Trade the Trend | Episode 8
By Jason McIntosh | Published 24 September 2021
Trade the Trend is a weekly video focusing on where the stock market is going. It’s for investors and traders looking for insights to the market’s next move. Jason uses technical analysis and trend following techniques to help you piece together the world’s biggest puzzle.
Where is the Stock Market Going?
00:25 Where is the S&P 500 going?
05:45 Where is the Nasdaq going?
08:24 Where is the Dow Jones Transport Average going?
09:56 Where is the All Ordinaries going?
13:48 Where is the Nikkei heading?
14:30 Where are emerging markets heading?
15:28 Where is uranium going?
17:42 Where is NorthShore Global Uranium Mining ETF (NYSE:URNM) going?
18:51 Where is Paladin Mining (ASX:PDN) going?
20:08 Where is Boss Energy (ASX:BOE) going?
20:55 Where is Deep Yellow (ASX:DYL) going?
Where to invest now?
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Please note: Charts available from video
Welcome to this week’s edition of “Trade the Trend,” a weekly video discussing where the stock market is going. I’m Jason McIntosh. It is Friday, the 24th September 2021. As always, this is a general commentary and doesn’t take your personal situation into account.
It’s not tailored specifically to you. So, with all that said, let’s kick into the first chart.
S&P 500, oh, geez, what an interesting week it’s been. So, last week we were talking about the markets when they were just around here. They were sitting right on that 50-day moving average.
And, well, look, there’s no doubt about what’s happened from there, so they completely lost their footing. And we’ve had this heavy fall on Monday.
Now, it’s interesting. Every time we get these sort of, like, these sharp pullbacks, a lot of nervousness comes into the market. I hear people talking about, “Oh, look, is this the start of a crash.” Are things going to get really bad?
But I think it’s really important to keep some perspective around this, because, look, so far this is the first 5% pullback we’ve had since March. So, from that perspective, what we’re seeing now, look, it’s really not out of the ordinary.
Five percent correction’s a pretty…look, they could happen a few times each year. So, look, we’ve become quite accustomed to these moves like this where the market falls and quickly snaps back.
These quick snap-back rallies. And, well, this one’s turning into something a little bit different. And, look, that becomes quite unnerving for a lot of people.
Now, we’ve found support. Support’s coming at the 100-day moving average. And we’ve had a really strong bounce off the moving average. So, at the moment, it looks a little bit like what we saw back here in March.
So, if we just have a look at this area, you can see it’s the same sort of, like, accelerated fall down towards the moving average, and then we’ve had this rebound back up, just like we’ve had here, the roll down and the reflexive bounce off that 100-day moving average.
And, look, I’m not convinced it’s going to play out exactly like this, because it really does mirror an earlier period. Every period is different. So, my feeling is that this could have a bit more in it.
Look, it’s possible that it’s all over and that we’re about to see something like this develop. That’s entirely possible. That’s sort of kind of like what we saw back here in March.
That’s probably not my base case, though. It’s possible, but, look, my feeling is it’s not. I think we need to keep an eye on this support region just down here.
What I’ll be looking for over the next couple of sessions, well, particularly tonight, I’ll be watching for one, if we got a day like that tonight.
We got a down day on Friday night, Friday in the U.S. that would trace much of yesterday’s gain. That would open up a third possibility that we’re going to retest the low, maybe a bounce off the low, and then come down and kiss this support sign.
So this support sign is down around the 4,200 sort of mark. That could well hold the market, but if it didn’t, well, then it brings the 200-day moving average into play. So let’s just bring that up.
So, this is a 100-day moving average, the blue line. So, I’m just going to change this over, and we’ll look at it from a different perspective. Where are we…? Inputs.
That’s the one. So, yeah, let’s make that a 200. Brings us back down around here. So, just drawing across. If we did sort of get a move down to here, right around this level, potentially, could see a move down there and that brings in some more supports around there.
So, look, we don’t know exactly how this is going to play out, but just so we know some of the levels, if we keep running from here, that’s all good. But there is a chance of some more volatility creeping in.
