{"id":80194,"date":"2023-11-03T08:06:16","date_gmt":"2023-11-03T12:06:16","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/are-investors-walking-into-a-monster-bull-trap-watch-for-these-signals-says-portfolio-manager\/"},"modified":"2023-11-03T08:06:19","modified_gmt":"2023-11-03T12:06:19","slug":"are-investors-walking-into-a-monster-bull-trap-watch-for-these-signals-says-portfolio-manager","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=80194","title":{"rendered":"Are investors walking into a monster bull trap? Watch for these signals, says portfolio manager."},"content":{"rendered":"

\u2018Tis the season to be jolly? The S&P 500
\n SPX
\n is teeing up for its best week in roughly a year, with Thursday\u2019s blowout performance nudging some to say the year-end rally is under way. <\/p>\n

\u201cStocks behaved as if the end of tightening is equivalent to rate cuts themselves,\u201d says Michael O\u2019Rourke, chief market technician at JonesTrading, of a big factor behind that rally \u2014 the view that the Fed is done hiking for this cycle. <\/p>\n

\n

While weekly gains may be in the can, Friday follow-up is looking tough, with futures down ahead of jobs data and after Apple disappointment.<\/p>\n

The year has been full of touch-and-go rallies, as this chart from Mott Capital Management\u2019s Michael Kramer shows \u2014 he highlights a 3-wave pattern for S&P 500 rallies since mid-July: <\/p>\n

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Our call of the day<\/strong> from RTM Capital Advisors\u2019 chief investment officer and portfolio manager,\u00a0Mark Ritchie II<\/a>, says there are clear signals to read for investors who want to know if they\u2019re walking into a \u201cmonster bull trap,\u201d especially after Thursday\u2019s big move. A bull trap happens when investors buy a stock or market thinking a selloff is over, only to get trapped and lose more money as selling resumes on that asset.<\/p>\n

\u201cWe\u2019ve been in a pretty nasty tape really since the end of late July, early August\u2026the peak to trough decline in the small-caps was close to 20%. You almost had a bear market decline within a larger decline over the last few months,\u201d Ritchie told Real Vision in an interview late Thursday.<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

\u201cThis entire year we\u2019ve seen momentum-driven snap backs rallies in equities and the breadth doesn\u2019t confirm really\u2026.the overall participation from stocks has been lackluster all year,\u201d he said. <\/p>\n

While some will chalk up Thursday\u2019s rally to short covering \u2014 \u00a0buying specific stocks to close out a bearish position \u2014 or a so-called dead cat bounce, he sees slivers of hope. \u201cI think it was constructive to say this rally has a little bit of juice because we saw better than nine to one buying volume, nine times the upside versus the downside,\u201d on the NYSE, he said.<\/p>\n

But he also says he\u2019s sitting on \u201can awful lot of cash,\u201d right now as he waits for real clear signs of whether the real buyers are showing up. \u201cRight now, we want to be watching [to see] is this rally initially met with distribution or selling. If you look since the highs in late July, August\u2026we have not had more than a couple of days rally that has not been met with distribution,\u201d he says. <\/p>\n

He defines distribution as \u201ca down day in the general market on higher volume than the prior day.\u201d<\/p>\n

\u201cAnd so even looking at the strongest of the indexes, say the Nasdaq
\n COMP,<\/span>
\n when you had a day like yesterday or today, within three to five days, it has been met with selling,\u201d said Ritchie.<\/p>\n

\u201cAre you getting buying? And then as you watch in subsequent days, if there\u2019s no follow-up buying and then you see a lot of net selling coming in, that tells you what you need to know, meaning there\u2019s still supply out there in the market and any buying that subsequently came in was probably more of a short-covering type nature,\u201d he said. <\/p>\n

\u201cThis is why everybody loves to label every bear market snap back as just short covering, until it rips their faces off and keeps running. Well that\u2019s just because there\u2019s more buying that\u2019s continuing to come in, where when it\u2019s just a dead cat bounce or that sort of bear market rally it fades quickly,\u201d he explains.<\/p>\n

So the market needs to see a \u201cchange in character,\u201d from over the last few months when rallies have faded due to those enormous buyers and sellers of stocks just turning into net sellers into market strength. <\/p>\n

Ritchie, the offspring of famed trader Mark Ritchie, said he gets caught in market traps all the time, but that is the nature of the business, and anyone who tries to be right all the time usually ends up losing big. <\/p>\n

\u201cIf you buy good stocks breaking out of bases with good fundamentals, you can do well regardless of what the Fed is doing,\u201d he said. <\/p>\n

The markets<\/h2>\n
<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

Stock futures
\n ES00,
\n -0.07%<\/bg-quote><\/p>\n

YM00,
\n +0.04%<\/bg-quote>
\n are holding near the flat line, with the exception of the Nasdaq-100
\n NQ00,
\n -0.21%<\/bg-quote>,<\/span>
\n which is down following those Apple results. Treasury yields
\n BX:TMUBMUSD10Y<\/p>\n

BX:TMUBMUSD02Y
\n are also holding steady after Thursday\u2019s big backup, with the dollar
\n DXY
\n steady, while oil prices
\n CL.1,
\n +0.81%<\/bg-quote>
\n are modestly higher. <\/p>\n

