The trend is your friend. An existing trend is likely to continue until it ends. Do not trade against the primary trend.
Investing can be cold and hard. The above sayings have stood the test of time. When you are confused or uncertain about investing, it is a good idea to refer to these pearls of wisdom.
This year has been especially challenging for both traders and investors alike. The market volatility will likely continue into the near future.
Investing in a difficult market environment comes down to two simple things – be disciplined and selective.
A technical scan of SPX stocks currently shows only 63-stocks trading above their 50-day and 200-day moving averages.
At the lowest point on 9/26/22, only 3% of SPX stocks were trading above their 50-day moving averages, and 11.40% of SPX stocks were above their 200-day moving averages on 9/27/22.
Currently, 18.40% and 20.40% of SPX stocks are trading above their 50-day and 200-day ma.
The following two indicators hint that the market conditions may be similar to the period corresponding to the 6/17/22 market low.
What can we expect from the current SPX oversold rally in the days and weeks ahead?
It is reasonable to expect stocks trading above their key moving averages to retain primary intermediate-to-longer term uptrends.
One of the basic rules of successful long-term investing is to invest in stocks in primary uptrends.
The caveat remains - if this is the start of a structural bear trend, then almost all stocks will succumb to the broad market selloff.
However, if a market bottom were to develop, stocks currently trading above their respective 50-day and 200-day moving averages may be leaders in the next bull rally.
Below are charts of the two moving average indicators and the 10/6/22 screen of the S&P 500 stocks sorted by S&P sectors and SCTR ratings.