Alex's daily Market update & Focuslist - 02/08
Reversal attempt #1....failed
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Alex ✌️🙏
GENERAL MARKET ANALYSIS
S&P500 (ES_F) Daily
Price Action Analysis:
ES_F was rejected at the 4180$ level overnight, and we opened very weakly and have never been able to bounce convincingly. We chopped around the 4137$ level all day to close below and above the 10dma.
So our first reversal attempt failed. Now what?
I see two potential scenarios:
We just made two rejections of a major resistance area, with the failed reversal attempt making a lower high. That’s the kind of pattern we would observe at the end of market rallies in 2022 before the market rolls over. We are still above all kma’s, but with other breadth indicator flipping, we must keep this scenario in mind and be cautious.
We are building a two legs-down pullback with the two recent highs creating a new DTL to confirm the breakout & continuation. If we take the Measured Move of the initial leg down, that will bring at the 4082$ level and also the 21dma. A very plausible scenario IMO. (See Glossary for Measured Move explanation)
On the upside,
I’ll watch for a retest of the 4137$ very closely. If we try to reclaim that level, will we reject it to create a short BORS setup (downside retest & rejection lower), or do we reclaim and close above it?
If we do reclaim 4137$, then 4180$ and 4212$ levels are significant potential resistance levels. We also have our potential wedge developing, so I’ll watch for that DTL on the upside.
On the downside,
I’ll also want to see the 4109$ level & 10dma show support tomorrow. It would be the perfect scenario for a small & healthy pullback. Below that, it could indicate a deeper move in the books.
If we push below, 4082/4056$ area and the 21dma would be the next target.
NASDAQ (NQ_F) Daily
RUSSELL 2K (RTY_F) Daily
In the following sections of tonight’s letter, I’ll cover essential parts of my daily routine & preparation for tomorrow’s trading session.
✅ My overall current market Takeaways & GAMEPLAN for tomorrow
✅ PRIME_LIST (potential TML’s)
✅ 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)
Alex’s TAKEAWAYS
Today, we failed yesterday’s reversal attempt but remained inside range (inside day) and above all kma’s.
Tomorrow and the next few days will be critical, IMO. Are we only building a tight consolidation above or at the 21dma, or do we rollover from that key resistance area rejection?
McClellan summation index historical study:
For me, the big red flag is the breadth extension we were at. We were extended after a two-leg up that started mid-October and flipped today. For reference, at 4300 on the McClellan summation index, we saw the most robust breadth thrust since the post-covid crash, similar to what we saw in the 2019 recovery.
Here’s the pullback action we’ve seen following these overbought reversals:
So, overall we can see that when these OVERBOUGHT breadth thrusts occur, it usually comes off a significant correction or bear market, as during such a period, they tend to reverse lower & quicker.
I want to share the same examples for the 2000 & 2008 bear markets as well, how these high MT_SIGNAL reversals affected the market while we were during an early uptrend period:
2003:
2009:
What is positive here, it's that typically, when we see these large thrust readings inside a bear market, it's usually the early signs of a new bull, and we only see healthy pullbacks to their 21/50dma before resuming the uptrend. I don't want to call anything, but these two large thrusts to 3500 & 4300 now are very high compared to previous swings, and we see them normally on the end of a bear market.
The last two breadth thrusts (2022/2023) compared to the 2021/2022 bear trend:
So, long story short. I remain on my thesis that in the intermediate term, we are good, and I think there is more to come on the upside, but short term, we might get a 21d or 50d pullback.
Some observations:
NQ_F is back 7.9% above the 50dma.
VIX reclaimed the base area and broke out of last month’s DTL - CAUTION
DXY 50dma rejection failed - CAUTION
Credit Spreads failed the short BORS and back above UTL - CAUTION
Strong action in the leading names, especially in semiconductors. - GOOD
McClellan's summation index (MT_SIGNAL) flipped back negative - CAUTION
Major indices still are at important resistance areas and failed the first reversal attempt, creating a lower high structure. - CAUTION
But we are still above all kma’s.
Stocks above 20/50/200dma pullback continue.
A strong reversal in the sectors I was watching closely today. XBI, IGV & TAN
The intermediate term is bright, and I think this rally might be the start of something more, but the market will not move in a straight line. This could also be another technical rally in this bear market, and we don’t know…so it’s very important to bend with the trend and follow price action.
Market health & Trend indicators:
LT_SIGNAL: uptrend (black) + ABOVE 50dma = INTERMEDIATE-TERM UPTREND (🟩)
MT_SIGNAL: downtrend (red) + ABOVE 10dma = SHORT-TERM UPTREND under pressure (🟨)
Tomorrow's economic news/events:
GAME PLAN:
Tomorrow I don’t plan to add any exposure or trade until we can confirm a DTL breakout & 4180$ pivot reclaim.
I believe the indecision is too high, and we don’t know which side the market will flip, especially after today’s failed reversal attempt.
We must wait for a higher probability window.
EXPOSURE MODEL:
PRIME_LIST (potential TMLs)
AEHR ALGM FOUR ELF BAND
AEHR: There was an offering announced pre-market, and the selling pressure was high today on AEHR. We came down to retest the 21dma but closed mid-range, which is quite impressive. Considering that we were extended, this higher low structure at the 21dma is very constructive and only good for a future move IMO. I’m keeping all my alerts on this name in case we run quickly out of that base.
BAND: Failed the BORS setup today and came back inside 26.74$. We are still above all kma’s, but I decided to close my position because of the ST UTL breakdown and second base rejection today.
FOUR: Similar to BAND, this is the second failed breakout and UTL breakdown today. That’s why I closed my position.
