Notes From The Editor

You've probably heard of market internals before. In fact, you'll find several of these indicators in each RightLine Report's Market Summary section. These numbers can help you answer some crucial questions: what's behind the market's movement, and how likely is it to continue?

The most fundamental internal is market-wide volume. The concept is familiar to anyone who watches the same indicator when gauging the performance of specific stocks; big moves that are backed by strong volume tend to have more "conviction," or staying power. Those with weak volume are often retraced. These numbers are revealed in the totals for each major exchange - the NYSE, Nasdaq, and sometimes the much smaller AMEX. Following the volume indicators over the days and weeks is a great way to get a feel for what a typical day looks like, versus a "light" or "heavy" day.

Another internal is the number of advancing stocks vs. declining stocks, or what's often referred to as the "A/D line." This can be especially revealing, because it shows how many stocks took part in a market move. Broad-based rallies or sell-offs are characterized by an A/D that's heavily skewed in the direction of the market's shift. These tend to generate a lot of lasting momentum, and are described as having a lot of "breadth."

The opposite is also true. Imagine, for example, that the market dropped sharply after a few big names reported bad news. Looking at the A/D, however, you find that there were actually more advancers than decliners for the session. This would indicate that most of the selling was concentrated in a relatively small number of stocks. Once the selling eased up in those big-name equities, you might expect the market to rebound and retrace its losses.

Combine volume and A/D, and you get Advancing volume and Declining volume. It's another great indicator of market breadth, and helps you peer a little deeper into the overall volume numbers.

Another interesting number to watch is new 52-week highs and lows. This one tends to be a lagging, rather than leading indicator, but it can still offer some helpful insights into the market's momentum. A large amount of 52-week highs signals a lot of upside momentum - there's no resistance to stop those stocks from charging higher - while lots of 52-week lows would point to a flurry of breakdowns in progress that could potentially sink the market.

For maximum impact, try combining the market internals with a quick top-down analysis of the market. Are all sectors participating in a big move? Or is the major up/down volume confined to just a few groups?

In an upcoming RightLine Report we'll look at some other helpful indicators that can help you read between the lines. And in the meantime, try watching those numbers in the Market Summary section. Before long, you'll be following the internals like a pro!

Here's to profits,

Kent Barton
Senior Analyst

Quick List

    
Stock     10/05     10/05      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

CRBG      19.66      0.51     19.93                   1.59/0.8      0.82
HCM       16.41      0.11     16.64                  1.12/0.56       0.6
MDV       14.76     -1.32     15.69                  1.62/0.81       1.5
FLNC      20.62     -0.48     21.26     19.62        1.64/0.82      2.34
NEP       21.00     -1.38     22.63     20.35        2.28/1.14      2.26

The "Quick List" provides a brief summary of each stock write-up and should be taken in the context of the related write-up presented in the "Stocks Covered in This Issue" section of this Report.

Be sure to read "How To Use The RightLine Quick List" and always use the RightLine Risk Control Calculator before entering any position.

For more on controlling risk go to the RightLine Risk Control System

For a glossary of terms unique to The RightLine Report go to: Glossary

Questions? Send us an email using our Contact Form.

Market Summary

US stocks concluded the Thursday session with a mixed performance, staging a recovery from morning declines. However, investors remained cautious, refraining from making significant moves in anticipation of the September Nonfarm Payroll report scheduled for release on Friday. This report is viewed as the next potentially significant catalyst for the market.

Earlier in the week, the ADP Private Payroll data fell nearly half of expectations, which alleviated concerns about a more aggressive Fed rate hike in November. Jobless claims reported Thursday mostly aligned with estimates. Still, Federal Reserve speakers reiterated the job market's resilience despite a slowdown in inflation.

In terms of sector performance in the S&P, Financials, Healthcare, and REITs led the gains, while Materials, Energy, and Consumer Staples suffered the most significant losses. Food and consumer product stocks, such as TAP, UTZ, KO, and PEP, experienced substantial declines, partly due to Clorox (CLX) lowering its guidance.

