Where Is The Market Headed Next?

The market was undeniably weak following Fed Chairman Jerome Powell’s comments and it has rattled investors nerves to see broad based selloffs to the tune of 3% in a single day.

Former favorites like Microstrategy and Tesla were taken out behind the proverbial wood shed while value stocks suffered a losing streak that extended to 12 days in a row, virtually unprecedented in almost a century.

With the S&P 500 down 2.95%, NASDAQ down 3.56%, and Dow Jones down 2.58% a perilous time appears to lie ahead but what do champion traders say to guide the way?

What Does A US Champion Say?

Oliver Kell, a U.S. Investing Championship winner, effectively came out to say he might have cashed in for the year, which seems to imply he may be fully encashed headed to year-end. That alone should cause investors to be vigilant if not downright jittery.

Kell generally leans toward growth-oriented plays but places great emphasis on pinpointing breakouts from sound base patterns. He remarked before the sharp drop today that many stocks have lately formed convoluted, choppy patterns, not the clean, low-risk setups that foster confidence. He has described the current backdrop as a time when patience pays.

Rather than forcing trades, Kell generally waits for conditions to clarify. A few months ago he thought the next few months may well bring a re-emergence of true leadership once the market flushed out weaker holders and shaky narratives, and he was proven right.

According to Investor’s Business Daily’s growth-stock screens, the pool of equities that exhibited strong earnings growth combined with upward price momentum had thinned considerably since mid-year.

Even so, the handful that remained often benefit from durable secular themes: cybersecurity, crypto, Magnificent 7 advanced analytics, and certain pockets of the consumer market that have proven surprisingly resilient.

Bloomberg’s consensus projections showed some of these high-growth names sustaining revenue growth above 20% annually, suggesting that if the economy avoided a severe downturn, these pockets could seize leadership and drag the broader indices upward from their current malaise.

At the granular level, YCharts data revealed that by late November, only about 15% of Russell 2000 constituents were perched above their 50-day moving averages, an unusually low threshold indicating that small- and mid-cap spaces have felt the strain.

Yet other such as InsiderScore seemed to suggest corporate insiders were building positions, such as Anthony Noto at SoFi.

This interplay of weak breadth but strong individual standouts supported Kell’s thesis that once the broader market finishes “shaking the tree,” a fresh cadre of leading stocks might emerge. And they did, rising sharply, whether that was Tesla or Microstrategy but both sold off sharply today. So what comes next?

Market Multiples Are Worrisome

Technology still commands premium valuations in spite of today’s action: FactSet’s close-of-day numbers put forward P/E multiples for leading megacap tech names well above the broader index average.

That divergence keeps widening. According to NASDAQ’s internal volatility data, secondary names including smaller tech or industrial companies faced greater intraday price swings today than their large-cap counterparts, hinting that institutional money remains concentrated at the top.

Put another way, the median stock is priced more conservatively, but that hasn’t lured capital into a broader range of sectors. This environment rewards Minervini-style selectivity and punishes traders who assume the index’s headline strength reflects uniform conviction.

Oliver Kell’s Market Perspective

Oliver Kell, whose success hinges on identifying breakout stocks, would likely describe today’s session as emblematic of a market that may be in for some “chop”, a rocky few weeks or months as it attempts to find new leaders. Just as the NASDAQ slid sharply, the patterns emerging in individual stocks remain messy. Kell’s approach emphasizes waiting for clarity.

Today’s numbers from IBD’s growth screens show a continued paucity of clean breakout candidates. Even as some AI-related and cybersecurity names have posted strong year-on-year revenue growth, their price charts remain choppy. The market’s rattling following Powell’s speech and disregard for stellar earnings results suggests the upside is limited unless a sharp rebound occurs now.

The good news for Kell’s viewpoint is a thinning roster of outperformers now includes a handful of stocks that quietly posted strong revenue beats this quarter, as recorded by FactSet’s final tallies. These few gems might lead once the market rebounds from today’s selloff.

Until we’re out of the woods with this current market selloff, Kell’s disciplined entry and carefully managed risk seems well-suited to a tape that refuses to provide easy momentum trades.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.