Alex's daily Market update & Focuslist - 12/26
Last week of 2022...at last!!
Good evening folks!
I wish you all a VERY HAPPY HOLIDAY. Take some time off trading and enjoy these beautiful moments with friends & family. 🙏💙
Alex ✌️
GENERAL MARKET ANALYSIS
S&P500 (ES_F) Daily
Price Action Analysis:
/ES could not follow through on Thursday’s reversal, and we reclaimed the 3855$ level while making a higher low and an inside day.
Overall not much information other than the selling pressure was unable to follow through, and we were able to hold the support area. Remember that Friday was also a pre-holiday and low-liquidity day, so we’ll need more liquidity to confirm any trend reversal.
We are still below ALL KMA’S and in a downtrend, so be careful on the long side until we confirm an actual trend change, with AT LEAST a higher low on /ES.
On the upside,
The 3900$ level is now acting as resistance, the first level I will look for is potential rejection tomorrow.
The down-trending 10dma might also be a potential resistance.
On the downside,
The 3855$ of the current support area will be the level of interest, along last Tuesday’s low pivot (3803$) for potential support.
NASDAQ (NQ_F) Daily
RUSSELL 2K (RTY_F) Daily
Alex’s TAKEAWAYS
We are still below all kma’s and in price and breadth downtrend, no doubt about that. Despite that, I see some interesting EARLY underneath action right now. Here are some observations:
The indices could not follow through on the 50dma & base area rejection while making a higher low.
Energy, Metals, and Miners are setting up potential reversals backed by an increase in individual names setups.
Recent leading sectors like XLV and SMH are holding around the 50dma and key support levels.
Breadth was improving Friday, and we saw a higher low in the stocks above their 20 & 50dma.
The VIX with a significant reversal at the 21dma, and rejected the recent consolidation area. This could be an excellent early clue.
This has been a while since I’ve had that many names in my long focuslist.
That said, we are still in a downtrend, and we have to respect the fact that this interesting action occurred on a low liquidity week, and things can change and get rejected very quickly. This is not a time to get aggressive, but it could be an early area to test potential leading stocks and see if things hold.
Market health & Trend indicators:
LT SIGNAL: downtrend (red) + BELOW 50dma = BEAR market (🟥)
MT SIGNAL: downtrend (red) + BELOW 10dma = Downtrend (🟥)
Tomorrow's economic news:
Gameplan:
I don’t plan to be really aggressive this week in general, but I do see early constructive signals to get me to test some long setups tomorrow.
One thing is sure: I won’t keep a lot of overnight exposure if I do. I will test 1-2 positions tomorrow morning on the alerts only (no anticipation trade) and trim a lot of exposure EOD if things hold. I won’t take more than 10-20% long exposure overnight as the risk of rollover is too high, IMO.
Progressive exposure and keeping position small are essential while anticipating a reversal in a downtrend.
If you can’t react quickly enough in case of a rollover, then it’s probably better to sit this one out until we get more confirmation.
In the following sections of tonight’s letter, I’ll cover essential parts of my daily routine & preparation for tomorrow’s trading session.
✅ My daily Focuslist, including setups, alert levels & explanation (LONG/SHORT)
✅ My Portfolio update
✅ Sectors Review
✅ Market Breadth & Internals
✅ Economic Calendar
✅ Prime Model spreadsheet (PT_database)
✅ Leaders list (technicals, fundamentals & potential TMLs)
Tonight’s letter is free for everyone, so enjoy it and make sure to subscribe to get it on a daily basis if you’re interested.
LONG FOCUSLIST
BTU 29.7, FOUR 54.26, PCG 16.1, STNG 59.27, CELH 109.74, PTEN 17.35, SMCI 83.31, KGC 4.26, TDW 35.48, HAL 39.26, AG 8.87,
BTU - 29.7, 28.63
#Coal stock keeps building higher lows at 10/21dma above the recent base area. The coal commodity is still shaping up for a potential base breakout, so these individual stocks could be explosive if this commodity breakout happens. BTU acted really well last week and closed very strong Friday. I would use the Thursday high pivot for an entry here.
