Bottom Fishing in a Murky Pond. Plus, Two New Momentum Trades

It's time to go bottom fishing.

Image courtesy of Fishing Knife World.com.

Stocks are starting the year on a solid note after a dismal end to 2024. The longer the market holds above the recent lows, the higher the odds that we’ve seen the bottom. This has been the theme I’ve been working on for the past couple of weeks, and if things continue as they are this morning, the confluence of indicators which I’ve highlighted will once again have served their purpose.

Of course, there are no guarantees, but so far so good.

Market Update

The New York Stock Exchange Advance Decline line (NYAD) is in recovery mode as the RSI on the most recent bottom was above the prior low. This, as I’ve detailed before (see the link above) suggests that last Friday’s decline was the panic bottom (lower low on lower volume), and that the sellers are exhausted. Let’s see how things develop.

As has been the case lately, the action in the bond market holds much of the key as to what happens in stocks. The U.S. Ten Year Note yield (TNX) is retreating this morning, which is helping the oversold stock market bounce.

A move below 4.5% on TNX would be very bullish for stocks, given their oversold status.

Momentum Portfolio Update

We’re going to put some cash to work this morning by deploying it into to two very beaten up stocks which have bottomed out. We’re keeping the Sell stops tight, just in case.

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