Tickers: SPY QQQ IWM FB AAPL TSLA MSFT AMZN GOOGL NFLX SMH
Before the Bell is premarket prep for active traders. The note provides detailed stock market technical analysis focused on the indexes and FAAMGs. Key levels and trading locations are provided, along with trading plans and timely commentary to keep you on the right side of the trade.
Inspiration – Market Wisdom from 1912
THe demons and pitfalls of traders 110 years ago are the same ones that torpedo us today. Item #1 is correctly placed. If you are not able to calm your mind and keep well – centered, you may want to consider a new profession. Without it, making progress on all the other things will be pretty difficult.
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 Feb 7
- Monday – Nothing of Consequence
- Tuesday – NFIB Small Business Optimism Index; International Trade; Redbook;
- Wednesday – Mortgage Applications; wholesale inventories prelim; Oil inventories; 2 FOMC speakers; 10yr Note Auction
- Thursday – CPI; Jobless Claims; NatGas Inv.; 30 yr bond auction 1pm
- Friday – Consumer Sentiment
Dead Cat Bounce ?
While there is room for this rally to make another push higher, I am leaning slightly bearish. All of the weekly trend lines have broken on the indexes and thus technical damage has been done. THis puts things in a bearish technical posture. Also, notice the relative performance of the defensive sectors are on the upswing. Lastly speculative areas of the market like the ARK complex are still very weak. Watch them for signs of animal spirits. I think they are a great gauge of sentiment.
$SPX Trend Break – Intermediate Bearish Posture
Noting this weekly trend break is important. It puts the $SPX in a bearish intermediate posture. While price remains below trend, the bounce remains suspect, but if price were to recapture the trend it would put the market on a much more solid technical footing for the bulls. As we’ve noted many times in recent weeks the 4500 level ( $450 on SPY ) is also an important level. It is the low side of a $20 wide consolidation trading range between $470 – $450. It isnt a coincidence that price stopped on a dime once it hit that level in Friday’s rally.
Key Option Strikes
Market Insights
It is far better to consistently have small, positive gains vs bigger gains but with big draw downs. Its the Tortoise vs the Hare. We are entering a new regime in markets as JPOW opens the drain on the liquidity pool.
Successful trading going forward will rely on these factors:
- Flexibility ( Leaf on a Stream )
- Be open to both bull and bear outcomes with lots of whipsaws in between
- Strive to show no bias for a bullish or bearish markets; money can be made in both.
- Comfort with 2-way trading
- We’re entering the Golden Age of Long / Short Trading
- If you’re not comfortable shorting or buying PUTS, time to start learning or know when to step aside.
- Comfort with Higher – Vol Environments
- In a whipsaw or bearish environment, Volatility will increase
- Higher Vol often leads to PnL Whipsaws that can crush positive trading psychology
- Trade smaller during these periods
- Comfort with New Asset Classes
- You ok being long Coffee, Cotton, Uranium, Copper etc?
- Cramer is right, there’s always a bull market somewhere. But if you’re not familiar or not willing to go there, you wont be able to participate.
- Not a prediction, but are you OK with FATMAAN going fallow for 3 years?
- Formulate strategies that dont include the old gravy train stocks everyone is used to simply holding forever.
- Recognize if / when those stalwarts are no longer working and trade something else.
ESG – Energy Stops Growing.
No Supply Response: 2022 is set up to be a lost year in terms of hoping for or expecting a supply response from producers. If a well was literally started today, oil would not hit the market until very late in 2022 or more likely in early 2023. Demand continues to move higher as the post-covid world moves toward normalization.
INDEX CHARTS
A detailed walk-through of the levels and trading strategy for the indexes is given in the video ( link above) . The static charts are provided for reference. The FATMAAN names are also reviewed in the video along with trade ideas and other charts of interest.
SPY Daily
SPY 2 hour
SPY 30 min
QQQ Daily
QQQ 2 hour
QQQ 30 min
IWM Daily
IWM 2 hour
$203 proved to be a problem as price was unable to take it out and now has reversed lower.
IWM 30 min
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