Amid expectations of rate hikes following the recent "hawkish" Fed comments and the consequent surge in Treasury yields, the S&P 500 is currently on track for its fifth consecutive weekly decline. The Dow is heading for its third straight down week, while the Nasdaq is aiming for back-to-back weekly gains.

Wall Street sentiment and viewpoints have undergone rapid changes. Just a few months ago, futures were pricing in four rate cuts in 2023, and we haven't seen one yet. Now, rate hikes are not expected until late 2024 at the earliest, with the possibility of one hike in November. Friday's job report is crucial, as a "hotter" number could lead to further market weakness, while a "cooler" reading, in line with the ADP report, might provide the market with the boost it needs.

                        Oct 4, 2023            Oct 5, 2023    
                  --------------------   --------------------
Dow                 33,129.55   127.17     33,119.57    -9.98
Nasdaq              13,236.01   176.54     13,219.83   -16.18
S&P 500              4,263.75    34.30      4,258.19    -5.56

NYSE Volume                      3.78B                   3.6B
NYSE Advancers                   1,746                  1,282
NYSE Decliners                   1,135                  1,565

Nasdaq Volume                    4.33B                  4.18B
Nasdaq Advancers                 2,386                  2,053
Nasdaq Decliners                 1,813                  2,092

                                 New Highs/Lows

                   09/28  09/29  10/02  10/03  10/04  10/05
                 --------------------------------------------
NYSE New Highs        42     29     17     10     11     10
NYSE New Lows        223     89    277    443    265    221
Nasdaq New Highs      38     37     18     20     17      9
Nasdaq New Lows      306    146    388    562    216     93
   

TRADER'S TIP: "Unbiased Trading"

Unbiased trading is a powerful tool; it allows us to take advantage of price movement that may not make sense from a news or fundamental perspective. Think about it for a second. Instead of missing out on a rally just because we don't agree that it should be taking place, isn't it better set our prejudices aside and let the market tell us what IT wants to do?

The Technical Analyst

For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Improve Your Trading With Moving Averages".

S&P 500 - 4258.19 October 5, 2023

52-Week High: 4607.07
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4488.15
Resistance 2: 4388.27
Resistance 1: 4338.16
Pivot: 4288.39
Support 1: 4238.28
Support 2: 4188.51
Support 3: 4088.63

NASDAQ Composite - 13219.83 October 5, 2023

52-Week High: 14446.55
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 14028.12
Resistance 2: 13608.30
Resistance 1: 13413.81
Pivot: 13188.48
Support 1: 12993.99
Support 2: 12768.66
Support 3: 12348.84
        
Dow Industrials - 33119.57 October 5, 2023

52-Week High: 35679.13
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 35032.90
Resistance 2: 34321.67
Resistance 1: 33914.58
Pivot: 33610.44
Support 1: 33203.35
Support 2: 32899.21
Support 3: 32187.98
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

WEDNESDAY, OCT. 4					
8:15 am	ADP employment	
9:45 am	S&P final U.S. services PMI	
10:00 am	Factory orders	
10:00 am	ISM services
	
THURSDAY, OCT. 5					
8:30 am	Initial jobless claims	
8:30 am	U.S. trade deficit
	
FRIDAY, OCT. 6					
8:30 am	U.S. employment report	
8:30 am	U.S. unemployment rate	
8:30 am	U.S. hourly wages	
8:30 am	Hourly wages year over year			
3:00 pm	Consumer credit

For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "Extended Hours and Erroneous Fills"

You'll sometimes find offers in extended hours trading that seem to good to be true. Don't celebrate too quickly when you buy a $20 stock for $15 bucks. Just remember that the person on the other side of your trade can contest the transaction (after the fact) whenever the sale price is too far away from the closing price. Stock buys and sells outside of the market range are considered "erroneous fills" and can be broken by the brokerage or Electronic Communication Network. For example, the ECN "Island" looks at a trade 20% outside the market price as an "erroneous fill."

