We had an amazing rollercoaster ride yesterday, which was solely dictated by the macro events coming from developments in Ukraine. Russia is hit now with sanctions from the EU, UK and the US. Mr Putin has “claimed” the two separatist Ukrainian regions and sent troops there, and the super powers reacted with economic wrist slaps. The most important part is that we have some answers, so the market can price that in and the level of uncertainty is lessening. The volatility index has reached a double top and it looks like the $VIX is starting to fade, which is an excellent signal for investors. The tech sector has fared better than the $SPY, as it was more oversold. Due to the increased oil prices, falsely pumped by this international conflict, the reopening stocks have taken a hit, but they might be buying opportunities. Today we could see the beginning of a bounce in the markets, as the inflation and international conflict start to be priced in, therefore we can start to incrementally buy some stocks versus yesterday’s levels for cash flow.
What you see on this chart is not everything, since yesterday’s pre-market and after-market can tell a different story. Monday’s futures were down about 2% and the market rallied off the open, only to bottom before Mr Biden’s press conference, then to rally back again and fall at the market’s close; however, in after-market the tech sector rallied back above $339, thus confirming a reversal candle.
As you know the semiconductors are very important for gauging market sentiment, and this stock put its low in the first 10 minutes after market open at $230 and then it managed to close ten points off this level. When semis are so strong it means the market is strong and the bulls are more in control, forcing the bears to cover shorts. Since $NVDA immediately pushed off the 200 day EMA and managed to close well off the lows it is a signal that a reversal from this bear market is imminent. However, care is advised in this volatile environment, when any international political headline is moving the needle in the markets.
As I mentioned in my intro I would look at reopening stocks since they have had only head winds from the Omicron news at the end of November. The price of the oil increasing at alarming levels, coupled with epidemiological restrictions has not brought this stock back down to December’s low, not even January’s low. After 3 days down $JETS have managed to post a higher low and high from last week, and it can be ready for a leg higher. Watch $21.92 as your stop and $22.58 (200 day EMA) as a possible turning point to the upside.
Today will be an interesting day, with hopefully less volatility which may give us lee way to the upside, having possibly reached a double bottom. After Mr Biden’s speech we have seen a reversal to the upside but we need to see if we have muscle memory. I would trim today into strength and leave trailers in order to see if the bulls manage to regain the 200 day EMA in the $SPY. If the 200 day EMA will prove a big resistance and the bulls cannot win this battle the market will continue into this downtrend. Continue to be tactical and take gains as this is a difficult environment to keep your gains. Wait for trend formation and for the backbone of the market to strengthen.