The S&P500 is Trending Up for the Week ending 01/10/2022
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The S&P500 is Trending Up for the Week ending 01/10/2022
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The Market Algo Newsletter
For the week ending 01/10/2022
Full Disclosure:
Analysis published is not investment advice!
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Our proprietary market algo forecasts the following trends (Risk-on or Risk-off) for the week ending 01/10/2022:
Risk-on:
Risk-on: WTI-Crude; Copper;
VIX and VVIX are both Risk-on!
Risk-off:
VIX-SPY Variance-Correlation: Note that this metric is VERY much biased to the “conservative” focus! --- NOT really geared for more aggressive traders!
QQQ: Risk-off
Reminder: Daniel Riley --Mr TopStep:
https://mrtopstep.com
He provides daily updates on the markets: His website & free email newsletter are a MUST!!! —Patrick
Conclusion:
The Bears remain in hibernation---- The Bulls continue to dominate!
IMHO - I think the long-term Bull market remains intact. Going forward.
Tracking the weekly price movement of QQQ during 2022:
So,. Moving forward, QQQ was a hypothetical “Buy” on 01/03/2020 at 401.68. IMHO this is a temporary bit of weakness in price- possibly a good entry point.
Each week, I shall indicate the profit or loss, based on this (pretend) entry point. Let’s see where it ends up at the end of 2022!
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Howard Lindzon’s Sunday Rants & Reads- dated 01/02/2022 as always-is a most compelling read:
Some excerpts-
I left the world of trading and running my hedge fund for Web 2.0 back in 2006 to start Wallstrip and Stocktwits. YouTube and Twitter made me do it.
I spent a lot of time in New York (not as much in San Francisco) as web 2.0 proliferated.
As I mentioned in my year end outlook podcast yesterday with Knut, people are moving to Florida over San Francisco as the web evolves and expands.
I like this riff from Thomasz Tunguz in his FIVE predictions for 2022…
The spirit of Silicon Valley continues a spread outward. The valley remains an important locus on innovation but its monopoly recedes as new geographies rise in importance and remote work, plus the return of in-person travel, creates a new way of working for many. Silicon Valley falls to below 20% in all venture financing.
I have seen it with my own eyes visiting Miami and San Francisco this year.
They are not just moving to work remotely keeping their old jobs, they are leaving their jobs to work on ‘web 3’ projects/companies.
I have read at least 50 year end Venture Fund letters and many describe some version of the same data point…
A ‘critical mass’ of the smartest people in the world have enough confidence in the future of crypto/web 3 that they are willing to bet their professional careers on it.
I did not know I was following Fred Wilson when I started Wallstrip at the beginning of Web 2.0, but since he was my first investor at Wallstrip I had an inside view of what he was doing and thinking though he was writing about it every day on his blog.
So what is Fred thinking now?
Even Fred this week was writing about ‘Why Web 3?‘. You should read it too.
All these web and people changes are still big wins for data companies and machine learning companies so they will continue to grow rapidly.
My gut feeling is that unlike past changes in technology, our centralized internet rulers will be heavily involved in ‘Web 3’no matter what the ‘brain drain’ happens to be. They have too much cash and too much to lose and they actually are quite aware that the stakes are high.
PS – People enjoyed watching me make an ass of myself in Wallstrip so here is another one with me walking the streets of NYC with my sleep machine from 2006.
Have a great New Year’s eve.
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Howard Lindzon
2159 India Street
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Dave Banister, Chief Analyst at The Market Analyst/com
(email: Dave@themarketanalysts.com) has some interesting information he shared in his Dec 26, 2021 Sunday Market Commentary:
[Full Disclosure: I subscribe to his Stock Reversals Premium newsletter - check out the SRP newsletter – to include a link to all of his awesome newsletters at:
https://srpmembers.com ].
Market Notes and Commentary:
Tax selling took over the last several weeks along with fears of the new Covid variant, Inflation, debt ceiling issues and the list goes on. The market does not like uncertainty as we all know. The short term volatility risks I think mostly center around the expansion of this Omicron variant, but so far what we are seeing is this is a highly transmisable virus but relatively weak in strength. It does not replicate fast enough to defeat most immune system defenses in the human body for the vast majority of those infected.
With that said, we saw a nice double bottom on the SP 500 and I have maintained my wave counts throughout intermediately as bullish until proven otherwise. We also hopefully are seeing some interim bottoms here in Biotech and Small Caps.
CRYPTO Protocols/TOKENS— Get involved
Over in my TPS service and even my flagship swing trade stock service we are getting involved very much in Crypto protocols, tokens, and related plays. We did a MANA.X swing alert late last week in SRP Stock service and already up are 15% on that swing on the final 1/2. Also LUNA.X which is a Stablecoin ecosystem around the Terra UST is up 50% in just 2 weeks since my LONG TERM BUY report, that could easily 10x for us from 66 average entry, now 100.