But, look, my key message here is I don’t think we’re setting up for a crash of any great description, certainly, nothing like 2020. I don’t think that’s happening. Those are low probability events.
The odds favor that this pullback is going to be of the 5% to 15% variety. And if it’s 5%, well, look it’s possible it’s already all over. My feeling is there’s a bit more to come. We hadn’t got a 10% pullback for pretty much about a year now.
And the 200-day moving average itself is interesting because, in a bull market, you often see the 200-day moving average get touched maybe once every year or two.
And the 200-day moving average, well, if we look back at this, the market hasn’t touched it since back in June 2020. So, it wouldn’t be out of the ordinary to see this come back to the 200-day moving average.
So, the base case is that the medium-term uptrend is still intact, but we are seeing some sort of a pullback or maybe a larger consolidation within that trend.
So, having looked at the S&P, let’s have a quick look over at the NASDAQ.
So, look, the key point I want to make on this NASDAQ chart is I’m just going to highlight this section in here. So, when I look at this, there’s nothing here whatsoever which suggests there’s a major, major topping pattern in place.
Now, markets typically don’t get to an all-time high and then just fall off the cliff and plummet. It did during COVID, but that was a highly unusual and unique situation.
Even the ’87 stock market crash, people will say, “Oh, look, that just plummeted. Fell 33% overnight,” or something like that. But, it actually took a little bit longer than that.
There was the building phase before the big acceleration day, which took something, like, six weeks. So, it didn’t actually just open up one day from a high and then plummet.
So, I don’t think we’re going to see that happen this time either. That’s not to say that we don’t get some sort of big distribution-type top maybe develop over the next few months.
Look, maybe, and this is just complete speculation, it’s possible if something like this formed over the next few months, you could get, like, a big topping sort of formation start to take place.
That’s when you start to look for the possibility of larger declines. At this stage, I think the base case is that this is a pullback within a larger trend. You know, again this was interesting.
I’m just going to pull back to…well, look, this actually came back to about the 100-day moving average. The line popped out on the chart. I’ll leave the 200-day there at a moment.
If this market does start to pull back again, well, then that’s going to bring into focus some support, quite a bit of heavy support region just around here around 14,200.
And if it were to get through that, then you got the 200-day moving average and after that, you’ve got these lows from down here, down around these…what is it…March, April, May lows. They come into focus.
So, lots of support beneath the market if it does happen to pull back and keep giving back some ground. But, look, we just need to see how the next few days play out, and we’re going to continue to learn more as the price action develops.
So, let’s look at the Dow Jones Transportation Average. It’s an interesting one. Look, we looked at this week and the formation of note was this wedging pattern that we had. We were right about here.
So, look, the market’s come back, and we talked about the possibility of the market coming back to the start of the base of the wedge. That’s exactly what it’s done.
It’s done that. It’s bounced. It’s right on this 200-day moving average. There is some support here, but, look, overall, it does look quite weak because you can see that 50-day moving average is really rolling over.
I think that if we just go back to the S&P for a sec, we look at the S&P in this phase here during March where we came back, and then we quickly snapped back. Look at the transportations during that same period.
They were very different to what they are now. They were up near their highs, whereas now, they’ve been in decline for several months. So, I think there’s an underlying weaker tone to the market.
So, one of those reasons I’m thinking that maybe this has a little bit more to play out over the next few weeks. With that all looked at, time for the local market, the All Ordinaries.
Well, look, it’s been a big week, big week in the All Ords. We had these little flagging formations up here, which were clues that there was some weakness developing in the market.
And this was the one we were focused on last week in particular. And we were wondering whether the market was going to fall out of the base of this.
And there’s no doubt about that, it certainly did.
And we got our first close behind the 100-day…below the 100-day moving average since…when was this…back in November. So I’m just going to switch back over to the 100-day average.
Yeah, look, last time was back in November that we closed below the 100-day moving average. Now, let’s get some support on this chart because it’s quite an interesting support level that the markets come back to.
Pretty much got to this support level and it’s rebounded straight off it. So, look, it’s that case of buy the dip. People become accustomed to, during bull markets, to buying the dip, to buying any pullback in price because they’re just conditioned to prices snapping back.
