Good evening folks,
The market came under some pressure Friday, are we only pulling back within that current rally, or is this the rally top and we’ll see that third leg down that everyone’s talking about…let’s try to find out!
Let’s go!!✌️🛡️
MARKET REVIEW
Friday started like a very decent day, with $NQ even trying to reclaim the 12578$ level and push in that resistance area. Until PMI economic data came out showing an accelerated economic contraction and the market really reacted to this news by rejecting the resistance area and closing down by 1.7%.
We still closed above the 5dma after finding decent support late in the afternoon.
Note that we really have a BIG week, this week. FOMC (Fed interest rate) on Wednesday and major mega-cap companies report earnings. So I’ll make sure to stay light & nimble on my exposure and probably won’t carry any exposure overnight.
Tuesday: MSFT, GOOG + GOOGL
Wednesday: META
Thursday: AAPL, AMZN
These 6 companies weigh more than 40,6% of the Nasdaq composition. So trust me when I say that next week will be DECISIVE for the market direction.
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. 🛡️
📈 scenario:
We are now in my bullish scenario until further red flags or consolidation
IF:
The recent swing high @ 12655$ will really be an important level to monitor in order to confirm a continuation of this rally by making a price structure new Higher High.
THEN:
I will not take action on these scenarios this week due to major daily news
📉 scenario:
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.
IF:
CLOSE below 12168$
CLOSE below 50dma
THEN:
I will not take action on these scenarios this week due to major daily news
Alex’s digest:
Let’s look high level at the (+) & (-) of where we stand with Friday’s action
A lot of pivots breakout failed & squats Friday (-)
NQ rejected the resistance area as expected, but held the 5dma (=)
XBI (biotech) with a big reversal invalidating the potential BO10PB setup for now (-)
Market breadth pulled back, but held well. (NNH,>50dma, etc) (=)
Speculative money wedging nicely below 50dma (Bitcoin) (+)
USD & VIX are drifting down despite a general market reversal (+)
2Y & 10Y bond yield crashed both today and look like selling pressure can continue (+)
Not a lot of interesting setups tonight (-)
Crude oil (CL_F) rejected is 5/10dma again Friday (+)
Mixed bag again. The market is under a bit of pressure, but no red flag yet.
MARKET BREADTH
Breath held pretty well Friday despite a 1.7% down day, this is constructive at this point.
MMFI (Stocks > 50dma) - We came under a bit of pressure here Friday, but an 8% down day is not an extreme or red flag for me yet. I like that we were able to stay above the 5dma
VIX - We tried to rally again but rejected the 5dma and closed unchanged. Note that there is a clear divergence here as the VIX DOES NOT confirm a meltdown scenario based on Friday's reaction. We’ll have to see in the next few days for a confirmation of this divergence or not.
USD/CAD - Found support in that support area and 50dma, but we are still below the 5/10/21, which can act as potential resistance above.
HYG/IEI (Credit Spread) - We found support in that support area from the recent month’s price action. We’ll have to see if we follow through on that reversal or not. Remember, we want to see credit spread stay down just like VIX.
ECONOMIC CALENDAR
SECTORS PERFORMANCE
The same 3 leading sectors are on the radar for me, SMH, TAN & XBI. There is also another sector that starts leading recently and that I’ll start to cover, ITB (home builders).
(SMH) Semis - We FINALLY found some resistance and look like a pullback is starting. I will look closely if we can find support at the support (green) area and also that 50dma that just started to turn up. This sector will be a focus for me in the next few days if we can form a nice technical setup in this support area. (SOXL, PLAB, etc)
(TAN) Solar I don’t really like the current action in TAN right now. I see that we tried to push in that resistance area only to get rejected 2 days in a row, creating a lower high from the early July swing high. Note that a couple of important Solar names have Earnings this week, so the ER reaction will really dictate where we head here. I’ll wait for EOW to make up my mind on whether this sector still being a leader or not.
