Good morning!
We had the best week of 2022 so far and I hope you took advantage of this together with us. Last week out of all the earnings calls close to 80% of the companies beat both expectations and revenue, so the market rallied. We had very strong numbers on Friday with regards to added jobs, three times the expected number, so the market reacted positively. The $SPY and $QQQ recovered from the January slump, but have a way to go until they get above the moving averages, therefore I recommend staying tactical and patient. Towards the end of the week we have again inflation data, which might shake the box and bring rates back up. We had specific winners in the tech sector and singular losers, therefore the action is specific and it does not push the whole sector up with the 2021 easiness.
$SPY Chart
On Friday the $SPY tried to push above the 21 day EMA but it did not manage to stay above it and it closed just above the 8 day EMA. This got us out of some positions as we took trades. Until the $SPY does not manage to stay above the moving averages we take trades and stay tactical. The futures are flattish and therefore we may have a quiet day with sideways action. This action can turn bearish at any time, and therefore don’t get overly invested until you see a trend forming. For the market to be healthy the $SPY should stay above $448 and get above and stay above $452. Watch if the $SPY gets above Friday’s high and then it grinds lower; this could be a sell sign.
https://www.tradingview.com/x/VSbIvF7x/
$QQQ Chart
The situation in the tech sector is even more treacherous as the $QQQ closed under the 8 day EMA $358.52. This got us out of tech, with some small trailers left. $AMZN could not manage to push the sector up when $FB posted the worst week ever in the history of the company. We have very specific action in this sector and therefore you should be surgical with your positions. We are flat in this sector waiting for it to show signs of life. If it gets above and stays above the 8 day EMA it should manage to tackle the 200 day at $363.44. Until then we are not touching this sector unless we go in for quick scalps in specific stocks. I would advise staying away until $QQQ shows any sign of strength.
https://www.tradingview.com/x/2bqybJf8/
$BTCUSD Chart
We have a flag forming in Bitcoin and therefore the situation becomes interesting. We bought mini futures on Friday and trimmed into strength, leaving a portion of it for today’s continuation. On Friday it was Day 1 and we got involved when it got above the 21 day EMA for a scalp, but we left a third for the possibility of the beginning of a new active sequence. Over the weekend Bitcoin flagged and now it is struggling to stay above the 50 day EMA. Watch $42800, if it stays above it then it can get another leg higher towards the 100 & 200 day EMAs of $46000 in the next sessions. This sector has been a big loser in 2022 and it proved it is not a good hedge against inflation and therefore I would urge caution yet again in this sector until it manages to stay and get above the moving averages. I am repeating myself by mentioning that Crypto is not in 2020 anymore and this sector should be treated like any other when it comes to technical analysis. If you follow these steps you can keep gains and minimize losses. In addition to Bitcoin we got exposure in this sector by buying $BKKT as it has plenty of upside potential from the $4 base.
https://www.tradingview.com/x/tolyYX2x/
Should we get overly excited after such a strong week or should caution come into the question? I am not being pessimistic but as long as the big ETFs don’t manage to get and stay above moving averages there is no reason to have a portfolio approach. Stay tactical, take gains and go in for micro-scalps. It is worth taking a look at the reopening sector since Europe is starting a relaxation approach towards covid, the US might follow suit. Futures are flattish as I am writing this piece so we may get side-ways action today, don’t jump the gun buying stocks hoping the $SPY gets above the 21 day EMA. Wait for your friend, the trend, to form and only then take decisive action. We have to follow the treasury yield curve closely as they directly affect the sectors, since this is a period in which money does not flow as easily. We should visualize that we are in a post-pandemic reality already since the markets see 6 months ahead and pick and choose our trades. With the FED hawkish and some companies under-performing this period is very selective when it comes to stocks, so cash is also a position.
Good luck!
We Grow Together!