So, I think that’s the reflex action that we’ve seen here. We’ve seen the buy the dip come in and support this market. It’s going to be interesting what happens. Just watching it today, during Friday, it has been a weaker day. It hasn’t been able to build on its strength from Thursday.
So my feeling is this market isn’t out of the woods just yet. I think there’s a fair chance we’re going to come back and retest this support back around 7,450, where we got down to earlier in the week.
And if that were to break, then it brings the 200-day moving average into focus, which is just down around here where there’s more support coming in around that level.
Last week I told you that I’d put some hedging in place. I put my hedging on…when did I put them on…I put them on, I think, it was on Thursday. It might have been here, around here, I put some hedging in place.
I’ve still got it. I haven’t closed it out. It’s always tempting to sort of closed out when it got down here, it opened really low. There was a good profit in the hedge.
But, look, the purpose of me hedging part of my portfolio isn’t to make a quick profit on the hedge, it’s to protect the portfolio just in case something bigger starts to develop.
So, the hedge is still in place. I’ll continue to hold it, at least for now. Look, if the market starts getting up around here, look, I’ll then look to close it out. But for now, it’s still on.
Look, I’ve been saying for a while, I think this is a market to be…just be cautious with. But, look, rather than go out there and sell everything, like I’ve heard some people suggest, I think it’s a case of exiting your lagging stocks, being selective with your buying, and not using leverage.
And that’s very much what I’ve done this week. I’ve let a couple of lagging stocks go, but I’ve actually also bought a handful of stocks, which were showing relative strength and breaking up. So, look, you’re getting the entry signals.
I think it’s always still important to follow those signals and not second-guess what the market’s going to do. And I think if you can manage a portfolio like that, then there’s no need to panic.
When you do get a down day or a down week, or maybe even a series of down weeks, you’ve got a plan, you know where your exits are, and you follow that plan accordingly.
So, just briefly, we just have a quick whip around some of these other markets. We looked at the Nikkei last week and, look, it’s an interesting contrast. It’s one of the reasons why I don’t think there’s a big, global decline in the makings.
So, the Nikkei’s broken up from this trend channel about a month ago. And now if we put some retracement levels on this latest advance, it’s like it hasn’t even gotten back to the 38.2 yet when we look at the Fibonacci levels.
Strong rebound today. This looks like a strong market. This looks like a market that wants to go higher. So it doesn’t fit a scenario of a big, global slump on the horizon.
The Nikkei should be falling into line with everything else. That’s what you’d usually, usually expect. And then just jumping over to the emerging markets, again, look, it doesn’t look like a market which is about to tumble.
You got the support here. The market got closed about a couple of days ago and it’s rebounded. I still look at this emerging-markets picture and see this as being a big consolidation through this phase here.
And that we’ve had the strong move up. We’re having the sideways consolidation. And that’s readying the market for, ultimately, at some point, that’s what I think it’s got the potential to do.
I wouldn’t be positioning for that yet because it hasn’t done it. Maybe it does break down. But if it starts to gain momentum and break up at some point, it may be over the next few months, that would be the play I would be looking at.
But, look, getting a bit ahead of ourselves with that one, that’s not the play for today. So, just to wrap up with this week, I thought I’d tell you about an opportunity which I’m keeping a close eye on, and it’s in uranium.
So, uranium’s a really interesting play. This is the Sprott Physical Uranium Trust. It’s listed in Toronto. But it’s a good proxy for the uranium price. So that’s why I’m looking at this.
So, let’s look at the weekly chart to gain some perspective before we really get into this. This is uranium during its last bull cycle. It went from $10 to $140, a huge bull market.
Then we got the big slump. So what’s been interesting over the last few years, probably the last four years maybe, we’ve had this big rounding base start to form.
And just recently, just in the last couple of weeks, broken up above, and you could say there was a big resistance being…possibly, you can say it stretches further back…look, it kind of runs all the way through there.
It’s had influences in this sort of region. And we’ve had this decisive break higher from it. So, it really puts this in play, I think, as a very interesting opportunity.
