plays and a cloud play, one of which is up 20% since we sent out trade notifications to our readers. Now we need to follow through. There are 3 big-picture patterns that we believe are playing out, and in this video, we identify the overhead levels to start getting cautious again.
I detail this for you more below and also feel free to check out my weekly webinars on YouTube where I discuss broad market levels.
10/13 Broad Market Levels Timestamps
00:00 - Where the Stock Market is Going
00:27 - Warning Signs from August 10, 2022, | Read here: This is Still a Warning Sign - Broad Market Analysis
03:36 - Extreme Selling Conditions and a Bullish Reversal
04:47 - Stock Market Divergences
07:12 - The Primary Scenario: The Expanded Flat Correction
08:27 - The Second Scenario: The Green Count
09:33 - The Third Scenario: Going Down Into the C Wave
10:40 - Key Broad Market Levels
13:00 - Key Reversal
14:36 - Supporting Markets
16:50 - Subscribe for More Free Analysis
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On the I/O Fund premium site, we provide weekly webinars that discuss what the I/O Fund is buying and selling. We also have a proprietary hedging signal that we monitor in real-time. Following the analysis, we provided for free on YouTube last month “This is Still a Warning Sign” and also in this article “Why the Next Two Weeks Could Determine 2022” we hedged going into the CPI number for a nice gain in a tough market and have had a hedge in place most of September
To watch more stock market analysis videos, follow me on YouTube here or sign up for the I/O Fund free newsletter to be notified when I publish the next weekly webinar.
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About I/O Fund Portfolio Manager Knox Ridley
Knox Ridley began consulting on portfolios in 2007 and is an experienced growth investor in both bull and bear markets, which is hard to find these days. As the portfolio manager of the I/O Fund, he beat the top-performing funds on Wall Street in both 2020 and in 2021. His real-time trade notifications to premium subscribers have garnered 27 entries with over 100% gains in the last two years. Knox began his career as an ETF wholesaler in 2007 before becoming a portfolio consultant for large RIAs, FAs, and Institutional accounts. He is very keen on macro trends and is trained in Fibonacci Trading, Elliott Wave theory, as well as Gann Cycles. He also uses classical technical analysis to manage risk and identify great risk/reward setups. Knox is known for increasing and decreasing allocations for record-breaking returns.
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