Pullback! Bears Get More To Chew On
Two straight down days for the stock market. We haven’t seen that since mid-November. The mid and small caps have pulled back more. Seasonally, this is a mild soft patch that lasts into the 20th.
Some things I am thinking about into January. Is this just another mild pullback that will lead to new highs on the next push? Or, will stocks bounce over the holidays and roll over harder come January like they did in 2022? Could both scenarios happen?
As I have been mentioning, we do have some cracks in the pavement, especially on the sentiment front where the masses were hugely bulled up. The only way to correct that is to see prices decline. What we never know is by how much. In strong bull markets, investors turn bearish fairly quickly and usually by the time we a 5% pullback. In emerging bear markets, the decline usually knifes to double digits.
The chart below is among the most important as the semiconductors are a significant canary in the coal mine. Besides Nvidia, we have basically steered clear of the group since we got lucky selling them in the middle of the year. While they do not have to lead all of the time, they also cannot break down which they are getting closer and closer to doing.
I don’t think 2025 will look anything like 2024. Preliminarily, I am calling 2025 the year momentum was broken
On Monday we bought SSO. We sold QQQW. On Tuesday we bought QQQW.