Lots of focus recently on green plays like lithium. But uranium is sort of a play which is, it’s a green play, which has been sitting up in the background.
And it’s green because nuclear’s got virtually no emissions when you’re using it as an energy source. So, it’s one of those…look, it could be a really exciting green play in the making. And there’s this really exciting story around a supply shortfall.
So, it’s a really interesting setup. There’s something, like, 54 reactors under construction around the world, 450 in the pipeline, and a lack of supply. That’s a potential story which building.
So, look, the way I’m playing this is through an ETF listed in the U.S. called the North Shore Global Uranium Mining ETF. So, I mean, I got in around here back last year.
So this is sort of a pullback which I would look at maybe as a place to add to some positions. And for those who don’t have it, look, it’s a place where you might even consider putting on a position.
So, I’m looking at the Fibonacci levels on this pullback. So, if we look at that whole rise, the pullback has come back to the 38.2. I think there’s probably more…this is going to take a little bit longer to consolidate and pull back.
And I think we could well see sort of, like, a classic sort of corrective move is a…it’s called an ABC or a three-leg correction. It sort of comes, like, one, AB, then down here, something like that with a C. So you get this ABC sort of formation.
I think something like that may develop. But then it might even stretch out and become a little bit longer. But I think around about this 74 sort of mark, this starts to become interesting as a point to dip the toe in the water for a position here, or maybe even add to a position.
On the Australian front, a couple of stocks of interest, one is Paladin. They’ve got a mine in Namibia, and it’s been mothballed during the low price period. But they’re bringing it back online. And I think it’s the largest of the Australian listed players.
Looking at the Fibonaccis on this, again, we’re seeing it come back towards this 50% mark. So, on Paladin, it’s around about that 75-cent mark. It could be a really interesting point to be looking at that.
And just putting Paladin on a weekly chart, just to show what can go on in this uranium space.nThis is what happened during the last uranium boom. You can see it went from almost nothing up to close to $10.
So, look, and look where we are now. We’re barely off the bottom from that perspective. So, there’s no forecast or predictions that it’s going back up here, but even if it ran up to around here, if it gets to around 80 cents, it’s still huge…a huge performance. It’s, like, 400% or 500%.
That’s potential over maybe the next couple of years. And just lastly, two others, which I look at locally, are Boss Energy, actually, it’s B-O-E, I think. There it is, Boss Energy.
Again, with this, I’m looking at the Fibonacci retracements after that really big run-up coming in around 25 cents. And you can just see this nice, little pattern it broke up from, happened really quickly, and it’s a low-priced and volatile stock.
I actually didn’t have my eye on this one, unfortunately, because it’s a textbook chart pattern. But, look, big markets, it’s hard to be across everything all the time.
But nonetheless, this is shaking up as a possible entry opportunity here. And last stock for today, and by the way, if you’re getting some value out of this, please hit that like button, because it tells Youtube that the videos are worth watching.
So Youtube then goes and shows them to other people. Please hit that like button. So, deep yellow. Again, look at the Fibonaccis. This is sort of, like, our guide to where things could pull back to.
I’m looking around that 50% mark, so maybe around a dollar. I’d say this pullback has a bit more in it still. But, look, it’s an opportunity which is really shaping up as looking interesting.
And, look, the global markets in general, the S&P 500, the Dow, the All Ords, a lot of interesting things happening this week also. So, look, I’m going to leave it there. That’s a wrap for this week.
Keep your portfolio in good shape and know where your exits are. But don’t be afraid to hold on to those good positions which are brought up or trends might just be pulling back. It’s all part of the game. Markets pull back as well as advance.
So, you’ve got to allow for those pullbacks and not let the noise scare you out of good positions. So, find some good trends this week.
I’ll be back next week to try and put all the pieces back together again. And until then, thank you for joining me.
I'm Jason McIntosh, the creator of Motion Trader. My career began in 1991 on the trading floor at Bankers Trust. Nowadays, I trade my own systems from home in Sydney.
Motion Trader is for investors who value robust analysis, data driven entry and exit signals, commentary, and education. I use engineered algorithms to identify when to buy and sell ASX stocks. No biases or guesswork, just data driven signals.