The market may look like it’s strong on the outside, but it’s a different story under the hood. Three factors are telling us that a market cooldown is coming… Investors should be cautious with growth stocks in this overbought market. I’ve identified two defensive pullbacks to trade instead — and more in today’s stock market recap.
In the stock market recap, global numbers are mixed following Asian factory data, affecting supply chains.
Chinese factory activity has started to decline as Japanese and South Korean production has fallen. Consumer Staples and Consumer Discretionary sector stocks could be affected in the next couple of months if supply chain issues continue or worsen.
The S&P 500 continues to push higher with less than half of its stocks trading above their 50-day moving averages. The S&P 500 is a capital-weighted index so giants like Apple, Amazon and Facebook are distorting what the index should look like.
The Nasdaq has its highest relative strength index since September 2020. The RSI is used by investors to buy when the market is oversold, and sell when the market is overbought. The current RSI tells us the Nasdaq is grossly overbought.
When considering all of these factors — this is the most vulnerable market we’ve seen since the start of the COVID-19 pandemic.
Philip Morris International Inc. (NYSE: PM) is a Consumer Staples stock traders buy when markets are vulnerable. PM has pulled back to its 50-day MA after making a swing high. It has a one-year return of 39.79% and could increase that figure if we see volatility pick up.
The second stock I’ve identified for today is an energy transportation and service provider. This company also experienced a pullback to its 50-day MA, and its momentum levels are bouncing back up from oversold territory.
In today’s video, you’ll discover why the market is grossly overbought… what divergence levels on the S&P 500 and Nasdaq are telling us… why the put/call ratio is too bullish in the short term… and two hot defensive stocks to target right now.
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Check back each morning for Roger’s Radar and the most important news and numbers in the WealthPress stock market recap.