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The price action in most stocks last week was basically a selloff on Monday and Friday and a weak bounce attempt in the middle of the week. All major stock indexes are looking vulnerable to further breakdowns. The one thing to keep in mind is that this is a headline-driven market. Any rumor about a ceasefire in Ukraine or the Fed being less hawkish than expected can lead to a massive short-term rally in most stocks and a big decline in oil. Other than that, I can see SPY testing 400 and QQQ testing 300 eventually.
The price leaders remain the same – oil, marine shipping, metals. Clean energy names tried to join them last week but still have much to prove. The solar ETF gained 10% in one day last Tuesday only to give most of it back afterward. It’s still a space I will be keeping a close eye on. It has two major catalysts going for it – high crude oil prices which should make all other energy plays more valuable too. Europe and the U.S. will invest even more heavily in renewables to reduce their dependence on foreign oil. Price setups have to confirm any market theory for me to open a position.
Let’s keep things in perspective. Over the past decade, we experienced some sizable corrections but they never really lasted more than a couple of months. A whole generation of investors hasn’t really faced a real bear market that lasts multiple months and it is filled with gradual lower highs and lower lows, panic selling followed by panic buying. The silver lining is that a bear market is the best thing that can happen to a trader – not only because it brings much wider price ranges and good opportunities to make money on the short side; not only because it lays down the foundation for 10-20x gains when the recovery begins but mostly because it teaches discipline. If you are not disciplined during a bear market, your account won’t make it for the inevitable bull market that eventually follows.
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Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice.
