Good morning,
The week started with 2 new headwinds for the overall market: the increase in the Treasury yields and an energy crisis. The former is affecting in particular the tech sector and growth stocks while the latter is a temporary boost to clean energy stocks. The market seems to continue to want to find explanations for its narrowness and poor overall performance if one looks at the plethora of individual stocks well beyond their 200EMA. Staying tactical and quick on your feet continues to work best. Cyclicals, value and re-opening plays are in fashion again, while big tech is for sale. There are however some positive news, such as the impressive rally in the small caps which is conducive of more investors’ risk as well as the semiconductors rally late in the afternoon fueled by $AMD. $TSLA continues its rally as it pushed above 780 and went as high as 799 on a good day for the EV sector.
$SPY chart
The overall market posted a Doji type candle as investors welcomed the rally in the EV and clean energy plays but were worried by the selloff in the big tech arena. For today, with futures mixed, expect some more intra-day rotation. 441.90 is pivot support with pivot resistance at 444.05.
https://www.tradingview.com/x/2V8JW7d1/
$QQQ chart
The tech sector has been for sale in the first part of the day only to find some support in the afternoon and the close off lows. Leaders such as $AAPL and $MSFT lagged the overall market, while $FB was a bright spot given its recent weakness. For today, pivot support is 367.73 and the pivot resistance is at 371.07. The line in the sand between bulls and bears will be at 369.25 which coincides with the gap entry from last Monday. See if any tech stock show some early relative strength in order to get an idea of the complexion of the day.
https://www.tradingview.com/x/Z2RWAdoC/
$IWM chart
The small caps continue to act well after Thursday’s rally. The ETF managed to get above the pivot resistance at 225 and is looking set for higher prices. It is noteworthy to mention that the small caps have been in a channel for a considerable period of time and a breakout above 234 would most likely be explosive for this sector. We are long some $225 calls for mid-October. Careful adding on strength as the 2021 rotation phenomenon might continue and the small caps might get out of favor.
https://www.tradingview.com/x/seTuajp2/
$AMD chart
Finally, $AMD showed some relative strength as it managed to lead the semiconductor stock. After an appalling start of the day, dipping as low as 103.44, the stock found its footing and on news of being on the buy side for several investment companies it rallied past 106 as high as 108.27. For today, see if it offers some continuation. The next resistance sport are 109.30 and 111.70.
https://www.tradingview.com/x/F5fNkV2f/
Remember that the trend is your friend. If money continues to rotate out of tech into cyclicals, value and clean energy, join the trend or get out of the way before losing too much capital on your conviction. The end of the quarter is looking to be a turbulent one. Be patient, observe the action in the markets and trade when the set-up is right for you. Continue to follow Eclub Trading, We Grow Together!