PowerRatings, Slow-Moving Stocks and Oversold Bonds
Buyers edged out sellers on Monday, moving markets in general closer to overbought territory below the 200-day moving average.
In many ways our Short Term PowerRatings are little changed from Friday, with a modest number of 8-rated stocks trading above their 200-day moving averages, but few clear-cut edges to the upside or downside for stock traders or ETF traders.
As I have been suggesting over the past few days, short term traders are in a position of either (a) waiting for markets to breakdown further, creating the sort of oversold extremes that will result in quality pullbacks and potentially, a surge in buying interest pushing the stocks higher, or (b) watching markets climb into overbought territory, encouraging to look to those short or inverse ETFs with the highest Short Term PowerRatings for the next short term trading opportunities.
Arguably, Monday’s price action hinted at the latter. A growing number of short/inverse ETFs have sold off, pulling back toward their 200-day moving averages and earning Short Term PowerRatings upgrades in the process.
Still, given the volatility we know this market is capable of, it seems worthwhile to be patient here, to wait for the market to make a more distinct and determined move higher or lower before we begin placing bets on high Short Term PowerRatings stocks or ETFs.
We could start to see opportunities begin to develop in a matter of days. While the FOMC meeting on Tuesday and Wednesday may keep prices pinned down, we are very much in earnings season and the lack of an obvious move to anticipate from the Fed may actually minimize the FOMC meeting’s impact on stock prices.
In any event, we’ll let our Short Term PowerRatings be our guide. The bond ETFs I have mentioned in recent days continue to pull back and remain attractive potential trades to the upside as their 2-period RSIs decline and their Short Term PowerRatings increase.
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