Good morning!
Now that we passed the FED day, we have more clarity with regards to the markets moving forward. Despite Powell’s hawkish tone the market seems to have had that priced in already, so the certainty of tapering and the exact pace at which it will be done created a rally in stocks. The $SPY and the $QQQ were slumping in the morning but they did not make new lows, which was a sign of strength but I waited for market discovery and did not make many moves until the FED speech. Once I saw the ETFs moving towards the levels mentioned yesterday I started buying against levels and trimming into strength. This made me more than my week, which shows you that when you trade following a strong trend you come out a winner. I will say it again: the trend is your friend.
$SPY Chart
If you look at this chart you’ll see that even in the morning slump the $SPY did not make new lows, and then when news hit the market it made a powerful push above all moving averages. When the $SPY went above the 8 day EMA $466.22 I was a buyer of things like $TSLA, even if the EV was much softer than other stocks. I chose $TSLA because it was oversold at these levels, and it has plenty of room to $1000-$1020. Today we may get a retracement to the moving averages and rally from there, but don’t chase things until the market opens.
https://www.tradingview.com/x/PH10b77M/
$QQQ Chart
Despite hawkish comments from Powell which would have normally tanked tech, the tech sector rallied back, as everything was already priced in and oversold. When the $QQQ hit $393.70 I was a heavy buyer of some call options for next week and I also bought a hefty size of $AAPL. I picked the strongest tech stock as it barely dipped under the 8 day EMA during the morning sell off, so I had a beautiful 5 point rally. I trimmed heavily and I am left with a trailer. I also took some $AMZN which worked out great, as it was oversold. I tried the weakest and the strongest tech stocks and they both rallied with the $QQQ. Now I am small as I am waiting to see if this strong green bar in the $QQQ is the beginning of a bull flag or an oversold bounce.
https://www.tradingview.com/x/oRmfr1K5/
I gave you again just the two charts as I believe now when we are above all moving averages you can go to your preferred stocks from the ETFs and make a nice cash flow. I would be careful today and I would wait for market discovery, just to check if yesterday’s afternoon is not a bull trap, like we had last week. There is no reason to think anything negative, but you can use experience and patterns as guides. Also pay attention to the reopening stocks, as they did not rally in the afternoon due to increased Omicron anxiety, so not all sectors are created equally. We still need news there, more information is required to give reopening trade a bid. I would also like to note that we had plenty of reversals to the upside yesterday afternoon, now it is your job to see which were real and which were just oversold bounces. The $XBI also made a reversal and pushed above the 8 day EMA, but it is still a broken sector until it shows that it has enough power to get out of this downtrend. Be careful today as you don’t want to give back yesterday’s gains. Futures are up so if you have stock left trim into strength pre-market so that you can buy dips. If the levels hold every dip should be buyable, but watch the ETFs hold their levels in order for other stocks to stay strong.
For a more detailed report of our portfolio read Alex’s Morning Game Plan, where he describes all our assets and a more in-depth plan of action.
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