Down we go

Good morning!

I thought my title yesterday was a bit harsh and bearish but it turn out that unfortunately I was going in the right direction. We had a very strong opening with a gap up yesterday, which frustrated everyone who rightly got stopped out the day before and then we got to the ‘right’ levels, at which the market could have signaled a move higher, and then we broke down and then some. This is a very painful move which if it catches you unaware it can be very painful to your portfolio. We all lost yesterday and it is ok to say so. The idea is to learn from it, move forward and find another way to produce cash flow and protect your assets. I got stopped out of all of my positions in that down move, being left with only some options. The good thing is that we had time to trim into strength in the morning and book some profits. $AAPL gave us a way to earn nicely and then reversed, which did not matter since we had only a trailer. $TSLA was difficult as it broke out in the first minutes, but then it went down all day. I am out of this stock and I am waiting for a better set-up. The $XBI sector was one of the most frustrating areas yesterday as it put in another yearly low, and it hurt my options and my stock. I exited for a loss since now it is in no-man’s land and it can go anywhere from here. Powell’s speech yesterday was in the same tone like the day before, but Omicron has landed in California. I am not sure if all this agitation and down-trend can only be attributed solely to Covid news, as it seems to be too aggressive. You can also take into consideration the fact that it has also been a massive sell-off in the last weeks due to tax purposes, which could have also affected the situation. Where do we go from here?

$SPY Chart

This menacing red bar in the $SPY, from $464 to $450 is quite bearish. We are now well under the 50 day EMA, and under the $454 support level. Theoretically we could say it is a good buying opportunity, but with all the frothiness going around it is difficult to assume. In September we had the $SPY under the 50 day EMA for about half a month, so this can be another downtrend starting. At the same time seasonality says I am wrong and we could have a rally forming after this tree shake. I would wait for market discovery and not run buying this dip. If we have a red to green kind of day the $SPY will be my first buy in order to test the waters, with a stop at yesterday’s low.

$QQQ Chart

The tech sector did not go down as much, it went under the 8 and 21 days but not under the 50 day, which is at $384.83. I believe there is room to the downside and for the moment I don’t have any stock or options in this sector. $382.78 can be a support, but I not touching anything until I have price discovery. It has had an amazing run from the middle of October and I am not willing to chop up money for the sake of it.

I am giving you just two charts today as they are the most important indicators for today’s action. Stay tactical, cash is a position and the power is in your hands. Use knowledge, levels, trends and patience as your tools today. They will help you navigate this difficult tape and protect you from unexpected moves. You can try some stocks with stops as yesterday’s lows, but in this environment less is more. Don’t try to make up your losses in one day, as revenge trading can only hurt you more. If we have clear signals for a positive move we’ll see them and act accordingly, if not we’ll just watch from the sidelines. ‘Square one’ is a good position to be in, not tied to anything, with endless possibilities. Try day trading for some cash flow and take your gains, it is ugly out there for the moment. This place between a rock and a hard place is not the place to be, stay on top of the rock and look at the horizon, you’ll have a better vantage point and take better decisions.

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