Before the Bell April 18

Inspiration 

It should not be a surprise that negative base emotions like anger, pride, jealousy and arrogance will destroy your trading account and quite possibly your life if you let it get that far.  The first step to turning things around is recognizing when those emotions begin to strike in real time. That’s where self awareness and having a journal handy as you trade can help.  Writing those emotions down in real-time, then contemplating on them as you recap the day will help you a great deal. Once you can recognize when those emotions begin to creep in, then you can have an opportunity to employ strategies to head them off at the pass before the downward spiral has a chance to take hold. The easiest thing to do in real-time is STOP doing whatever it is that led you to that point.  If it is a position that is causing you distress, close it. Maybe its just stepping away from the screen for 15min to recompose yourself. And never forget, you always have the option of breaking the glass in case of emergency……..close EVERYTHING.  There are numerous examples in Market Wizards where a Wizard would walk in Monday morning and tell the staff to liquidate everything. If that solution is good enough for a Market Wizard, it should be good enough for you and me. One last tidbit.  ACTION cures FEAR.  Doing something will reduce your fear and anxiety.

Earnings

Companion Video  

The video is a detailed technical review of the indexes and FATMAAN names. All the key trading levels are identified along with commentary and trade plans for each ticker. Trade ideas are also discussed.  Run the video at  1.5x to maximize efficiency without loss of clarity.

Find the Companion Video   HERE

Macro Data Releases Week of April 18

• Monday – Housing Market Index; Bullard 4pm
• Tuesday – Housing Starts; Evans Noon
• Wednesday – Existing Home Sales; Oil Inventory; 20yr bond auction 1pm; Beige Book
• Thursday – Jobless Claims; Philly Fed; Leading indicators; NatGas inventory; 5 yr TIPs Auction
• Friday – PMI Composite Flash; Rig Count

There is still Time ( to get long commodities )

Below is a chart for copper going back 50 years. It shows you the magnitude and duration of the bull markets. We are about to breakout into a completely new range and I think a new floor on prices will be put in. While the example is copper, I think its emblematic of commodities across the board. Huge demand drawing on supply that has been starved of capital for a decade. There structural deficits won’t be cured with niceties or rhetoric. It must be met with tons of capital and a plan. Each month of delay, extends the potential duration of the move. I believe when the big money rushes into the tiny energy / commodity space, the move are going to be violent.  Get some markers out there to get toe holds in the space if you have not done so already.  There is still time.

Macro Backdrop until further notice

Shrinking Liquidity

The combination of aggressive rates hikes and balance sheet run-off are bearish for markets.  Markets thrive in times of ample liquidity and starve in times of low liquidity.  JPOW & Co. now have a singular mission to knock down inflation by the reverse wealth effect. These guys won’t stop until the market is down substantially. There will be lots of trades both bullish and bearish between now and then, but they’ve made themselves clear, they will insist on the market going down. This will be the over-arching theme from now through the summer.

Persistent Inflation

While inflation may moderate later this year, I think that inflation will be persistent for at least a year. The FOMC’s rate hikes will tighten financial conditions and thus make it tough on financial assets, but it wont affect oil or gas prices, a grain shortage or a myriad of other commodity based inflation inputs that are the root causes of the problem.  s

Commodity Super Cycle

“Spot Prices cure Surpluses; Long-Term Contracts solve shortages”  Jeff Currie Head of Commodities at Goldman Sachs.  Commodities, historically speaking, tend to trend in broad 10 year Boom –  Bust cycles. This is also coincident with capital funding of the sector. The commodity boom of 2000-2008 was met with a wall of capital investment. THis greatly expanded capacity of all manner of commodities. Then from 2012 – 2020 was a period of capital destruction and collapsing returns. The emergence of ESG has constrained re-investment into these “dirty Sectors”.  We are now in the upswing of the commodity cycle.  We are probably in just the first year of the upswing. We are literally YEARs away from seeing supply expand because no capital is yet flowing into the sector.  The exception of course is a recession. A recession will kill demand and cause most asset classes , including commodities.  Here is a 60min podcast that summarizes the commodity situation.  Find it HERE

Earnings Season & Bracket Trades

As earnings season kicks into gear, a reminder that this is prime time for Bracket Trades. Bracket Trades are those trades created when a stock gaps up or down from a news driven event. Bracket Trades are set up as “2nd day trades” where you alarm the high and low of the prior day’s trading range, then patiently wait for price to either break lower or higher from the range.  You then follow price out of the range. I will do my best to help identify them for you, but you can easily find them yourself by doing a sort for “GAP ups” and “GAP Down” on your trading platform.  I add additional filters for only stocks above $10 and at least 500,000 shares traded. You can add additional filters to cut down the sort further. Generally speaking, stocks favor continuing in the direction of the gap higher or lower.

You can find out more about Bracket Trades in the video Run the Player at 1.5x      HERE.

COPPER – Breakout Watch

I think that based on the charts, Copper is about to break higher into the next regime of price between $5 – $7.  In the chart I show copper’s  3 distinct price regimes over the past 60 years. If price can clear this $5 level and hold it, there will then be a ton of support below. THe point here is two fold. Number 1 is to show the steepness of the 2005 – 2008 bull move.  Number 2 is to dispel the notion that you’ve probably been thinking “I’ve missed the move”.  I think its just getting started.  Tickers of Interest COPR, COPX, FCX, SCCO, TECK, ECH, SQM

Trades about to Happen

NOTE: Please Check earnings dates for all these. 

$AA Alcoa 

Price working higher within a well-defined uptrend. I like it long against the trendline. I think it is still close enough to provide an objective entry w/ a stop nearby, just below trendAfter the recent move to overbought territory following the recent rally, now the oscillators are diving quickly toward oversold.  When these oscillators reach minus 60, it will be a good idea to reduce any short exposure and lean to the long side.

STLD – Steel Dynamics

Setting up for the breakout above $89. Notice the pending bull cross on PPO

$ATI – Allegheny

Monthly chart here. Price at key resistance. A clean break above 30 should open the door to $44 as a T1.

$OXY – Occidental Petroleum

Currently has been in consolidation for 2 months following Buffett’s bum rush into the name. Above 62 and I think it takes the next leg higher.

INDEX CHARTS

Use the following pivots and levels in your active and swing trading. Added color is provided on the video.  Link above.

QQQ 30 min

IWM 30 min

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