Category: Uncategorized

The charts in this video are powered by MarketSmith

Happy New Year! Let’s make it a great one!

I am not going to make any specific predictions. What I am sure of is that the year will be full of surprises and that the crypto markets will continue to be way more volatile than the stocks markets. More volatility means better opportunities for those who know how to manage risk and more headaches for those who don’t. There will be thousands of three-to-five-day 10-20% moves and they will all start the same way.

The last few days and the first two three weeks of every year stand out with big mean reversions. Some of the worst-performing stocks and sectors suddenly wake up and attempt a powerful rally from the bottom of the ocean. We caught a glimpse of this last week. Chinese stocks, which were some of the dogs of 2021, had a big 5-10% jump across the board on Thursday.  More often than not, these end up being “dead-cat” bounces that fizzle quickly but while they last, they can deliver for the prudent short-term speculator.

At any other time of the year, we are better off looking and trading momentum stocks that are close to their 52-week highs. They allow to trade with the established trend (which means trading with an edge) and offer much better risk-to-reward opportunities. But in this brief window at the beginning of the year, the pumpkins can become Teslas and the rockets from the past year can take a break.

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.

The charts in this video are powered by MarketSmith

The small-cap Russell 2k (IWM) tested its multi-month range lows last Monday and it bounced again. The large-cap, QQQ, and SPY also recovered from vulnerable positions below their 50-day moving averages. The participation in the rally was widespread – from reopening stocks like airlines, casinos, hotels, cruise lines, and beaten-down sectors like biotech and ARKK to momentum leaders like semiconductors.

The range-bound market environment remains intact. You don’t want to get too bearish when the main indexes are down several days in a row in a range market as was the case last Monday. You also don’t want to get overly bullish when the indexes are up several days in a row in the same environment. 

The last and the first week of the year typically feature big short-term moves in beaten-down former momentum names. I will be watching for opportunities in those. We already saw stocks like BROS and MARA perking up on Friday.

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.

The charts in this video are powered by MarketSmith

What really happened last week from a big picture perspective – anything high-growth and cyclical that had shown even remote relative strength finally caved in – the mega caps QQQ, semiconductors SMH, homebuilders XHB, financials XLF. It might seem dramatic to talk about a market correction with the S&P500 so close to its all-time highs and still above its 50-day moving average but there has been some serious damage under the surface. Many of last year’s momentum leaders are down 40-50% from their highs. There is a new group of stocks getting hit every week while the most-oversold sectors are having big 1-2-day short-covering rallies. All of this has created extreme volatility and choppiness which require all traders to be extra nimble or just step aside a wait it out.

The Fed wants to accelerate tapering and plans to raise interest rates three times next year in order to fight inflation. Initially, the market read this as complacency and underreaction. All stocks had a major rally on Wednesday afternoon. Most were given back on the following day. Friday was a quadruple option expirations day and we had some major mean reversions. The worst-hit groups in the past few weeks had a sizable bounce – biotech and high-growth, high-multiples software stocks. In the meantime, financials, homebuilders, mega-caps, and semis showed relative weakness. At least this market is not boring and riddled with high correlations. 

SPY, QQQ, and SMH are now looking vulnerable to further downside if they lose their lows from Friday. The odds are that we will see more choppiness next week.

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.