Wednesday was a lackluster session. The best I can say is at pivotal points when it could have become a rout, buyers stepped into the fray. On second thought, it was pretty impressive, and exactly the kind of thing we look for when assessing the true pulse of the market and the mindset of investors. 

Investors are not eager to sell, but when they do not get an affirmation or a confirmation of upside catalyst(s), they begin to get itchy.  We saw that more so with hot growth stocks that were sitting on big profits, which gives investors more options to hit the exits. 

This is why the NASDAQ Composite was the worst performer on the day - although the decline was less than 1%. Meanwhile, the market is still in the shadow of the all-time high, and no one wants to be out when that happens. 

It’s like missing the party of the year in High School.

I like the action in Industrials and Materials. It’s where you want to build long-term positions.

As the major indices began racing higher this month, the up volume dwarfed the down volume, which is best captured with the McClellan Oscillator. There are several measures of market breadth, and this one smooths the difference between money coming into the market and money leaving the market.

It’s been super-hot, but it is fading, just as the S&P is nearing a double top (a simple but effective bearish chart formation).  Keep in mind that even if the rally fades, and there is a pullback from the double top, that would be fine. However, as we this shake out weaker hands, be ready for a true breakout on the subsequent attempt.

Banks have fallen flat with a chance to lead the market higher, so investors might have to wait until next week for that elusive catalyst. But make sure you are looking below the surface, as these are the perfect moments to build positions in names you want to own rather than you want to trade.

Fast Investment Lessons

After the close, trading darling Fastly (FSLY) issued a revenue warning, resulting in lower guidance for the current quarter. Management now sees $71.0 million at the high end of its guidance range from $75.5 million in prior guidance. It may not seem like a lot, but the stock was smacked around pretty good in after-hours trading.

This is a name we would only feature in the Swing trading service because of its high Beta and its higher risk. What investors should take away here is one customer (TikTok) was 13% of revenue, and that came up short. But there were signs, as earnings estimates for next year had been slowly declining over the past two months. 

By the way, the financial media is cheering the thought of Robinhood investors taking a huge hit without admitting the fact anyone that’s been trading this is up (at one point, more than 1000%) and should be okay unless they only recently bought for the first time.

Hotline Model Portfolio Approach

Yesterday, we add a new position in Industrials in the Hotline Model Portfolio.

Today's Session

The futures were down all morning.  Earnings season is in gear, and economic data out didnt help.  We will discuss more in the afternoon note.