• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

Corrective Action Is Developing and Is Putting Bulls to the Test

We soon will see how much bullish support there really is.
By JAMES "REV SHARK" DEPORRE
Aug 18, 2022 | 06:32 AM EDT

Following a sharp reversal on Tuesday and around four to one negative breadth on Wednesday, the market is now in danger of further corrective action. Technical conditions are still overbought and the potential for negative economic news is quite high, but this rally caused tremendous underperformance as many investors were underinvested and quite skeptical of the strength.

The big move off the June lows lasted long enough and was strong enough to convince many that it wasn't just an energetic bear market bounce. There are many market participants who believe the Fed is threading the needle, that it is battling back inflation and will be able to avoid a recession. The price action over the past month reflects that optimism.

We are now at the juncture where the bullish narrative will be more critically tested. Better-than-expected retail sales news on Wednesday was not sufficient to avoid some selling. The Fed minutes produced a brief uptick in action, but that fizzled out as it became apparent that there really was nothing new in the comments.

The biggest positive the bulls have going for them right now is momentum. This move left a lot of money on the sidelines. Many investors are unwilling to chase straight-up moves, but they do want to buy dips when there is a chance. They need not be very deep in order to trigger some accumulation. However, dip buying quickly loses its appeal when bounces do not hold. Once there are a series of lower lows, then the dip buyers lose their aggressiveness very fast.

There is news here on Thursday morning that Goldman Sachs and Nomura are cutting their estimates of China's growth. This helps with the fears of inflation, but it increases the risk that the US economy will fall into a recession. The reaction of bonds may be a clue as to whether the primary worry of the market is inflation or recession.

I've raised my cash levels substantially and am now waiting for better entry points to develop. I am in no hurry to put money to work right now and am optimistic that better opportunities are going to develop as we work our way through seasonal weakness.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Investing | Stocks | Real Money | Global Equity

More from Stocks

Trading Like It's 1999!

James "Rev Shark" DePorre
Jan 27, 2023 4:46 PM EST

The mood was bubbly as speculative investors piled into stocks with any minor exposure to Artificial Intelligence.

More Good Dividend Stocks With Pretty Charts

Bruce Kamich
Jan 27, 2023 1:31 PM EST

In this second part of a two-part series, we look at the final five of 10 stocks with the best of the both worlds.

Even Some Out of Fashion Names Are Now Back in Style

Jonathan Heller
Jan 27, 2023 12:30 PM EST

Sure, we're only one month in to 2023, but so far these stocks are starting the new year with a bang.

I'm Making Small Bets With These 2 Stocks

Bret Jensen
Jan 27, 2023 11:30 AM EST

While I remain cautious on the overall market, I continue to act upon the limited opportunities I'm finding in the current market.

Chevron Is Crushing It and for My Portfolio Too: Here's the Trade

Stephen Guilfoyle
Jan 27, 2023 10:51 AM EST

The only reason to exit the stock now is profit-taking.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:48 AM EST REAL MONEY

    Watch Doug Kass on the Daily Rundown!

    In today's Action Alerts PLUS Daily Rundown, Doug ...
  • 11:03 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend On Real Money

    It's time to start using this power to build great...
  • 03:06 PM EST BOB LANG

    LEAPS Webinar

    This week, I offered a free webinar session talkin...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login