Before the Bell Nov 22

Tickers:  SPY QQQ IWM FB AAPL TSLA  AAPL AMZN NFLX GOOGL SMH ZM  / Oscillators &  Breadth

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 

Although earnings season is quickly coming to a close and we have a shortened holiday week, there are still a few marquis names on he board for this week including: ZM / DKS / DLTR / DE / FUTU / ADSK / GAP / JWN / HPE / DELL / AEO / ANF

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 November 22

  • Monday – Chicago FED; Existing Home sales
  • Tuesday – Flash PMI; Richmond FED; 7yr note auction 1pm
  • Wednesday – Big Day……Durable Goods; GDP; Jobless Claims; Intl Trade; New Home Sales; oil inventory; Personal Income; Consumer Sentiment; NatGas Inv.
  • Thursday –  Holiday
  • Friday – Nothing

Pre-Holiday Setup

As we head toward Thanksgiving and year end, we’ve got a lot of  moving pieces to consider.  Rather than craft a narrative, lets look how the markets stand.

  • Cap weighted indexes SPY & QQQ are near the highs. 
  • Breadth is deteriorating as shown by RSP / QQQE losing relative strength  ( see discussion below )
  • Incredibly, the oscillators are diving toward oversold ( discussion below )
  • Seasonal tailwinds favor a year-end melt up.   November – December is typically 2 of the strongest months on the calendar
  • FOMC Appointment: Biden’s FOMC Chair appointment is due and is clearly being used as a political pawn in the DC drama.  Probably not a big policy difference between Powell and Brainerd but still there’s that uncertainty that is hard to predict.
  • FATMAAN dominance.  Plainly stated, this has been the place to be.  I think the canary might be TSLA.  Watch that $1000 psychological level. A big break and hold below may signal a risk-off more broadly.
    • High Valuation names are struggling as traders preferring tried and true names with solid earnings support.
    • We discussed the ARK Invest complex being weak despite a raging bull market in 2021. IMO this will be the first area of market to have a major breakdown is there is one.
    • Watch as a canary, even if you don’t trade it.
  • Small Caps ( IWM ) are currently back-testing it’s breakout in the $233 zone.  It’s gotta hold here. A move back into the prior trading would be a bearish move.  That too should be watched as a canary in the sense that if most stocks falling under the surface that would not speak too well about the cyclical recover.
  • Covid Resurgence threatens global cyclical recovery
    • Some Euro countries are going back into lockdown; if more countries follow it would be bearish
    • Bond rates have nose dived since these announcements
    • The $USD wrecking ball is breaking out as the Euro dives. ( Safe haven bid )
    • Covid concerns have whacked energy, travel / tourism, and to a certain extent commodities
    • In the US I don’t think you’ll see anymore lockdowns, but if the virus numbers spike it will have nearly the same effect dampening expectations.
  • Post November OPEX volatility.  After a monthly OPEX there is an increased chance of added volatility.

Breadth Divergences Persist

Shown Below are 2 ratio charts.  The First panel is RSP vs SPY.  This shows the divergence between the EQ WGT SPY and the Cap Wgt SPY. You can see the equal weighted index losing steam since June with a steady decline and most recently a sharp move down with a break of support.

The second panel is the EQ WGT QQQ  vs Cap WGT QQQ.   Here too the equal weighted version has been losing steam since April w/ a sharp drop in November.

Takeaways:  The mega-cap ( FATMAAN ) dominance is asserting its leadership position is the indexes. The average stock on the other hand is either slightly going up, flat or going down as the mega-caps race higher.   So the narrowness of the rally is increasing and therefore the market indexes at large are more vulnerable to a sharp pullback.

Meanwhile The Oscillators dive toward oversold

It’s bizarre to fathom being almost oversold with the indexes at /near ATH’s.  I think the key lies with the panels above.  THe average stock within the market has been correcting while the mega-caps mask what is really going on.

$ZM – Do or Die moment

After setting the world on fire in 2020, the bloom has seemingly fallen off the rose with price testing 52 week lows around the $250 mark. As discussed last week with the ARK Invest complex. I think it would be wise to begin collecting potential short set ups for either a market -wide pull back or a continued migration by investors / traders to companies with solid earnings support. Rather than mess around right here on the daily chart, I want you to focus on the Weekly.  Look at the massive void under $240. I see $80 of downside in a break of that level. That would also be the trade location that if the bulls were going to mount one last defense, it would be right there. If they can’t hold it, I think those $80 would come quickly with no technical support below $240.  Bulls n Bears alike should have alarms set at $240.

Note:  ZOOM earnings are Today after the market close.  

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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