This market seems to be following a repetitive pattern, which frustrates all participants, and it already seems predictable, until it’s not. We had strong mornings, which brought plenty of the stocks from red to green, lines and levels looked like they were ready to be overcome to the upside, then we had free-fall, fake reversal and finally a strong sell program. This seems surreal especially after a few long days of selling big tech, with oil softening up, the $TLT becoming stronger, we have no respite. The $SPY is not far behind in this precarious situation. Today we have a catalyst, the CPI numbers (Core Consumer Price Index) MoM at 8:30 am ET. If inflation seems to be rising at the expected rate of 0.3% month on month, or lower this will give tech and the overall market a respite. If the number will be hot the bears will really manage to take control over the situation.
On top of the CPI numbers we have the first earnings of the season, in the banking sector – $JPM, both before the opening bell. If inflation seems to be on track and if JP Morgan beats expectations we should see a recovery in the $SPY above yesterday’s high of $436.10, all the way over all the moving averages at $438.79. The fall at the end of the tape brought the $SPY all the way just above the 100 day EMA, making us wait for the worst today. However, these catalysts can change the complexion of the market completely.
The $QQQ seemed to have been on this up and down trip all day yesterday, frustrating everyone, a strong morning was followed by a drip down, a fake reversal and ended on the usual note – a final fall. The fall was further accentuated by a news in $AAPL, which seems to cut its iPhone production due to a shortage in chips. This news seems to be exaggerated and at the same time it is old news when it comes to chip shortages, and therefore it should not have signaled such a sharp drop in the stock and in the overall index. Any negative news seems to hit the tech sector in a disproportionate manner, as it looks like it is becoming discount land. It can mean that we have the beginning of a negative active sequence, or that we reached oversold territory, ready for a reversal to the upside. Everything is in the air, until earnings from the companies in the next two weeks. Today seems to be the pivot of this story, with the CPI numbers in the limelight. If the numbers will be in-line or better we may finally see a reversal and the beginning of a run into earnings. Ideally yesterday’s low should hold and then push $363.20 for a strong move.
I leave you only with the indices today because it is a pivotal day and nothing else matters. Last night at the end of the tape I went without positions, waiting for today’s news, I just bought some call options in $SPY and $QQQ in case we have good news. If not, the loss is minimal and this helped me stay engaged. If the first mechanical move is up and it is confirmed by strong 30-60 minutes of trading I will put my capital to work, if not I will stay on the sides. I am not sure about shorting anything here because it has been a carousel type of move in this market atmosphere and you may find yourselves losing both long and short, and that may hurt. I did not get involved in the banking sector, as I the exhaustion created by this type of market wore me down. On top of that, historically the banks have an amazing run into earnings and then deflation after the event. Watch closely this morning’s action because it will give you the tools necessary to move forward. We’ll post on our website the latest news and keep you up to date.
Good luck and stay tactical!
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