Before the Bell Jul 16

Tickers discussed: SPY QQQ IWM FB AAPL AMZN GOOGL MSFT NFLX TSLA  Strategy Session

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.

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 to reduce run time.

Find the Video  HERE

 

Macro Data Releases Week of July 12

  • Monday – Light….Couple of FOMC speakers
  • Tuesday – NFIB Sm. Biz Optimism; CPI ; Redbook; 30yr bond auction
  • Wednesday – PPI final; Atlanta Fed Inflation expectations; Oil inventory; Jerome Powell Capitol Hill Noon
  • Thursday – Jobless Claims, Philly Fed MFG; Empire State MFG; Import/ Export numbers; Industrial Production; Jerome Powell Capitol Hill 9.30am; EIA Natural Gas Inventories,   Consumer Credit
  • Friday – JULY OPEX, Retail Sales; Business Inventories; Consumer Sentiment

Pay Attention

For weeks I’ve been saying I’d let you know when to PAY ATTENTION.  That day has arrived. Dont read into that anything more than what it says.  Does not mean bail out, go doomsday prepper or anything like that. It simply means I think we are at an important point. This point may resolve higher or lower.  So for me paying attention means to back off risk and be ready to turn left or right at the fork in the road.

Reasons to Pay Attention

  • Today is July OPEX – THe week following a monthly options expiration usually brings more volatility.  Vol can mean higher or lower, but with wider intra-day moves.
  • Trendline tests:  QQQ and SPY made tests of their uptrend lines yesterday. They held. Cautionary.
  • Bearish Divergences:  They’ve been persistent for months. Cautionary
  • Seasonality.  Today marks the end of the most bullish 2-week period in the market since 1950.  Now we move into the void of August where, unlike last year during lockdown, lots of people will be going on vacation. If you thought volume was light in July, you’ll be checking SPX for a pulse in 2 weeks. Potential for outsized swings with no one home.
  • FOMC –  Meetings at the end of July and Jackson Hole in August. Potential Fireworks with taper signaling
  • Debt Ceiling:  Lawmakers go on vacation in 2 weeks with debt ceiling looming. These things dont matter until they do.
  • Breadth Stinks:  FATMAAN has lead this narrow advance with only 42% of SPX stocks above their 50ema.
  • FATMAAN Earnings:  TSLA and NFLX report next week. THe others the following week. If earnings reaction is lower, the broad market averages are going lower. It’s just math with FATMAAN like 25% of the index.  If earnings resolve higher, we go higher.
  • Earnings at Large:  Bank earnings have been greeted with a thud. Lots of reporting over the next several weeks. Expectations are high with the potential of see the news.
  • Semis – THe group is a risk on / off indicator and the price action stinks. Off nearly 3% yesterday and with 2 failed breakouts in as many weeks.
  • Small Caps – IWM is usually also viewed as a risk on/ off group.  It’s rolling over.  Bulls would like to see it stabilize and reverse but we may need to go to the bottom of the range.
  • Oscillators – NYMO / NAMO shown above that as impossible as it may seem we are almost oversold and it’s time to pile in. We know the average stock has sold off. Maybe we are almost to the point of a reversal there. Pay Attention
  • Sentiment:  Not many bears out there.  Fund managers are already all in.  Short interest is nearly at record lows. There wont be any air breaks if they pull the rug.
  • FED LIQUIDITY: They are still pumping and that’s bullish
  • Treasury General Account Drawdown:  The Treasury has added about a trillion dollars of liquidity over the past 3 months by drawing down their general account. Their target is a $500B balance. That level will be achieved in 2 weeks. Then that spigot gets turned off.

I hope that is enough reasons to pay attention.  Watch and Listen closely. Be in a position to move once we get resolution.

FATMAAN Earnings

July 20:  NFLX / TSLA   July 27: GOOGL / MSFT      July 28: FB / AMZN / AAPL

Oscillators – Oversold at ATH’s?

The selling under the surface has pushed the oscillators to near oversold conditions. How many of your trading buddies would laugh in your face if you told them we are oversold at all time highs?  So what if FATMAAN was the driver the past 6-8 weeks, and now the broader market kicks in from oversold conditions?  Certainly possible.  The problem is these Oscillators dont give you a perfect timing signal.  We could extend lower.  It is however a reason not to go gonzo short into the hole just in yime for the snap back rally that rips your face off. If you’ve been playing the downside in the average stock over the past 2 months, congrats. Be looking to cover soon, not add on to those positions.

A Simple Bull Market / Bull Stock Checklist

Being a fear-monger is popular. Bearish tweets and doomsters are more widely followed than a tweet saying “stay long”.  Use this simple checklist to tell if the market or a particular stock you follow is in bull mode.  THe list is not intended to be the end-all checklist, but if you find  yourself saying yes to most of the questions, you can certainly come out from under your desk and delay subscribing to “Doomsday Prepper” magazine.

  1. Is Price at an All-time high?  All time highs are bullish, not bearish
  2. Is price above the 8ema and 20ema?  Price above the fast moving averages is as bullish as it gets
  3. Are the ema’s bullishly stacked? if from top to bottom the 8 is above the 20, 20 above the 50 and 50 above the 200 tells you the trend is higher and in bull mode.
  4. Is the slope of the moving averages positive?  If the moving averages are tilted positive and rising; its bullish
  5. Have any trend lines been violated?  Draw a trendline connecting the lows of the recent trend. As long as price stays above, its bullish. If a trendline is broken, pay closer attention.
  6. Are the indicators operating in their bullish regimes?   If RSI is above 50 and PPO momentum is above the zero line, the indicators are bullish.

Use these simple questions to ally any fears you have about the market or favorite stock but confirming it’s bull market status.

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 2 hour

SPY 30 min

QQQ 2 hour

QQQ 30 min

IWM 2 hour

$IWM 30 Min 

 

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