Swing Trading Stock Market Outlook for the week of September 26

Market conditions are bad. I don’t take new long swing trades until conditions improve. I discuss below what that would look like. I don’t have long positions and I’m in cash. No analysis listing this week since taking trades is probably at least a week away for me (or more… however long it takes for conditions to improve).

Here is a quick recap video of the current state of the stock market and what needs to happen for me to start buying swing trading stocks again.

How do stock indices move?

I look at 4 different US indices because they each tell a different story about the overall health of the stock market. The stock market is at its healthiest – and swing trading stocks on the long side are the most profitable – when all of these indices are trending up. Here is what each of the 4 clues represents:

  • Nasdaq 100 – Technology stocks
  • S&P 500 – Large US Companies
  • NYSE Composite – A wide range of stocks, varying in size and industry
  • Russell 2000 – Small Business

2 Canadian stock indices are also included. The Composite tracks large companies, while the Venture tracks very small companies.

Charts are provided by TradingView – charts I personally use.

All indices had a difficult week. From a price action perspective, all indices are in short-term downtrends in the midst of a longer-term downtrend.

Downtrends are made up of highs and lows, and that’s what we currently have in the US and Canadian indices.

Uptrend behavior is higher swing highs and higher swing lows. Until that happens, these indices are weak and represent what is happening in most stocks.

State of Market Health Indicators

The following chart shows the market health indicators that I monitor. They tell me the state of the stock market as a whole, and whether it’s a good time to swing trade individual stocks.

S&P 500 chart with poor market health indicators September 25

Market health indicators are poor.

  • 4% of S&P 500 stocks are above their 50-day moving average. 12% of all US stocks are above their 50-day moving average. It is usually much easier to make profitable trades (on the long side) when more stocks are above their 50-day average. When this indicator is below 50%, it tends to be sideways or down for most stocks/indexes. Poor.
  • Volume is currently irrelevant.
  • The dark blue bars are the daily percentage movement of the S&P 500. Big moves are associated with downtrends and turning points. Small values ​​are associated with an uptrend. Values ​​of -2 are a warning sign whenever they occur. A drop of more than 3% on September 13. Nearly 2% drop on September 21 and 23. Poor.
  • The blue line is the cumulative NYSE Advance-Declin Line. It tends to go down. Any strength he showed was lost. Poor.
  • The blue columns are NYSE upside volume divided by total NYSE volume. It tracks buying and selling enthusiasm. A day of decline of 93% on September 6. Poor.
  • The ultimate indicator is the number of quality setups and the operation of trades. Once the indicators turned negative in mid-September, almost every stock I was watching or trading started to tumble. A few managed to hold on, but that didn’t matter. If we are monitoring 10 stocks, we want 7 of them to do well. Right now, maybe 1 or 2 out of 10 are doing well. And they don’t even really progress, they just hold their ground. These are not favorable conditions for trading. Expect almost everything you watch to skyrocket. Much better chances of catching winners. So for now, stay out.

My entire stock swing trading method is covered in the Complete Method Stock Swing Trading Course. Now is a great time to review the material and prepare for the opportunities that arise.

Moving sectors

Everything changed last week.

Utilities and defensive stocks had the least bad performance… which is still not good.

Over the past month and past 3 months, financials, industrials and consumer cyclical stocks are in the top half on both time frames.

I’m more interested in seeing which sectors start to emerge when market health indicators improve. These could be sectors that will lead the next bull market.

Sector performance provided by Finviz.

breakdown of sector performance over several periods as of September 25

What I’m doing right now

I am not adding new long swing trading positions at this time. I will wait for conditions to improve.

Still day trading… it saved me money and provided income when swing trading was slow in 2022. I day trade EURUSD (here’s how) and a stock day trading quote will come out below little.

JOIN ME FOR WEEKLY TRADING DISCUSSIONS. Mondays, Wednesdays and Fridays. Ask questions about trading, get advice and discuss current market conditions.

By Cory Mitchell, CMT

Disclaimer: Nothing in this article is personal investment advice or advice for buying or selling anything. Trading is risky and can lead to substantial losses, even more than those deposited if you use leverage.

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