The buzz<\/h2>\n

Nonfarm payroll data for October is due at 8:30 a.m. and is expected to show 170,000 jobs created, versus 336,000 in September, with hourly wages rising and the unemployment rate holding steady at 3.8%. <\/p>\n

The Institute for Supply Management\u2019s services index is due at 10 a.m. A couple of Fed speakers are mixed in, with the Fed Vice Chair for Supervision Michael Barr due to speak at 8 a.m. and Richmond Fed President Thomas Barkin at 10 a.m.<\/p>\n

Apple shares
\n AAPL,
\n +2.07%<\/bg-quote>
\n are under pressure as revenue fell for a fourth straight quarter, though just beating analysts expectations at $89.5 billion. China sales fell short and overall guidance was disappointing, but Sunny Optical
\n 2382,
\n +5.28%<\/bg-quote>
\n and other Chinese smartphone suppliers rallied.<\/p>\n

Opinion:<\/strong> Apple\u2019s losing revenue streak could stretch into the holidays<\/p>\n

Square parent Block
\n SQ,
\n +7.37%<\/bg-quote>
\n is rallying after announcing buybacks and a big earnings goal. DraftKings
\n DKNG,
\n +6.43%<\/bg-quote>
\n is climbing on upbeat results and a guidance boost, while Paramount Global
\n PARA,
\n +10.37%<\/bg-quote>
\n is up after the streaming giant posted forecast beating results. <\/p>\n

On the downside, Bill Holdings
\n BILL,
\n +1.37%<\/bg-quote>
\n sank 30% after the financial software group cut sales guidance and flagged worries about inflation and consumer demand. Fortinet
\n FTNT,
\n +0.49%<\/bg-quote>
\n is down 17% on a revenue estimate miss from the cybersecurity group.<\/p>\n

Best of the web<\/h2>\n

Sam Bankman-Fried was found guilty of siphoning billions in customer money in the FTX collapse,<\/p>\n

Here\u2019s what the zoo can tell us about a slowing economy.<\/p>\n

The \u2018biggest threat to global order since the 1930s\u2019 is under way and every CEO is talking about it.<\/p>\n

The chart<\/h2>\n

An online marketplace that\u2019s barely on the investor radar \u2014 Temu \u2014 is gobbling up market share, says a team at Morgan Stanley led by Edward Stanley. Observe their chart:<\/p>\n

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Temu, which has a cohort of loyal female shoppers, is operated by China\u2019s PDD Holdings
\n PDD,
\n -1.57%<\/bg-quote>.<\/span>
\n Since its U.S. launch in September 2022, Temu has expanded to 47 countries, and as of last month, its app was downloaded 223 million times, with 120 million monthly active users and 43% of those coming from the U.S., notes Stanley. \u201cWith most generalist eyes still on Obesity baskets, companies perceived to be challenged by a rising Temu threat \u2013 notably the legacy incumbents \u2013 could plausibly be the next challenged group of stocks the market turns its attention to.\u201d<\/p>\n

The tickers<\/h2>\n

These were the top-searched tickers as of 6 a.m.:<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
\n Ticker<\/p>\n<\/td>\n\n Security name<\/p>\n<\/td>\n<\/tr>\n
\n AAPL,
\n +2.07%<\/bg-quote>\n <\/td>\n		\n Apple<\/p>\n<\/td>\n<\/tr>\n
\n TSLA,
\n +6.25%<\/bg-quote>\n <\/td>\n		\n Tesla<\/p>\n<\/td>\n<\/tr>\n
\n NVDA,
\n +2.79%<\/bg-quote>\n <\/td>\n		\n Nvidia <\/p>\n<\/td>\n<\/tr>\n
\n AMC,
\n +4.59%<\/bg-quote>\n <\/td>\n		\n AMC Entertainment<\/p>\n<\/td>\n<\/tr>\n
\n NIO,
\n +4.56%<\/bg-quote>\n <\/td>\n		\n NIO<\/p>\n<\/td>\n<\/tr>\n
\n AMZN,
\n +0.78%<\/bg-quote>\n <\/td>\n		\n Amazon.com<\/p>\n<\/td>\n<\/tr>\n
\n PLTR,
\n +20.44%<\/bg-quote>\n <\/td>\n		\n Palantir<\/p>\n<\/td>\n<\/tr>\n
\n MULN,
\n +9.85%<\/bg-quote>\n <\/td>\n		\n Mullen Automotive<\/p>\n<\/td>\n<\/tr>\n
\n GME,
\n +4.84%<\/bg-quote>\n <\/td>\n		\n GameStop<\/p>\n<\/td>\n<\/tr>\n
\n SQ,
\n +7.37%<\/bg-quote>\n <\/td>\n		\n Block<\/p>\n<\/td>\n<\/tr>\n<\/table>\n

Random reads<\/h2>\n

Amazon founder Jeff Bezos is ready to start using his Miami mansions.<\/p>\n

Jedi rats?<\/p>\n

Need to Know starts early and is updated until the opening bell, but\u00a0sign up here\u00a0to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.<\/strong><\/p>\n<\/p><\/div>\n