Alex's daily Update & Focuslist
Stock Market Newsletter
Good evening folks,
I must say, I was not expecting this strong action today! I was ready for any scenario, but this one caught me off guard. I was still ready for any eventuality and was able to make good trades despite the gap ups & early strength.
Now let’s get ready for tomorrow!
What a reversal! That was a very strong day…but now we are getting into the crunchy part of this rally!
We found really big support early at the open and pushed within the first hour above Tuesday’s high. Then trended higher all day to finally close 2.75% higher on good volume and more importantly above 13184$ pivot.
Something I really like to use for gauging if we are extended or not, especially out of a correction is the distance for the 50dma.
I prepared a little something tonight, going back to the 2000 bear market and trying to see what is the typical 50dma extension we could see before pulling back on this rally.
12% extension from 50dma (3 touches) then a final overshoot before a meaningful pullback.
Around 5 touches to the 12% extension from the 50dma before a meaningful pullback
The first couple touches to the 7% extension, then 6-7 touches and trending at the 10% extension for a few weeks.
Mainly at the 5% extension all rally from the bottom, then 2 overshoot to the 7% extension.
Mainly 7/10% extensions in the first few weeks of the rally, then some 12% extensions but only later on.
2022: Where are we now?
We are currently at the 7% extension, so this is on the average extension we have seen in the past 2 decades of corrections. We could see a 10 or even 12% extension as we saw in ‘01/02 and ‘09 bear market rally
What are the levels I’m watching tomorrow?
On the downside, I want to see NQ hold the 13108$ level (Tuesday high) along ideally the 5dma.
On the upside, the next level I’m watching is 13555$ which is the next potential important resistance area (area top) and also the DTL from the previous bear market rally top. That’s a 1.9% move.
Remember that we are in a bear market, and we are playing a rally, which means the market can roll over anytime despite the good action we are seeing right now. 🛡️
We are now in my bullish scenario until further red flags or consolidation.
I give some leeway to the market to consolidate in a healthy manner before switching to a bearish scenario. Remember, the market & stocks don’t move in straight lines. We have a rally, watch how we react on the pullback and especially on the kma’s retest.
CLOSE below 12655$
CLOSE below 50dma
Reduce long exposure and treat this reversal as a potential rollover
MMFI (Stocks > 50dma) - We manage to gap above 66.60$ important level and close above it. That’s a clear change of character, breadth-wise. Very positive.
VIX - BIG reversal on the VIX today. The last 2 days spooked me tbh, but today we closed 8.5% lower (which is big) and below yesterday AND Monday’s low. This is exactly the kind of move we want to see.
USD/CAD - Rejected by kma’s at support top level and close in the middle of it. This is constructive.
US10Y (US 10Y bond yield) - Reversal from the support area got stopped pretty hard at the 21dma and closed back in the support area. Not the type of action you normally want to see out of the gate… Good for growth stocks.
HYG/IEI (Credit Spread) - Break below support area from recent months/years… that’s a big move today on the credit spread chart…
BTC/USD (Bitcoin) - Just chopping around without much direction for now…
ECONOMIC & EARNINGS CALENDAR
(SMH) Semis - Big breakout of Friday’s high pivot. We are now approaching potential resistance area.
(TAN) Solar - Still flagging very constructively and found support at the 10dma today.
(XBI) Biotech - That’s a very good move for the biotech sector today. We are now back at the top of the past few week’s consolidation area. If we can breakout of that pivot tomorrow, we could see another leg up.
CL_F (Crude Oil) - Breakdown from recent support area… Not good for Oil, but good for the economy and inflation ;)
NG_F (Natural Gas) - Natural Gas is really interesting. After having a big push from the lows back to highs, we pulled back to the 21dma and now looking at a potential reversal here to attempt a breakout. Good volume today too.
Leading names still acting strong (+)
NQ reversal and pushing higher (+)
NQ around 7% extension from 50dma, could be looking at ST top between here and 12% extension. (=)
SMH (Semi’s) breaking out and TAN & XBI consolidating but are strong (+)
Market breadth continues higher. (NNH,>50dma, etc) (+)
Crypto consolidating but rejected 50dma (Bitcoin) (=)
USD & VIX crashed (+)
2Y & 10Y bond yield failed their breakout (+)
Crude oil (CL_F) broke support area bottom (+)
Overall leaders (PRIME Score)
Fundamental leaders (FA Score)
Technical leaders (TA Score)
Relative Strength 1 Month (1M-RS)
Relative Strength 3 Month (3M-RS)
Relative Strength 6 Month (6M-RS)
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