Category: Uncategorized

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The large caps are holding above their big gap from last Tuesday and acting relatively constructively. Both QQQ and SPY have consolidated near a potential pivot. Going above last week’s highs would be a buying signal. I would not trust those potential breakouts for anything more than a quick scalp because there is simply too much weakness among individual stocks.

In the meantime, the divergences continue. While defensive sectors like consumer staples (XLP), healthcare (XLV), and some semiconductors are perking up, small caps and many software/internet stocks are under pressure. The recipe to surviving in this tape (meaning limiting drawdowns and if possible, growing our accounts) is to trade smaller and be selectively active, only focus on the best setups, and be willing to play both sides of the market. 

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The charts in this video are powered by MarketSmith

The Fed has changed its interpretation of inflation and this is wreaking havoc in the high-growth, high-momentum world and a scare in the rest of the stock market. The vast majority of momentum names that tripled and quadrupled last year are in the midst of 30%+ drawdowns. The small-caps index Russell 2k is near the bottom of its range since February while adding multiple distribution days just in the past couple of weeks. The large-caps S&P 500 and the Nasdaq 100 managed to close the week barely above their 50-day moving average but are also looking vulnerable to further downside especially if they lose their Friday’s lows. The main indexes are in a correction mode. The most common-sense strategy for active market participants in this market environment is to either focus on intraday setups or sit on the sidelines with a large cash position. There are still plenty of opportunities for the nimble. In fact, corrective markets are active traders’ paradise because of the elevated volatility. Granted intraday trading is not for everyone and there is nothing wrong in taking the occasional mental break from the market and coming back recharged and ready to ride the next market rally aggressively. 

In the meantime, there are more Covid-related restrictions around the world as the Omicron mutation is spreading quickly. We still don’t know enough about its death rate and the current vaccines’ protection rate against it. It seems at this point the market is more worried about Fed’s tightening policy than the virus. The narrative has changed. Covid used to be favorable for tech stocks because it meant more liquidity from the Fed. Lately, a new Covid threat means that the Fed will worry about inflation due to supply chain issues. This is why the same playbook from last year is not working now.

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 market has been telegraphing the Covid threat for the past three weeks. The recent acceleration in big tech stocks’ ascent and the decimation of the so-called reopening industries have been clear signs and we often talked about them here. What we saw on Friday was something different. It was a panic. There is a new significant mutation of Covid and we know very little about it yet – is it more transmissible, is it more deadly, how efficient are vaccines against it. When things become clearer, the market will calm down. Until then, we might see more widespread weakness. 

At some point, the smart market participants will realize that there’s still plenty of liquidity in the market and an accommodating Fed. All that money is not going to sit idle on the sidelines. It will rotate somewhere. That somewhere can be vaccine stocks – they have proven to be effective, the same technology can be used to quickly produce a version that will deal with any mutation, and it seems the world might need an annual booster shot for the next couple of years. Or enough people will realize that the virus mutations and lockdowns will accelerate “the work and play from home” trend which will benefit the companies that are building the metaverse – U, RBLX, NVDA, FB, MANA, etc. Or what if Pfizer’s antiviral drug turns out to be very efficient against any of the virus mutations – in this case, all the so-called reopening stocks will have a major rally. In other words, after the panic subsides, money will rotate somewhere and very quickly.

In the meantime, the clean-tech space is holding relatively well. Look at the major EV stocks. Most gained ground last week, even the Chinese ones.

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.