It is day 7 of war and last night Mr Biden had his speech in front of the State of the Union. The rhetoric was very clear across the board: unity abroad and at home. Futures are muted this morning, raging from -0.4% to +0.1% (at the time of writing this piece). As mentioned in yesterday’s article after 3 days up we will have digestion and possibly a trip lower. Neither the $SPY nor the $QQQ held the levels mentioned and therefore we got out of our trailer positions. However, due to the volatile environment going short is not a good idea, since headlines will heavily control today’s tape. Mr Powell will give an update today in front of a House panel today, and the question is: will he be hawkish or bearish? When we have all of these elements which can push the needle either way the best for you as investors is to be tactical and surgical. Go in for scalps but don’t put out a portfolio approach as the risks are high and the possibility for reward low. We are still in a downtrend with oil prices soaring and inflation raging, it is not a situation conducive to indices rallying.
The $SPY broke Friday’s low yesterday and went under all moving averages, being unable to hold onto gains. This did not surprise us since we were mostly flat with only small trailers left in case the 8 day EMA would have held. We can see the $SPY in this wedge formation, but with all the events taking place today it can go either way. I would advise trying to go long against yesterday’s low of $427 in case you want to test the waters, but with a sharp stop, otherwise you risk taking a falling knife.
The tech sector looks slightly better than the $SPY but the level was not held either. We trimmed our positions heavily into strength and got out of our trailers when $343 was broken. There is no need to hold onto anything when it cannot manage to get and stay above the 8 day EMA, and with the war pushing oil prices higher this is a big negative for tech. Reversals in big tech names such as $AAPL, $MSFT and $GOOGL were good indicators yesterday. Watch $AMD today for market sentiment.
The war developments, sanctions and Powell’s update are all important signals for the market, and all of these have not yet been priced in. Take care because the trend is still downward and sellers seem to be more popular than buyers. The bears are in control of the situation but the bulls don’t seem to throw in the towel, yet. Pay attention to your levels, look at $AAPL, $MSFT, $TSLA and semiconductors for market sentiment. The crypto sector could not hold onto gains either and $GLD is increasing, rather than the “digital gold”. Sanctions are scaring the markets since bottlenecks will once again form due to restricted trade. However, if you can see above all this negative chatter and have a broader vision together with technical analysis you can come out a winner. Watch levels not TV sets and you’ll be fine navigating the choppy and uncharted waters of this international ocean. Do not let yourselves swayed in either direction as in volatile situations everything can change swiftly. If you don’t feel comfortable stay out of the way, and try small positions in stocks you know very well using technical analysis.
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