Too Far, Too Fast?

Too Far, Too Fast?

June 22, 2023

Key Takeaway

There is no doubt that buyers have come back into the market. Confidence levels have recovered for investors; however, has the market traveled too far, too fast?  In looking at the S&P 500, I mentioned during our last Markets 'N5 (Climbing the Ladder´╗┐) that there are many positive signs within the markets right now from a technical perspective - all of the moving averages are pointing up; technical breakouts are occurring; all while MACD and RSI levels are both climbing.

This week, the market has cooled off a bit, so we are watching to see if this is a normal and healthy pullback that results in a good buying opportunity, or is it the beginning of a larger leg down to lower support levels. Time will tell. So far this year, technology and the very largest of companies have led the charge off of the bottom, with little participation from the vast majority of their index peers. Although this type of lopsided market participation is not sustainable for long, it can last a much longer than investors might anticipate.  

In the chart below, you will see that RSI is now overbought and MACD has not crossed down yet, but appears to be heading that direction; however, the moving averages all still look great. The market needs a breather, and this week may just be that, before resuming it's charge up the hill. The market can and will change on a dime, so watching these various indicators is crucial.


Cannon AIQ example: 

Below is a recent buy signal (Rockwell Automation) which we jumped on and has done very well so far. It's now a bit overbought, so we are watching to determine if it's simply consolidated it's recent gains before continuing it's rise, or about to rollover. Our plan most likely will be to take some of the profits and leave a bit of the trade on to see if it continues it's march up to the top range of it's up-channel, which would be ideal.

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