After a deep shakeout on Monday, September 20, 2021, the market reversed off its’ lows and closed near the upper part of its’ range on Friday. This type of action is very constructive as it shakes out weak hands and excessive bullishness. There is a strong possibility that a major market bottom may be in. Let's take a look at a few of the factors that contribute to a bullish market environment.
Sentiment
Sentiment got really bearish on Monday. People just can't believe the market can possibly head higher here. However, the market always seems to fool the majority, and there was an increase in put buying Monday which is a positive for bulls.
Action Of Leading Stocks
As the market dove on Monday, I noticed that I was not stopped out of core positions in my portfolio such as NVDA, PLTR, ZIM, and TSLA. These stocks found support at logical price levels which is a very bullish sign. As I noted last month, strength has been building beneath the surface for several growth stocks. Many of these leading stocks are forming very large bases and look like they have potential for strong rallies over the next few months. Take Tesla as an example, which has been building a huge base throughout 2021. TSLA continued to impress on Friday, and I added to my position as it broke out on volume. I also bought SNAP as it cleared resistance with volume coming in. I’m also seeing some really fantastic setups in MRNA and SQ which lead me to believe growth is poised for a strong fall. When I look at charts that exhibit this type of action, I can only come to one conclusion: "It's a bull market, you know!"
Index Action
We saw some great action on the Russell 2000, the S&P 500, and the Nasdaq Composite this week. I always love to see the indexes hammer off the lows on volume and end the week near the high of the range. Remember, the close is much more important than what happens earlier in the week. It is also important to note that FFTY closed at a new weekly high. This is along with the strong volume action on the Russell 2000 is an excellent sign for growth traders.
Don't Fight The Fed
Most importantly, the market continues to like the current FED policy. I always make a point to “never fight the FED.” They are too powerful and can keep uptrends going far longer than anyone can imagine. The FED is still “easy” here which provides a huge wind at the backs of traders.
Seasonality
Finally, we are approaching the fourth quarter which is usually the strongest period of the year for the stock market. While this is by no means a stand alone indicator, it’s a great icing on what looks to be a bullish cake.
Risk right. Sit tight.
-Tom
Full Disclosure: I currently own NVDA, TSLA, PLTR, SNAP, and ZIM.
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bases
bullish
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