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MarketSmith powers the charts in this video

SPY and QQQ are consolidating above their rising 20-day moving average. In the meantime, there is a constant sector rotation. While semiconductor stocks have pulled back in the last couple of weeks, the biotech sector exploded higher. The majority of stocks that went up 10% or more last week were biotech. 

The market has been a bit choppy lately, trading in a range. It hasn’t been the easiest tape. A minor tweak can improve your odds and risk-to-reward significantly in this environment. Breakouts to new 52-week highs continue to get faded initially. We saw that in homebuilders last week which have been among the best-performing groups year-to-date. Meanwhile, the pullbacks to rising 20 or 50-day moving averages in strong stocks are getting bought on a regular basis. I don’t know how long this buy-the-dip mentality will last but currently, it is working better than chasing obvious breakouts.  

Gambling stocks were on fire last week. IGT, which makes slot machines made a new 52-week high. DKNG also broke out after a long consolidation. LVS crushed earnings estimates and gapped higher. MGM and WYNN are consolidating near their 52-week highs.

The earnings season has just begun. Expectations have fallen to a point where it is not too hard to get beaten. NFLX and TSLA missed estimates last week and pulled back after their reports but nothing major. The selling seems to be muted for now. It gets a lot more interesting next week with MSFT, META, AMZN, and V on deck.

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MarketSmith powers the charts in this video

I published a new trading book recently. Check it out on Amazon.

Many of the recent breakouts to 52-week highs haven’t really followed through. In the meantime, pullbacks to rising 20 and 50-day moving averages in strong stocks keep getting bought. There is a constant sector rotation. Semiconductors are the undisputed big leader year to date but they have fallen behind in the past couple of weeks. Their relative strength line has been declining as other sectors have picked up. The net result is a resilient S&P 500. SPY broke out last week. As long as it holds above 407, it is likely to test 420. The Nasdaq 100 (QQQ) is setting up for a potential breakout near 320-322. If it clears that level, it is likely to test 330. 

A lot will depend on the market reaction to earnings. The new earnings season has just begun. Big banks like JPMorgan crushed estimates and gapped above their 50-day moving average. This alleviates some of the concerns about the financial sector which has been keeping the S&P 500 down. Next on deck is Big Tech which reports in the next three weeks.

Much of equities’ resilience in the past month or so can be attributed to declining inflation expectations and a weak US dollar. The dollar has been almost perfectly negatively correlated to the S&P 500. If for whatever reason the US Dollar rallies, equities are likely to have a serious headwind.

Try my subscription service which includes a private Twitter feed with option and stock ideas, emails with concise market commentary and actionable swing, intraday, and position trade ideas, the Momentum 40 list of market leaders, and much more. See some of the recent testimonials.

PERFORMANCE

Here’s a Google spreadsheet tracking all closed options and stock ideas shared on my private Twitter stream and emails for subscribers.

Check out my free weekly email to get an idea of the content I share with members.

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

MarketSmith powers the charts in this video

I published a new trading book recently. Check it out on Amazon.

We saw a clear rotation into defensive sectors in the past week. Healthcare, utilities, and consumer staples – lower-beta stocks that pay relatively high dividends notably outperformed anything else. This happens when interest rates pull back and the market expects an economic slowdown. In the meantime, most momentum stocks, especially tech stocks, had quick pullbacks. We will know soon enough if this was just a temporary hiccup or the beginning of a bigger pullback. Mega-cap tech stocks remain harbors of perceived safety. GOOGL, AAPL, MSFT, META continue to show notable relative strength. This can also be interpreted as a defensive market move.

Inflation expectations have been gradually decreasing so far this year. The Fed officials like to regularly remind us that they are not done fighting high inflation. And they might have their point. OPEC cut oil production which cause a big upside gap in oil last week. Let’s see if this gap can follow through. There hasn’t been a lot of buying after the gap. Contrast this to the price action in gold, which after its big gap on March 13 hasn’t looked back turning gold miner stocks into momentum vehicles. They are all extended from a swing trading perspective and need some time to potentially set up again.

Try my subscription service which includes a private Twitter feed with option and stock ideas, emails with concise market commentary and actionable swing, intraday, and position trade ideas, the Momentum 40 list of market leaders, and much more. See some of the recent testimonials.

PERFORMANCE

Here’s a Google spreadsheet tracking all closed options and stock ideas shared on my private Twitter stream and emails for subscribers.

Check out my free weekly email to get an idea of the content I share with members.

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