Stocks Covered in This Issue

FINANCIAL SERVICES SECTOR

Corebridge Financial, Inc. (CRBG: Financial Services/Asset Management) - BULLISH BOUNCE. Entering a position in the early stages of a bounce is great way to get on board an up-trending stock. The "Bullish Bounce" setup identifies probable candidates by evaluating the trading action that takes place near support levels. CRBG's behavior on Thursday could very well be a sign that a new bounce is underway. Place a BUY trigger at 19.93. In the event your trigger is met, also place a 1.59 trailing stop which can be trimmed down to 0.8 when you have a 0.82 profit. CRBG closed Thursday at 19.66. Earnings Report Date: Nov 03, 2023. Beta: N/A. Market-Cap: 12.5B. Optionable.

HEALTHCARE SECTOR

HUTCHMED (HCM: Healthcare/Drug Manufacturers - Specialty & Generic) - BULLISH BOUNCE. Some people hear of a stock that's performing nicely and then buy it without any regard for timing the entry. This approach usually leaves money on the table, money that could just as well be added to profits. The Bullish Bounce setup provides a well timed entry and reduces exposure to risk by placing both the entry trigger and exit stop near the bottom of the bounce. We have an opportunity to use this approach with HCM which met our setup criteria on Thursday. The BUY trigger for this trade is at 16.64, and the trailing stop is sized at 1.12. Resize the stop to 0.56 upon collecting a 0.6 point gain. HCM closed Thursday at 16.41. Earnings Report Date: N/A. Beta: 0.87. Market-Cap: 2.897B. Optionable.

REAL ESTATE SECTOR

Modiv Industrial, Inc. (MDV: Real Estate/REIT - Diversified) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 14.76, MDV is on our radar for a BUY entry at 15.69. If you purchase shares of MDV, be sure to also place a trailing stop of 1.62. Snug it up to 0.81 on a 1.5 gain. Earnings Report Date: Nov 13, 2023. Beta: N/A. Market-Cap: 111.358M. Not Optionable.

UTILITIES SECTOR

Fluence Energy, Inc. (FLNC: Utilities/Utilities - Renewable) - SQUEEZE PLAY. FLNC is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 21.26 and a SELL short entry at 19.62. Once your trade is filled, enter a 1.64 trailing stop. Tighten it to 0.82 after a 2.34 gain. FLNC closed on Thursday at 20.62. Earnings Report Date: Dec 12, 2023. Beta: N/A. Market-Cap: 3.652B. Optionable.

NextEra Energy Partners, LP (NEP: Utilities/Utilities - Renewable) - SQUEEZE PLAY. Traders are feeling the pressure as NEP's intra-day price range on Thursday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 22.63 and a SELL short entry at 20.35. NEP's price movement will decide which entry is filled. As soon as you're in the trade, enter a 2.28 trailing stop. Tighten it to 1.14 after you get a 2.26 gain. NEP closed Thursday at 21.00. Earnings Report Date: Oct 26, 2023. Beta: 0.99. Market-Cap: 1.962B. Optionable.

IMPORTANT: Before entering any positions, always use the Risk Control System to determine the level of acceptable risk and the maximum number of shares to buy. Use Gap Adjusted Entries to reset the Entry Price for stocks that gap beyond recommended entry levels.

Stock Splits

Below are the stocks that have announced splits and have recently executed or will execute soon. There is generally a return to normal price behavior in the weeks following a split announcement in what we call a "Dormancy Phase." As the stock nears its split execution date (Effective Date) it often moves into the "Pre-Split Run" stage where quick and sometimes dramatic gains can occur.

                             Announce     Eff.       Split
Company Name     (Symbol)      Date       Date       Ratio   Options  
---------------- -------     --------    -------     ------  -------   

NOTE: The number of stock split announcments goes up during Bull markets, 
and goes down during Bear market cycles. There are currently no upcoming 
stock splits that meet RightLine's proprietary criteria for split ratio, 
trading volume and price action.      

Split details are also available online at the RightLine Online Stock Split Calendar. For a detailed look at the different stages of a Stock Split, Click Here.

A simple yet powerful tool, the Risk Control Calculator helps you manage risk by recommending a maximum number of shares to purchase. Available in the RightLine Member's Area.

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