This week, I wanted to highlight analysis from my friend and well-respected colleague, Mary Ellen McGonagle! She primarily focuses on stocks with a 2-week to 9-month horizon depending on market conditions.
Check out her guest newsletter below to learn more.
These Macro Signals Will Help Your Portfolio Management
With the broader markets in a confirmed downtrend, it’s important to identify what’s driving negative price action so that you can stay on top of these dynamics and determine if further downside is ahead.
In the video below, I identify several key characteristics that have an overriding impact on not only the broader markets, but sector rotation as well. These are easy-to-follow metrics and you’ll be surprised at how powerful they are in driving price action.
Since posting the video above, additional global events have emerged that are impacting the markets and they’re well worth noting. One is China’s partial closing of several large cities that have now imposed Covid-related curbs.
In response, the price of oil fell 3.5% today as demand from China – the largest consumer of oil – will be reduced. In turn, Energy stocks have traded lower and may be in jeopardy of entering a downtrend.
Below is a chart of the Energy sector where I’ve highlighted the pullback in early March vs the more pronounced downtrend in mid-June.
In the more damaging June period, the RSI turned negative as the sector broke below its key 50-day moving average. Be on the lookout for similar chart action in the coming weeks as a negative signal of further downside ahead for Energy.
In addition, Materials stocks such as Steel and Metals are pulling back as economic data this week brought on fears of a recession into next year. In the event of an economic slowdown, the need for these construction and building-related products will drop; which will reduce their growth outlook.
Steel Dynamics (STLD) which I highlight in the video above, still has positive momentum indicators however, and unless we see a negative RSI on the daily chart similar to early May and early June, I view this pullback as a possible buying opportunity.
If you’d like to have an expert stay on top of impactful global economic news that will drive price action in the markets as well as various sectors, try my twice weekly MEM Edge Report for a nominal fee.
Use this link and you’ll have immediate access to all of my current reports, as well as access over the next 4 weeks. Select stock picks and market commentary will be delivered directly to you with Alert Reports sent when there’s been a significant shift in my views.
Mary Ellen McGonagle
Editor, MEM Edge Report