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Last week was interesting. Price was apparently driven by a plethora of news. Inflation came in higher then expected, Michigan Consumer Sentiment Survey was the lowest on record and fears of a recession are growing. All valid. All of which you should be paying attention to. But in reality, markets just acted how they act when in they are in downtrends… they go lower. No need to overcomplicate and overthink this right now.
I have been saying this repeatedly on my notes. Market indexes are in confirmed downtrends. We got the first step towards a trend reversal when the high on the Nasdaq made on 5/17 was breached to the upside on 5/27- signaling a new higher high. Step two would be for a ‘higher low” to be made now (staying above the low of 280 on QQQ) and taking out the high made on 5/27. That would be the start of a new uptrend.
Until that happens, we must respect the trend lower and path of least resistance down. I wrote in my previous note the price trend down and Macro environment have me thinking we are in for a long and protracted downturn. I can be proven wrong of course, and I talked about how that can happen (FED pivot, Price trend reversal).
Below you will see what I talked about last week regarding the overhead supply zone and the SMI indicator rolling over. Both played out as expected and markets reversed sharply. Again, downtrends acting like downtrends. Guilty until proven innocent (via a real confirmed uptrend) As of now, we are in no mans land. I see no real edge.
This note will be a little different. A few select growth names are holding up, but I don’t want to trade them. It is good to keep an eye on them, but it is very early to try and trade them long. As of the close on Friday, we are in No Mans Land. Speaking of the QQQ, we could easily bounce off the lows around 280’ish, creating a tradable bounce. We could breakdown, put in an undercut and rally type setup, and move higher. Or we can continue moving lower and lower. Personally, If you are not already short, this is not the greatest spot. And if you are long, I hope you are long from much lower. Sometimes less is more, and cash is not always trash. Fortunes will be made on the other side of this environment by those who did not lose their bankroll or burn out their mental capital. Patience is key.
Review of Last Week’s Market Note
Focus List- The ones that triggered started out Ok. NOC moved higher, then was stopped out. Same for ATI. UUP is still in play and working. Other names on the list- ZIM GRIN and shippers got smoked but never triggered.
Index Interpretation- Was spot on with resistance/supply zone and using SMI to avoid a bad week. This kept me out of a lot of trouble as I was hesitant to really put any exposure on. Remember the larger time frame trends of the large market groups.
Short Setups- Nailed these. Wrote I wanted to add exposure if they triggered, and WRBY BETZ ARKK FROG did. I will see how they work this week, but as of now they are looking good.
Overall- Avoided most longs due to market setup, tried a few and got stopped out at small loss or BE and caught some short exposure.
The Week Ahead
Index’s - As noted above, we are in no mans land. It is too messy to have any directional bias coming into the week. I want to see the first couple of days and how price/volume shape up around key levels.
Long Ideas
I know this is called Bullish Growth Stocks. But as of right now, there is nothing bullish about growth stocks. Speaking frankly, there is nothing bullish about almost any stock outside oil/gas and energy. But the leaders of those groups are starting to look overdone to the upside and might need time to base out. Commodities look interesting, but not the easiest to trade. There is really nothing on the long side right now. That can change at any moment, but has not yet.
Soybeans & Soybean Oil
Corn
GDX
Shorts
The bummer is Bitcoin is already on the move lower and futures are pointing to steep losses on Monday morning. Sometimes patterns setup and I cant get them out on time, and sometimes they just gap away from you. That is ok. I will leave it here so you can see what it looked like before it broke down. Some of these shorts triggered last week from the previous weekend note. I hope you saw them.
BTC and ETH
XBI
ARKK
XRT
WOOD
BETZ
Conclusion
As I wrap up this weekend note, Futures are down over 3% on the Nasdaq and 2.4% on SP500. Crypto is getting smoked to the downside. Risk is off. Not much to say other then if you are short, trim and trail. If you are long, know you pain points and have a plan to save capital.
Good luck!
NS