Before the Bell Dec 22

Inspiration – Abandon Knowledge

Don’t confuse “abandoning knowledge” as a license to be lazy or to stop learning. We need to work as hard as we can for understanding and growth. To me trading is like a massive jig saw puzzle with thousands of pieces but you dont have the completed picture to use as a reference. It’s a constantly changing picture.  The key is to never let yourself think you “figured something out”.  Because that is the right about the time you become over-confident and open the door to getting wiped out.  Assume you know nothing at all times and you’ll be in the best psychological posture to take advantage of what you see.

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 1.25x- 1.5x to reduce run time without loss of clarity.

 Find the Companion Video HERE 

Macro Data Releases Week of Dec 20

After a stumbling start out of the north pole due to heavy weather, Santa is making up for lost time and making a run for an on time delivery. In the market insights section below, you’ll see the “Santa Rally ” period truly starts now and runs into early January. Breadth on both the Nasdaq and NYSE bottomed out and signs of breadth improvement are out there. Santa still has work to do but with some luck we will get price follow through and head higher from here. Taking nothing for granted, move stops and strikes higher to protect gains if we move higher. In the video I point out some important levels to watch in the coming days. If we can clear those hurdles, it may get a little easier from a technical stand point.

Re-Post Technical Trading Cheat Codes.

Received a lot of positive feedback on the TA Cheat Codes.  Will leave it up for a day or two for those that either missed it or have not had a chance to Clip it.  It might be a nice way to start your own TA Cheat code / decision-making tree.  You can then modify over time as you customize the general rules to your own trading style.

In your trading, keep the active trading game plan at your fingertips.  Keep in mind this is a cheat sheet and not meant to applicable to every situation imaginable. THat said, the rule set should keep you out of major trouble…especially if you are newer to technical trading.

• EMA Rules:
  • Price above all ema’s >> Full BULL
  • Price above the 20ema:  Bull look; buying a pull in to the 20ema, especially if there is technical support nearby, is often a good trade location for getting long.
  • Price between the 20 & 50 emas:  Tactically defensive.  Once the 20 is lost, the next move is either structural support or the 50ema. The chart is still bullish but care needs to be taken to only get long if price comes into support and stabilizes.
  • Price at the 50ema:   I think this a good level to use as a bull  / bear pivot.  Bullish if it holds; Bearish if it doesnt.
  • Price below the 50ema:  Defensive posture and potential shorting opportunity. Not much good happens below the 50ema.
  • Price at the 200ema.   Another key pivot location as it is the last chance for bulls to save the chart.
  • Price below all the moving averages:   Full BEAR
• Trade level to level. 
  • Recapturing levels from below is bullish and represent buying opportunities.
  • Losing levels from above is bearish and represent selling opportunities.
• Buy Support / Sell Resistance. 
  • If price moves into support and shows signs of stabilization it is a low-risk objective buying location w/ a stop just below.
  • If price moves into a well identified resistance area and the price advance stalls, it is an objective place to SELL with a stop just above resistance.
• Breakouts and Breakdowns
  • Breakouts relative highs are buying opportunities
  • Breakdown below a prior low are selling opportunities.
  • In both cases set a stop near by and honor it.  This market has a lot of 2-way action.  Honoring your stop is the only way to prevent getting your face ripped off….a papercut seems more appealing.
• Other tips on trading higher- vol environments
  • Trade smaller.  In higher-Vol environments you can make just as much as having a big position in a low vol market
  • Powell announced a doubling of the Taper rate to $30B a month and QE purchases to wrap up in March. The FOMC also expects to have 3 rate hikes in 2022 and 3 in 2023.  Interestingly the bond market didnt move an inch.  Also the Dot Plots seemed to indicate that the Fed thinks inflation will be 2.7% next year when it is close to 7% now. So maybe the FOMC thinks

Market Insights

While I try to always show panels I find interesting, pay special attention to the last panel today.  It shows January being the biggest month of equity inflows. THis year may be particularly big. With an anticipated rising rate environment, it will be really tough to allocate to bonds.  We may see flows increase to equities as money migrates toward equities. Also, folks may have extra cash on hand after any tax loss selling done late in 2021 that will need to find a home.

INDEX CHARTS

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