FOUR - 54.26, 51.41
Probably one of the strongest tech stocks in the market right now. Still building very tightly at the 10dma and below the initial breakout swing high pivot. Also, notice the higher lows and a very strong close Friday. It really showed high RS last week.
PCG - 16.1, 15.62
Long-term trending stock that retested the recent base area and made higher lows at the 21dma retest last week. We just broke the current consolidation DTL and I would look at the recent swing high pivot for an entry.
STNG - 59.27, 52.71
Oil tanker setting up on the base area & 21dma retest. I am still looking at the DTL to really confirm the setup and continuation. I also like the volume decline on that entire consolidation, perfect profile.
CELH - 109.74, 103.24
Still a very volatile stock, but I like how we tighten up at the base area and the 21dma. We are near ATH, and the fact that we hold that base is very constructive. If we lose that level, then that’s another story.
PTEN - 17.35, 16.08
The Energy sector is setting up nicely, and individual names begin to emerge with potential early entry on pullbacks. PTEN Tried to breakout of the DTL last Wed. but was not able to follow through. We retested the lows that created that WBPB.
SMCI - 83.31, 79.47
The SMH sector is still not shaping up perfectly, but SMCI, which could be a potential leader, is building very nice higher lows at the 50dma. This consolidation also shows perfect measure move characteristics. This is a really perfect spot to initiate a position in a potential sector leader.
KGC - 4.26, 4.04
Gold sector is the strongest of the past month or so and we are building the first consolidation of the very recent stage 2 uptrend. KGC is an individual that trade a lot like GDX, but show a bit higher alpha than the ETF itself. It can be a good alternative.
TDW - 35.48, 32.05
The strongest stock of my PT model right now. We broke the DTL last Tuesday and we came back to retest it on Thursday. I really like the setup and it will be my focus tomorrow on the potential base level reclaim.
HAL - 39.26, 36.68
Another Energy stock with a DTL breakout last Friday after a recent consolidation and higher lows at the 50dma. I would play the recent swing high pivot for an entry, or the base high level.
AG - 8.87, 8.32
Silver is another sector that has shown a lot of strength recently. I like how this name is building higher lows at the stage 1 base area and refusing to really break further down the 50dma.
SHORT FOCUSLIST
Not a lot of short setups right now…
PORTFOLIO UPDATE
INTRADAY/CLOSED TRADES:
SECTORS PERFORMANCE
Leading sectors
(GDX) Gold miners - Last month leading sector. I like how we build at the 21dma and the recent base area. This is the first consolidation of the stage 2 uptrend, and if we get a reversal here, we could really take off.
(XLE) Energy - Energy names setting up, like RIG HAL APA PTEN. The sector found support at the 83/85$ base with higher lows & we did what Oliver Kell calls a wedge pop above the 21dma & DTL. Still below the 50dma, but I think we are set for a potential next leg up in Energy
(XME) Metals & Mining - Metals are also setting up very nicely at the 50dma with a near-perfect measured move from the highs. I like the higher lows, but we’ll need to break that DTL and close above the 10/21dma to really confirm the potential reversal.
(XLV) Healthcare - XLV has been one of the strongest sectors recently, and we are holding the support area & 50dma really well. We still need to break above the 10/21dma and reclaim that base area, but the price action is constructive, at least.
Sectors on watch:
(SMH) Semiconductors - Still a LOT of work to do, but we are at a potentially important support area near the 50dma, and we are holding for now. We need to break that channel, reclaim the 50dma and show some tight action before we can say we really get a reversal here.
(TAN) Solar - Just lost the 50dma, but it still inside that support area. I’m watching the 74$ level closely in the next few days as this would be a very important level to break.
(XBI) Biotech - The chop fest continues… Until we break above 85$ or break below 78$… this sector is really a no touch for me. Individual stocks will show volatile & choppy action with breakout failing with this action.
MARKET BREADTH & INTERNALS
$USHL (Cumulative new 52W Highs/Lows & 50dma)
Still on bear market signal.
LT SIGNAL: downtrend (red) + BELOW 50dma = BEAR market (🟥)
!MCSUMNYA (McClellan summation index & 10dma)
The McClellan sum. index continues downward.
