Ivanhoff Capital

MarketSurge powers the charts in this video.

The Nasdaq 100 (QQQ) tested its VWAP since its lows again near 438. It held it again. If it goes back under 438, we will likely see another leg lower. There is also a possibility of a higher low forming near 438. 

The silver lining from last week is that we are finally seeing the market trying to find the potential winners in the new macro environment. For example, we saw a big jump in rare earth metal stocks after China curbed its exports. Stocks like MP, USAR went up between 20% and 100%. There’s always a bull market somewhere; even in the midst of an overall bear market; even if those rallies don’t last long. 

Foreign financial stocks are showing notable relative strength. Indian banks broke out to new all-time highs – IBN; Argentine and European banks are back above their 50dma and setting up – GGAL, BBAR, EUFN, etc. 

The energy sector also woke up last week – the reason is not an expected economic growth, but a potential escalation with Iran and other oil-rich nations that could limit supply. 

Other than the above-mentioned, the industries that are currently showing relative strength have a mostly defensive nature – telecoms, consumer staples, and utilities. The market is pricing a potential slowdown in growth or even a recession.

In the meantime, the new earnings season has just begun, and so far, the market reaction has been mostly bearish. Companies are warning about missing estimates ahead of their reports. Even the ones that beat estimates are selling off or not following through because of lower guidance. At this point, the market seems more focused on tariffs and trade wars than earnings.

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MarketSurge powers the charts in this video.

The Nasdaq 100 (QQQ) tested its 2021 highs and had a big 15% bounce. This is likely a bear market rally from deeply oversold levels and not the beginning of a new trend higher. If QQQ follows through, the next upside targets are its declining 20-day moving average near 465 and its year-to-date volume-weighted-average price around 470.

Trump paused tariff increases for all countries except China. The current tariffs are 10% for everyone and 125% for China. The trade war escalated and now China has also announced 125% tariffs on US products. It is hard to believe that the current bear market will end before there’s an agreement between the two biggest economies in the world.

In the meantime, the new earnings season has begun. JPMorgan beat estimates but warned of a potential recession and financial crisis down the road if the current trade war is not resolved. The silver lining is that despite the warnings, JPM gained 4% – a positive market reaction but the stock remains in an overall downtrend, so nothing has really changed. The market will be paying close attention to earnings in the next few weeks – not so much to what companies report but to what companies expect in the foreseeable future. If enough of them guide lower or even remove guidance due to elevated uncertainty, the market might be spooked and have another leg lower. 

We remain in a bear market environment, which requires nimble trading and frequent profit-taking. It is important to remain open-minded to any scenario and be willing to quickly switch between long and short in a tape that can change direction quickly. There are many moving parts in play. It is not just the stock market. The US Dollar just had one of its fastest declines in the past two months and it is now 10% cheaper year-to-date. Previously, US Treasuries played the role of a safe haven during equity corrections. Not this time. Rates jumped as stocks went lower. This is a major change in intermarket relations that can lead to forced liquidations. The only place to hide was gold.

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Check out my free weekly email to get an idea of the content I share with members. How my ideas/alerts did.

You can find my trading books on Amazon here.

Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice. Read my full disclaimer here.

MarketSurge powers the charts in this video.

 The Nasdaq 100 (QQQ) is already down 22% from its 52-week highs. It tested its August low from last year. I wouldn’t be surprised if it overshoots to 400 and then rallies to its 20-day moving average. The S&P 500 is down 17% from its 52-week highs. The next area of potential support is around 500-480. The damage in individual stocks is even more pronounced. META is down 31%, AMZN and GOOGL are down about 28%, AAPL -27%, NVDA -38%, TSLA -51%, PLTR -41%, HOOD – 48%, RDDT -53%, APP -58%, CEG -51%, VRT -62%. 

The market is sending a clear message. A tariff war with the rest of the world is likely to lead to a recession. The average drop in SPY during the last ten recession was 31%, though declines ranged from 14% to 57%. A 20% drop in SPY from its 52-week highs would mean testing 490. A 30% drop would mean a decline to 430. 

Powell spoke on Friday and reiterated what he said previously. There is not enough evidence to panic and cut rates now. In other words, the Fed is not going to try to proactively avert a potential crisis because it might break something else. The Fed will show up when there’s clear evidence of unemployment spike. Unemployment is a lagging indicator; therefore the Fed is likely to get involved after most of the correction is over.

We finally saw clear signs of panic selling last week. Even the groups that had held well recently, came under distribution – energy, gold miners, utilities, China. Such high correlations are typical for forced liquidation when people sell not because they want to but because they must. The silver lining is that such selloffs often precede a strong bounce. Let’s not forget that some of the most powerful rallies happen during bear markets. Nothing goes down in a straight line. The bear markets are full of false breakdowns, so one has to remain nimble and willing to play both sides of the market.

Try my subscription service which includes a private X feed with option and stock ideas, emails with concise market commentary, real-time market education, the Momentum 40 list of market leaders, and much more. See what subscribers say about my educational service.

Check out my free weekly email to get an idea of the content I share with members. How my ideas/alerts did.

You can find my trading books on Amazon here.

Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice. Read my full disclaimer here.