Today will be a decisive day for the market because depending on the attitude of Powell with regards to tapering the market will react accordingly. If the FED decides the economy does not need pumping anymore and tapering should start earlier, or on time, we may see a further drop in the market. Should the FED decide to take a more dovish attitude and to give the possibility of a delay to tapering the indices could start to rally back over the moving averages, and cancel this downward move. Volatility is the big word in this session as you’ll see wide swings in the value of stocks. The best thing to do is to stay on the side lines and wait for the FED talk. The trend will reveal itself, and usually the first reaction of the market after the news is the correct one.
The $SPY like had a pre-market rally yesterday and this unfortunately faltered after the opening bell. Every time the bulls were pushing for an upward move the bears showed their claws and pulled it down. This is not a time to put your money at work, other than incrementally, to test the waters. $431.42 is the 100 day EMA and it should hold if the tape is not to be taken by the bears. For a more bullish signal we need this index to push through the 50 and 8 day EMAs which are at $441.3.
The Big Tech is in a similar situation to the one mentioned above, with a muted day yesterday. For the bears to take control we need to the $QQQ going under Monday’s low of $360.93, or worse, to the 100 day EMA of $357.45. If the bulls show any signs of life we want the $QQQ to push into and over $368.53.
This stock showed relative strength during this market’s bear session, but yesterday it struggled with the moving averages. Due to the volatility and risk of the tape we decided to exit this stock and buy some $750 option calls for Friday, in order to protect our capital. Why did we buy call options? Because the stock is still above the 21 day EMA and if the tape turns bullish it should prove to be very strong and push through last week’s high of $761.04.
$UBER was an interesting choice yesterday, after its CEO spoke on CNBC and said that breakeven is expected in Q3 and profitability in Q4. Uber basically showed flexibility and the power to adapt to covid, supply and demand started to normalize in a post-Covid world and therefore strong guidance was given. All of this analysis pushed the stock out of its downward move and now it has an open way towards recovery.
To sum it all up I would like to leave you with this: please be patient to see the effects of the FED talk, put your money into play only if the $SPY shows signs of recovery and if you want to try reopening stocks $UBER is your best choice of the day.