(XBI) Biotech - Well… Not the pivot rejection you want to see from the current market leader. We did not make a lower low yet in that current consolidation but broke down from that UTL Friday. Let’s be patient and see how we can hold the 21dma & that support area as a whole. Patience here.
(ITB) Home builders - The group climbed fast in the leadership, but Friday we found some resistance at a pretty important level. We’ll have to see if we can find support quickly below that level before trying to push above it for the breakout attempt. Note that many names are due for their Earnings within a week, so this could change the price picture quite fast.
I made some digging by pulling at the stocks within the ITB ETF and running them in my spreadsheet. Of the 36 names, only these 8 respect my FA & TA template.
Sorted by Prime Score:
GRBK,BLDR,SKY,HCC,TMHC,KBH,TREX,LPX
LEADERS LIST
Overall leaders (PRIME Score)
VET,PRCT,EQT,NFE,INSW,CHK,QURE,RRC,AR,CNK,HIMS,TELL,TH,ENPH,SBLK,AIV,GNK,CRK,FLNG,CAN,
Fundamental leaders (FA Score)
MRO,AMR,HDSN,ARCH,SQM,NFE,OXY,LTHM,PLYA,METC,HCC,PXD,CAN,MXL,GSL,HST,HUT,HP,CF,SHO,
Technical leaders (TA Score)
TH,EQT,VET,PRCT,INSW,QURE,TELL,CNK,HIMS,AR,CHK,RRC,ENPH,RGEN,AIV,CRK,PLAB,NFE,GRBK,NUE,
Relative Strength 1 Month (1M-RS)
TH,SI,RIOT,IS,BEAM,HUT,AFRM,CPNG,CNK,CYH,TELL,GRBK,RGEN,BFLY,SGRY,QCOM,AGEN,VET,HIMS,FTCH,
Relative Strength 3 Month (3M-RS)
TH,SIGA,YMM,STKL,PDD,DVAX,LI,CELH,QURE,BEAM,AHCO,DQ,PLAB,CD,ELF,RGEN,ENPH,HRB,BKSY,CEIX,
Relative Strength 6 Month (6M-RS)
TH,CEIX,LNTH,VTNR,HDSN,AMR,SIGA,PRCT,AR,EQT,NFE,HRB,OXY,CELH,SQM,STKL,FLNG,ENPH,CRK,SD,
PT PORTFOLIO UPDATE
After closing my open long exposure before the weekend, I now sit on 100% cash in my trading account.
Due to the packed news release this week and being on vacation, I will not be very active this week as you’ll see. Might try a couple of momentum intraday swings, but nothing more than that.
Alex’s FOCUSLIST
CEIX
I am looking closely at the Coal sector as the commodity is setting up for one hell of a potential breakout above 430/440$.
I am looking at CEIX which shows more liquidity & RS than ARLP lately. I am now seeing a retest of the DTL, to create my WBPB technical setup. I will be looking at WB breakout candle high for a confirmation of the setup and an entry. (58.39)
UPDATE: Small gap up Friday and came down to retest the 10dma. We are finding good support on low volume. In the last 3 days, volume is really drying up. We broke that mini channel DTL Friday and we could now see a breakout of 58.39$ to confirm the WBPB setup or maybe another 1-2 more days of sideway action before attempting another breakout.
Alert - 58.39$
GTLB
We are building that mini consolidation nicely and I like how we reacted to Wednesday's squat. We held the previous pivot and closed above the 10dma & AT the DTL again Friday.
Still acting like a leading stock IMO and will look to get back if we reclaim that 59.90$ pivot.
Alert - 59.90$
FLNG
We are still within the base with this one, so nothing is guaranteed, but it has shown a lot of RS recently and just pushed out of his wedge DTL from the 50dma last week. I like how we were able to hold 29.08$ base top pivot Thursday & Friday.
I will be looking at 29.76$ pivot for a continuation and a potential swing push at the larger base resistance area around 32/33$. (7-8% swing)
Alert - 29.76$
🎖️ = Alex’s high conviction setups
REFERENCES
Articles on my system:
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