Good morning fellow traders and welcome to a new week on Wall Street!
Putin made a decisive step yesterday as it announced the recognition of two regions within Ukraine. This move, similar to the one from Georgia is the prelude to the Russian troops entering the country. While the West is preparing for economic sanctions, markets around the world are looking to open considerably lower. Asian markets are down about 3%, while US futures point to a drop of 1.5-2% for now. Given the uncertainty factor, oil and gold have a strong bid this morning, helping Putin finance this ‘war’.
From a historical perspective, ‘invasion days’, are usually a good buy opportunity as the markets recover in the coming weeks given the fact that uncertainty subsides. However, a lot will depend on the overall response from the EU and NATO, as well as Ukraine itself. In case the whole situation escalates, a re-test of the January lows is in play for the main indices.
Our focus for today will be on buying a dip in the indices vs a 10-15 minutes low. We will look also look at the stocks that reported good earnings and have no direct exposure to Russia. Big gap downs usually offer good day trading opportunities if the lows are set early and we can have a decent bounce. Sentiment is extremely bearish at this point, so the move off lows may be explosive. We are set to open way below Friday’s lows. In this case, see if any stocks or indices manage to reclaim those levels for a possible reversal. Inflation and FED will be of secondary importance today. With the 10 Year Treasury yield below 1.9% once again, see if tech catches a bid throughout the day. On our focus will be $AAPL, $AMZN, $TSLA, $GOOGL and $AMD.
$SPY chart
The next two important support levels for the overall market are $427 and $420. See if we put in a low in the first hour of trading and if we manage to bounce off it. See if tech can catch a bid helping the overall market, given its oversold status. From a technical perspective the re-test of the January lows is in play for today or tomorrow. Do not try to time the market before you get a clear reversal sign. Reclaiming $431 at some point today would be an impressive stance from the active bulls.
https://www.tradingview.com/x/FSeaUS20/
$QQQ chart
Tech is fast approaching the January lows. With the Nasdaq futures currently down 2%, we may be opening around the January lows of $334. See if this level gets reclaimed throughout the day or not. With most tech stocks below their 200EMA, see if any can show some relative strength. Watch also the small caps and semiconductors for possible reversals, as they are leading market indicators.
https://www.tradingview.com/x/zc5kBeg2/
When most analysts and market participants are extremely bearish, look for divergencies. A double bottom at the January lows will be an interesting inflection point. If we get a strong bounce from there, we expect a relief rally which may be extremely profitable. Remain tactical, prepare your levels and make the most of the opportunities that will arise from this. If we continue to make new lows throughout the day, make sure to have exit plans and do not chase falling knives.