I am always entertained by the explanation pundits give about why the market is doing something. In the morning, the market was dropping because the job numbers were too good. By the afternoon, it was clear AI stocks were bearing the brunt of the pullback. Not sure why they gave the job reports excuse initially when most of the stock markets around the world had already fallen before the market in the US even opened. For example, the South Korean stock market was down 10% before anyone in the US was even out of bed. The job numbers had not been reported yet.
The news cycle on Friday reinforced my belief that technical trading is the way to go. The news does not matter. The reaction to the news is what is important! On Friday, the real reason for the sell off was not even reported until after the damage had been done.
With that said, I keep going back to my post from a few weeks ago about bond rates vs stock prices. When they both go up, somebody is normally wrong…and it is normally stocks.
Somebody is Wrong!
NHNL is negative, so is the capitalized NHNL. Not surprising given the sell off on Friday.
What makes me think a deeper pullback is more likely is the rolling 52-week NHNL. A convincing bearish divergence has formed and the last few times that has happened, the market pulled back.
This is not a prediction, just the more likely scenario. The market pulled back from being overbought on the daily and weekly timeframes, but is still a little overbought on the monthly timeframe. No idea what will happen this week, but it is a good idea to stay cautious. This is still a very expensive market!
