We have observed significant drawdowns across the market in the last two weeks. Nifty 50 faced resistance at its October 2021 high which coincides with a critical Fibonacci extension. This time the index marked a lower high.
According to Dow Theory, the Primary trend is intact. Why is that? Because a lower highs and lower low would mark a negative trend. As long as Nifty50 sustains above 16,500, we could just as well see a market that consolidates.
These are the registration details for our Live Monthly Candlestick Strategy Session for Premium Members of All Star Charts.
This month’s Video Conference Call will be held on Tuesday February 1st @ 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
If you’re searching for strength, look no further than commodities!
With risk assets coming under increasing pressure, the strength from commodities and commodity-related stocks stands out that much more. Except for rates, it’s the only thing the bulls have left.
When we look beneath the surface, so far, the story centers around energy – whether we’re talking about crude oil printing fresh seven-year highs or Chevron Corp. $CVX breaking out of a multi-year base to new all-time highs.
Energy is -- and has been -- re-asserting itself as the next dominant leadership group.
But unlike the stock market -- where energy is the only group working -- we’re seeing broad participation within the commodities market.
In fact, there are still plenty of pockets of strength we want to be buying.
Today, we’re going to highlight one of those areas by outlining a trade setup in soybean oil.
Our Hall of Famers list is composed of the 150 largest US-based stocks.
These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.
It has all the big names and more.
It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that which you can check out here.
The Hall of Famers is simple.
We take our list of 150 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.
Let’s dive right in and check out what these big boys are up to.
There was plenty of focus on the Fed this week - not so much for what they did (which was nothing), but for what they said. After a benign written statement, Fed Chair Powell took to the podium at his post-FOMC meeting press conference and spent a lot of time talking about how inflation has been more persistent than the Fed had hoped it would be. From the Fed’s perspective it is now time to raise rates rather than to let the negative effects of sustained higher inflation fester in the economy. Data released in the wake of the FOMC meeting shows that higher inflation remains persistent, in terms of both degree and duration.
Inflation based on the Trimmed Mean PCE is at its highest level since the early 90’s, based on the Core PCE it’s at its highest level since the early 80’s.There are only a few times in the history of this data that inflation has risen this many months in row. The only times we’ve experienced a more sustained rise in inflation were in 2012 (coming off the secular low) and in the 1970’s. So far this cycle the Fed has aided & abetted inflation, going forward it’s poised to fight it.
For anyone that joined me, JC, and Strazza on the Twitter Spaces this morning, you heard us scratching our heads on what to trade next.
In this sloppy tape, there just aren't any real compelling opportunities we can find worth getting aggressive with. When the best idea on the table is "buy $QQQ above 350," then you know we're struggling for good directional bets.
But that's ok. We options traders don't just need directional markets to make money. We can take advantage of sideways action too!
And that's what we're going to continue to do with today's trade.
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
The Federal Reserve is doing its best to prepare the market for what is expected to be a year of rate hikes. But investors aren’t exactly enthusiastic about this outlook, as stocks came under further pressure following Wednesday’s Federal Open Market Committee announcement.
The bond market is also offering some valuable information again. And considering the recent volatility, it’s more important than ever to listen closely.
When we think about bonds, credit spreads are always top of mind, as they’re a great barometer of market health. When there's stress on risk assets, it shows up in credit spreads.
When analyzing credit spreads, all we’re doing is measuring the difference in yield between a Treasury (the safest bet) and a corporate bond (riskier asset) of the same maturity. If these spreads begin to widen, it’s usually problematic for equities.
We’ve seen pockets of strength in the market. But by and large, it’s been a tough slog to start 2022. In the words of an All Star Charts colleague, it’s starting to look a bit like “no-man’s land” out there as stocks have tried (but generally failed) to produce some positive momentum after the worst start ever to a new year.
Even if we were able to get back above some key levels, where would that put us? Back into the sideways mess that characterized most of 2021. Not breaking down is a necessary – but not sufficient – condition for breaking out.
