Flash Alert: Bottoming Process is Proceeding. Staying Patient and Adding a New Pick

Going against the grain with a stealthy smart money contrarian pick this morning.

The stock market continues its bumpy post FOMC mini-crash course but until proven otherwise, it’s working on making a bottom. As a result, this is an excellent time to pick through the rubble and cautiously pickup stocks which are showing some excellent relative strength as stealthy, smart money moves in. I have one such stock this morning.

Market Update

First, let’s look at the markets. The New York Stock Exchange Advance Decline line (NYAD) has bottomed out and, unless it makes a new low for this move, is in repair mode. There are three possible scenarios as to how things may proceed. You can find them here. The short version is that if NYAD makes a new low but the RSI indicator’s corresponding low is above the recent low, then the odds that we’ve seen the full bottom in place rise. Thus, if the market continues to sell off but the RSI doesn’t make a new low, the odds of the uptrend restarting will be much higher.

The biggest problem with the stock market, however, is the bond market. If bond yields continue to rise, then the stock market will continue to struggle, even if it doesn’t make a new low.

The U.S. Ten Year Note yield (TNX) is trading above 4.6% this morning. In order for bond traders to turn bullish we’d have to see a sustained break below 4.5%. This may happen as the RSI for TNX remains close to 70, which is an overbought reading.

The third wheel in the markets, Bitcoin (BTC) continues to struggle and is now testing the support of its 50-day moving average. A break below this key support level could take BTC decidedly lower. We are currently out of BTC as we were stopped out with a nice profit recently. Once the RSI hits 30, however, we’ll be looking to get back in.

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If you’re looking for a slower pace to nifty profits, like this morning’s new stealthy pick check out Joe’s Weekender Portfolio.

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will get you started along the right path.

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