ALGM: new ATH… and closed within yesterday’s range.
ELF: Inside day
FOCUSLIST (LONG)
YPF 11.75, SMCI 85.95, UAL 52.34,
YPF - Alert: 11.75, SL: 10.99
The best-looking Energy setup tonight. A PERFECT BO21PB setup. Clear VCP characteristic with the contraction both in price & volume. Three higher lows at the 21dma, and tomorrow if we breakout of the DTL, this one could move fast.
UPDATE: It tried to breakout again but could not close above. Still in the FL for tomorrow.
SMCI - Alert: 85.95, SL: 82.33
Ony of the strongest semiconductor name following the last earnings. We broke out of the wedge DTL today but could not close above the 85.95$ pivot I was watching from 2 nights back FL. That could be an excellent entry in a not extended name.
UAL - Alert: 52.34, SL: 49.38
Airlines are looking hot right now as they consolidate in a very healthy way above their 21dma. I would use the most recent swing high pivot for confirmation. For a more aggressive entry, one can also use the DTL itself.
PORTFOLIO UPDATE
INTRADAY/CLOSED TRADES (Included in Discord membership):
SECTORS PERFORMANCE
Leading sectors:
(SMH) Semiconductors - Similar pattern as the market itself today. Rejection inside the resistance area creates a lower high. It was still an inside day today, so it could swing either way.
(TAN) Solar - Nasty candle… It gapped up following ENPH earnings, then faded at the open-to-close red on the day and below all kma’s. That sector is a DO NOT TOUCH for me.
(XBI) Biotech - Nasty candle… We failed the BORS setup today and broke down below the 10&21dma, recent leg UTL and recent base area. Ho, and on volume.
(XLE) Energy - 21dma rejection today, but still closed inside yesterday’s range and at the 50dma.
(XME) Metals & Mining - Failed to bounce from the 21dma and undercut it. We might retest that 54.91$ level next.
(XRT) Retail - Unable to bounce from the 10dma and even rejected at the 71.89$ level today.
(IGV) Software - Tried to follow through but got rejected at the 293.41$ resistance area level, creating a lower high here as well.
MARKET BREADTH & INTERNALS
$NYHL (Cumulative new 52W Highs/Lows & 50dma)
LT_SIGNAL: uptrend (black) + ABOVE 50dma = INTERMEDIATE-TERM UPTREND (🟩)
!MCSUMNYA (McClellan summation index & 10dma)
We turned back negative today after a reversal attempt yesterday. We are either in a choppy period, or we will see a deeper pullback in the next few days.
Either way, we must remain cautious as this signal is historically pretty accurate to spot pullback.
MT_SIGNAL: downtrend (red) + ABOVE 10dma = SHORT-TERM UPTREND under pressure (🟨)
$NYMOT (McClellan Oscillator - Breadth extensions)
Flipped negative today.
NYHL (New 52W Highs/Lows) - Remains positive
NYAD (Net Adv/Decl) - -1000 negative thrust
$NYA200R (Stocks > 200dma - LT breadth) - slipping again.
$NYA50R (Stocks > 50dma - MT breadth) - slipping again.
$NYA20R (Stocks > 20dma - ST breadth) - Downtrend
VIX (Volatility S&P 500) - VIX with an expectation breaker today. We bounce from the 18.67$ level and reclaimed that base area as we closed above 19.54. We also closed ABOVE last month's consolidation DTL for the first time.
Cautious needed.
DXY/TNX (US$) - reversal and closed right back at the 50dma.
Credit Spreads (IEI/HYG) - We failed the short BORS today and reclaimed the LT wedge UTL… This is not good.
We are still below all kma’s, but if we follow through tomorrow, this is a clear warning sign at least for the ST.
ECONOMIC & EARNINGS CALENDAR
PRIME MODEL SPREADSHEET (PT_database)
Access to the PT_database 👇
LEADERS LIST
Overall leaders (PRIME Score)
AEHR,JXN,ALGM,ELF,TGTX,FOUR,OII,BAND,YPF,RPD,RCL,CENX,MNDY,LSCC,PATH,DKNG,HCP,CCL,BLDR,TOST,
Fundamental leaders (FA Score)
EURN,FRO,ALB,NOG,CALM,ELF,TRIP,LTHM,ESTE,GFS,RUN,PR,JXN,CPRX,SPLK,LNTH,ALGM,AEHR,CPE,PAA,
Technical leaders (TA Score)
TGTX,AEHR,ALGM,JXN,OII,RPD,BAND,YPF,MNDY,CENX,ELF,FOUR,RCL,LSCC,PATH,BLDR,TOST,DKNG,CCL,HCP,
Relative Strength 1 Month (1M-RS)
LCID,TGTX,RPD,DKNG,CNK,APP,JXN,MNDY,TOST,ABNB,GTLB,PATH,MRVL,RCL,AYX,ELF,AEHR,DOCN,HCP,ON,
Relative Strength 3 Month (3M-RS)
TGTX,RPD,MNDY,AEHR,ALGM,OII,CENX,FOUR,DOCS,PATH,JXN,DKNG,BAND,APPS,YPF,LSCC,HCP,SPLK,NINE,FLYW,
Relative Strength 6 Month (6M-RS)
NINE,TGTX,YPF,OII,AEHR,ELF,RCL,ALGM,JXN,BAND,PRTA,VAL,WNC,FOUR,PARR,GPS,CENX,INSW,PR,LSCC,
REFERENCES
Articles on the system:
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Thanks Alex.. AEHR testing my patience!! ;) Not giving up on FOUR, think the connection to Elon could be a major catalyst, but will respect my levels. ;)