Let’s make this week’s post a quick hit – main thoughts on the state of the market and the charts I’m looking at. Last week (Dec 21-25), I listed out my points of concern and the possible positives in the charts. See positives below
#1 and #2 played out to the bulls’ favor and we had a broad advance - mainly due to #3 also playing out
$SPX ignored the inverted hammer printed last week and closed at 2060, right under the 40wma. Further, the 10/40 wma bullish cross was defended. All very positive in short term. A 4% range remains – I get bearish again under 2020. Taking out 2,100 is the next major step needed in the chart. I’m expecting a retest of this level into this week
$NDX continues to hold up the best. Tech took a back seat to energy names and the $SPX due to the broad commodity bounce. I’ve been long $TQQQ since last Friday and will continue to hold over the index 5ema (daily) at 4600. If bull run continues, a retest of 4700 is on deck for this index
Going to last week’s #3 positive – I “called bottom” on Crude ($WTIC) on Tuesday and is +10% 0ff the low at $34.5. My current thesis calls for a continuation upwards for Oil, bringing up all major indexes with it. $SPX should outperfom $NDX in this scenario; however, I rather “tag along” in tech versus being too exposed to crude’s whims in the $SPX
Another key chart on watch is $AAPL.
$AAPL weighting is 11% of $QQQ & topped on Jul20 at $132. It’s dropped -17.5% since while the Q's declined -1.94%. That means ex-$AAPL, $QQQ is +0.06% YTD. For tech to go higher $AAPL will need advance at least temporarily
I shared this $AAPL daily chart on my stocktwits stream on Tuesday 12/22. Buying $AAPL at RSI=30 has been a succesful trade this year. Set up is to enter once $AAPL regains its 5ema at $108.28 expecting a retest of 20dma at $113
Lastly, the market looks cheap from a breadth perspective compared to 3 weeks ago. Ony 37% of the nasdaq is over its 200dma while 47% is over the 50dma. Contrast that vs 65% over the 50dma from the $NDX early December highs around 4700. Media outlets will scare you with “bad breadth” headlines. I love seeing the $NAA50R lower – it means I’m buying in cheap
In summary,
- $SPX upheld 10/40 weekly bullish cross at 2060. Need to push higher from here
- $NDX made strides towards regaining it’s uptrend over 10wma – I expect retest of 4700 (long $TQQQ)
- I believe we have found a bottom in Oil ($WTIC) at $34.5 and expect another leg higher. $SPX and energy sector ($XLE) to be favored in this scenario
- Breadth tells us the market is cheap right now compared to 3 weeks ago – that’s a good thing
FINAL THOUGHT
The awesome thing about being a trader versus an investor is that I am trained to change my mind if the charts prove it. Last week, the weekly charts looked horrible. The only way to regain a bullish bias was to completely reverse the move – and it happened. This mini “bottom” on the indexes comes hand in hand with the reversal is crude oil and energy sector. My thesis calls for a continuation of this commodity bounce, bringing the $SPX and $NDX with it. Volumes this entering week will be low which should put a lid on volatility. I remain long and bullish over the indexes 5emas ($SPX 2049 / $NDX 4603). I am watching Apple closely to monitor a broad move in tech space.
As always, thank you for reading. Happy holidays. Trade ‘em well - Gio
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