Weekly review: breach of the lower parallel is the theme of the week

breach of the lower parallel

This was an unusual week, to say the least, as we’ve had such a big drop after almost 2 months of intermittent erosion in the market. I think it is useful to look at the different classes of price behaviour and sort out stocks based on how they are acting. While nearly all the stocks I have been following have been going down, so it is fair to say that the market generally, in terms of its averages and in terms of its constituent parts, has been on a downtrend since September, but more noticeably since mid-October, it should be pointed out at the outset that of the stocks I am following NIO has been the rare exception. That is, not everything is going down, just the overwhelming majority of charts.

wow

While it has been pointed out that the S&P has not breached its September lows I’m not entirely sure that this is necessarily an encouraging signal in the context of other indices which have breached their September low, notably the Dow Jones industrial average and, more important in this tech market, QQQ. More to the point, many stocks have breached their September lows so I don’t really think that this supposedly encouraging fact should hold much sway at this point in the market cycle. The reason why one index may be above or below its September low may have more to do with the weighting of the index and whether or not it is heavier or lighter in bubble names: it is true that many of the bubble names have not breached their September lows but that merely underscores how the more normal stocks already have (such as MA, MRK or DIS). Still, while it will be too late at this point, when even the bubble names have breached their September lows then I suppose even the media will acknowledge that the market is indeed in a downtrend. In the meantime, the charts are certainly displaying plenty of downward price action.

still holding September lows for now

the market

non-bubble name price action

Starting with AAPL, the most noticeable point about its chart is that it has breached the lower parallel and of course yesterday’s price action with a -6% move down was very unusual for such a blue chip tech icon.

You see a lot of charts with breakdowns from their lower parallel such as ABB, AMD, AMZN, APD, BE, arguably BLDP, BYND (it is just at the lower parallel), CVNA, of course the Dow Jones industrial average itself, DIS, JNJ, LIN, MA, MRK, MS, MSFT, NFLX, PG, PYPL, QQQ, which is important because most tech names were assumed to be leaders in this market, SBUX, SHOP, SPY, TSLA, UBER, V, VALE, and WDAY.

finally

There are still a lot of names which are at the lower parallel but haven’t breached them such as BIDU, CHD, COST, FCEL, and NOW.

Besides NIO there are a very few stocks which have been sort of trending up, such as GE, GM and Google, but these names are few and far between. PDD has also been going up since October but on Friday did fall quite sharply with a -4.84% drop so maybe that uptrend has stalled out at resistance.

getting tired?

Without necessarily getting into the weeds of each individual chart it is clear that the overall trend has been down in the month of October, particularly since the second week of October, although of course looking further out you could see that many of these charts had their peak in September and although there are a few outliers which continue to power up, such as NIO, it is becoming increasingly clear that many of the former high flyers are correcting in this market as the indices are now in a general downtrend.

This was really the week when even the bubble names like TSLA, ZM and PDD started acting in accord with the rest of the market.

breakdown, finally