MT SIGNAL: downtrend (red) + BELOW 10dma = Downtrend (🟥)
NYHL (New 52W Highs/Lows) - Back up Friday and closed almost flat on the day.
NYAD (Net Adv/Decl) - Decent thrust Friday and followed through on Thursday positive breadth.
MMFI (Stocks > 50dma - MT breadth) - Higher low, but still below all kma’s. Need to follow through and make a higher high.
MMTW (Stocks > 20dma - ST breadth) - Higher low, but still below all kma’s. Need to follow through and make a higher high.
VIX (Volatility S&P 500) - Following the massive spike last Thursday, VIX was not able to follow through, and we rejected the 21dma and recent consolidation area. If we follow through on the downside, an 18.50/19.50$ support area retest is possible. If we do so, that would be positive for the equities.
DXY/TNX (US$) - Still building the potential WBPB setup. It looks like it wants higher.
US10Y/TNX (US 10Y bond yield) - Bounce on the 3.67% retest. Now the 50dma will be an interesting level of interest for a potential reversal.
ECONOMIC & EARNINGS CALENDAR
PRIME MODEL SPREADSHEET (PT_database)
Access to the PT_database 👇
LEADERS LIST
Overall leaders (PRIME Score)
TDW,WFRD,OII,RIG,CPRX,HAL,WMG,BTU,BAND,PR,APA,LBRT,SMCI,ELF,FOUR,CEIX,PBF,AEHR,HCC,TGTX,
Fundamental leaders (FA Score)
NOG,FRO,PR,CALM,RUN,HGV,GFS,JXN,LBRT,DVAX,CEIX,DK,AEHR,PBF,ALB,LYV,EURN,NEX,SMCI,PTEN,
Technical leaders (TA Score)
OII,WFRD,RIG,TDW,CPRX,HAL,WMG,BAND,APA,BTU,ELF,PR,LBRT,FOUR,SMCI,PRTA,TGTX,PCG,PBF,AEHR,
Relative Strength 1 Month (1M-RS)
WFRD,OII,CYTK,FOUR,RIG,MNDY,TDW,PBF,BAND,HAL,CALM,DLO,COTY,WMG,HCC,NLY,RCUS,PCG,KBH,GOGL,
Relative Strength 3 Month (3M-RS)
OII,PRTA,BAND,RIG,WFRD,TDW,HAL,AEHR,SMCI,CPRX,PR,PTEN,WMG,APA,IGT,GPS,TGTX,BTU,CPRI,BIIB,
Relative Strength 6 Month (6M-RS)
CPRX,AEHR,WFRD,PRTA,OII,SMCI,ELF,TGTX,TDW,INSW,RIG,ARRY,PR,PCG,CELH,WMG,HAL,CEIX,ALGM,BTU,
IMPORTANT NOTE:
I have the discipline to build a detailed FocusList each night, but I want to emphasize that I DON’T take all the trades that would trigger their entry. Some reasons to take a specific position over another or not take any trade, even if the alert is activated, are:
The general market price action
My Market-Based exposure model
My Portfolio-based exposure model (progressive exposure)
A high-conviction setup
Price action around the entry pivot
STOP LOSS:
Recent swing low pivot
For less active trading, you can use the recent swing low pivot as a good structure level to place your SL, but consider that the distance with the entry is more significant. You need to adjust your position size to keep the trade risk as a % of your portfolio, ideally below 0.5% or even 0.25% when the market conditions are imperfect.
LOD (Low Of Day) / HOD (High Of Day)
I like to use the LOD of the day I enter the trade. This way, I can use a larger position for the same trade risk as a % of my portfolio. BUT requires more active trade management and expects to be taken out more often (lower hit rate).
Then even if I take a trade at the entry pivot, I will very often sell it right away if the market roll over or the stock is backing out of the gate. I prefer to re-enter on the entry pivot reclaim than to be stuck with a more considerable loss. Please study all my education articles closely to learn how I handle trades around these entry pivots.
REFERENCES
Articles on the system:
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Generous and amazing long list setups! I hope you had a beautiful Christmas and wish you a good last trading week of the year. Cheers!