Happy Monday everyone.
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Before I get started… My favorite FREE daily markets email is Stocktwits Daily Rip. There is now a weekly Crypto update newsletter which is excellent and an Indian daily email. You can get them all here.
It should be an interesting week with still lot’s of big earnings announcements so stay on your toes if you are trading.
I will get right to this weeks Momentum Monday. Ivanhoff and I had our friend Brian Lund (The Lund Loop) join in who has traded through 30 years of markets. It is always good to get some fresh eyes from a grizzled tape watcher when the market feel extra wierd. You can watch/listen to this weeks episode right here on Youtube. I have embedded it below on the blog:
Here are Ivanhoff’s quick thoughts:
The S&P 500 came close to its 50-day moving average and reversed. The Nasdaq 100 tested its 200-day moving average and pulled back lower. Finding some resistance after going up for several days in a row is not a big surprise. It’s how markets move – every rally and every selloff have counter-trend reactions. What matters is what happens afterward. The bearish scenario for next week is clear – anything that loses its lows from Friday (Feb 4th) can be shorted for a quick trade. For example, if SPY loses 444, it will probably fall to 440. If QQQ loses 352, it is likely to test 340. If those breaks happen, most individual stocks will follow.
Now that we covered the bearish scenario, we can focus on the alternative. Last week brought new bullish arguments. We finally saw some recent IPOs like BROS and HOOD wake up and push higher. This is a clear sign of improving risk appetite. In the meantime, quite a few oil & gas stocks broke out to new 52-week highs. Commodity-related names are currently the only momentum stocks left. Financials are quickly catching up with the spike in interest rates. XLF is back above its 50-day moving average.
The era of negative bond rates is coming to an end and this has led to a repricing of all risk assets. Is the repricing over? Probably not for everything but plenty of software, Internet, biotech stocks and crypto fell 50% to 80% in the past three months. That’s not a bear market; that’s a crash. The silver lining last week was that the spike in interest rate didn’t lead to further downside in those risk assets. On the contrary, they bounced. This could be the proverbial dead-cat bounce that just goes nowhere fast or an acknowledgment that even if rates go from 0% to 2.5% quickly, some businesses will grow into their valuations, eventually. Don’t get complacent. Many of those stocks are not going to go back to their all-time highs for many years if ever. That’s how financial markets work. A constant cycle of booms and busts and new trends.
We are still in the midst of earnings season. If Facebook, Amazon, and Snapchat can trade like small-cap biotech stocks, you know that anything is possible. No stock is safe, no bet is a sure thing. My keyword for 2022 was higher volatility and this is exactly what we have been seeing so far. Adjust to the new market reality because it can last much longer than you expect.
Ok Howard here again…
If the bond market were to close today, it would be the worst year in 30 years. If you are old…do not open your statements this month!
I like The Rotation Reports take on the most important charts in the world. He points out energy of course as well as China and India. The liquid corportae bond market looks like hell (technically).
Here is Charlie’s 7 chart Sunday.
This weeks Stocktwits Momentum 25 lists.
If you love oil and energy…what a time to be alive.
OK – I think you get the point. The great news about tough markets is if you survive them an easier trending market lies ahead.
Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here.
