New week, new challenges

Good morning!

I hope you had a relaxing weekend and you distanced yourselves from the market. This ‘painful’ week has been a reminder that anything can happen and that usual seasonal trends don’t always make themselves available. We got a bit tricked by Thursday’s ‘reversal’, which in the end turned up to be just an oversold bounce, which turned into a wash on Friday. I am out of all my longs, I have no positions coming into this week, apart from some leap options in $SPY for the end of the month. I put these on just in case we have a ‘Santa rally’ and also because the $SPY held where it was supposed to. I will give you just two chart today, the $SPY and $QQQ, as these are all you need to get a general feel of the market.

$QQQ Chart

Tech has been for sale in the past week and it has fallen into the closing on Friday, making a new monthly low. The chart looks like tech has entered a downtrend after all the signals point towards no future lockdowns, but different government approaches toward Covid 19, like vaccination and testing. I am possibly even looking to short tech if the trend continues, but until then I will stay out of the way. Now the 8 and 21 days EMAs are intertwined, signaling a possible move lower, so be careful taking more falling knives. The 100 day EMA is at $374.71, so we are not far from there, you can try buying or shorting against this level if you feel like getting involved in the action.

$SPY Chart

The $SPY had an ugly week after Black Friday, but on Friday afternoon after putting in a new low it has closed above Thursday’s low. The backbone of the market is looking a bit stronger than tech, but it does not look inviting either. The 100 day EMA is at $447.19, so we are not far from that level either. The big difference is that the $SPY managed to close above $450, at about $453. I would stay out of the way here also, until we get a price discovery and we can assess wether the $SPY is going in the direction of the $QQQ or if it is recovering from this downtrend. Don’t jump the gun in either direction as we had some misdirection in the past week, so cash is also a position.

We have the FED chair saying inflation is not transitory anymore, and that tapering will happen at a quicker pace, Omicron variant poses questions, but it doesn’t require lockdowns yet. We have CPI numbers coming out at the end of this week, and a 0.65% increase is expected, therefore accelerated tapering seems the way to go. The volatility index is off the charts, the highest it has been in the last year, and therefore the fear factor is high. I recommend sitting on the side lines, watch the show as in unravels in front of you and learn from this rather than jump buying or shorting this move. We always venture into the unknown, but with some tools in hand. When the compass is broken you need to calibrate it in order to get the correct bearings. I recommend to have a look at the overall market movement today, calibrate your understanding of it and then, only if you can see a clear direction start tactically putting positions on. Don’t try to make up last week’s losses in a day, as you may create a bigger hole in your portfolio. Start with small trades for cash flow, take your money and keep your mind elastic for any possible situation. Don’t stress over your losses, as you cannot change the past, but you can live in the present and shape your future.

We Grow Together!

P.S.: For a mode in-depth view check out Alex’s Morning Game Plan, where he’ll give you more details about our tactical plan for today. Our Daily Video will be live on our Twitter page approximately 1 hour before the opening bell.

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