You must get involved in the Decentralized Finance explosion worldwide and do not assume Crypto is a scam. Read up on Protocols, and the stop 10-15 tokens in market cap for starters. I have been recommending Polygon, Terra, Algorand, Defi Technologies, MANA (Decentraland) and more on Stocktwits and in my services. Get involved for your wealth potential, its an exploding sector worldwide. The entire market is NOT BITCOIN… don’t get distracted with Meme coins either. Just my rant… tippingpointstocks.com will be aggressive here and SRPMEMBERS.COM will be swing trading tokens off and on along with our stock plays.
Charts: SP 500, IWM ETF, XBI ETF, LUNA Token (Terra UST Coin)
[unable to print the charts-POC]
He shares LOTS of actionable recommendations in his SRP newsletter – I LOVE it!!!
I also subscribe to The Cestrian Stock Bulletin – free
(they have a paid version too)i:
https://newsletter.cestriancapitalresearch.com/add_subscriber
They have a paid plan on Substack- only $9 per month:
https://www.getrevue.co/subscribers/eU5H4l7fdLGkqv7aEMpeoQ/upgrade
They have samples of their newsletter posts on Substack, along with links to other newsletters they offer:
Excerpts from their Cestrian Stockls Bulletin #108 are reprinted below- I shall start to track the QQQ in each issue of The Market Algo NL- I did some math and found that if you had bought the QQQ in Jan 2021, as of the close of trading in Dec 2021, your ROI would be approx. 30%. I shall track it effective 01/03/2022 and see where it ends up at the end of 2022. What’s not to like?
Excerpts from Bulletin # 108:
The Story Of The Qs
Wave 1 up from the Taper Tantrum of December 2018 (J-Po tried to raise rates lol) to right before the Covid crisis; a move of some +$95/share.
Wave 2, a brutal 0.786 retracement (the same metric as SPY by the way … yet more spookiness around Fibonaccis) within just a couple months, bottoming at around $165/share in March 2020.
Then when the whole of DC came on TV and said, don’t worry folks we are all underwriting the market, no expense spared, not surprisingly the market shot up, putting in a major Wave 3 move up. SPY put in around a 1.618 extension of its pre-Covid Wave 1 before hitting resistance; QQQ put in a 2.618 extension which for a major index like this is quite a thing to behold. You can see from the chart that the index hasn’t quite mustered the strength to hit that 2.618 extension and indeed its failure to do so thus far is what says to us that we could see some weakness in the near term.
If QQQ can move up above that $411 level and turn it into support, yikes, everybody get out of Tim and Larry and Satya’s way because, Wen Moon? Moon soon. Buy a big ol chunk of $TQQQ and go play socially distanced golf.
If it can’t? We think a Wave 4 down may be upon us. And as we said yesterday regarding SPY, a brutal Wave 2 can mean a shallow Wave 4, which is what we think will happen here if indeed we’re in a down move. A correction back to the 0.236 retracement of the Wave 3 up would put QQQ at around $350-355/share which whilst is simply the level the instrument held around the end of September, would nonetheless cause general declarations of panic and selling of leased Lambos. (Amongst Johnny B. Retail and friends, that is. We can expect Big Money to just yawn, wait, and then load up when those late model Aventadors were hitting the listings. Then contemplate whether to have spinach or chard salad for lunch.)
If we do see that Wave 4 down, we think it gets followed by a final (in this cycle) Wave 5 up, to make new highs of more than $410. Call it $430-450 if you like, in our experience lately we are seeing big bold Wave 3s get followed by relatively timid Wave 5s, so, let’s keep ourselves safe by assuming something similar can happen in QQQ.
So, what to do if you want to make money from the Nasdaq right now? Well, the obvious choices are:
1. Decide that a little year-end weakness is just low volume related, some Omicron worry gotten out of hand, paper hands stuff. Buy QQQ or TQQQ and wait for normal service to resume ie. up, and bigly; or,
2. Take fright at what QQQ350 would look like in Q1, and short QQQ in some way (short the QQQ itself, buy QQQ puts, buy $SQQQ, many ways to cut this), hoping to gain on the way down.
Having stared at this chart a lot, we can’t get excited about either approach in staff personal accounts. In recent weeks QQQ hasn’t been able to get out of its own way in that $379-404 range you see in November and December. Until it pushes up above that $411 level or decisively rejects it, we don’t feel much like playing this game. We said the same about SPY yesterday. When the big dogs are deciding which way to run, best let them think a little longer, then run with them in the direction they decided to take.
We think that a good way to play this is just to be long a bunch of smaller tech names. Nothing scary or illiquid or unproven, just not so much the top table Nvidias, Microsofts, Apples and so on. Not so much the major components of the QQQ. Instead, a bunch of higher-growth Woodstock type picks which are proper companies, growing, usually cash generative (but EPS negative which puts the old-timers off buying them until it’s too late), usually wide and deep moats … and which have sold off hard in recent weeks as money has moved out of them and into the big tech names that make up the foundations of QQQ. Go hunting for some deep retracements in these names and consider buying them. If you prefer to stick with ETFs, $ARKK is looking suitably beat up and notably, was rather green today on a red day for the QQQ.
In recent weeks, individual growth stocks and growthier ETFs have suffered whilst the QQQ has just marched ahead. Whilst QQQ is working out whether it wants to conquer the Eiger - 3.618, anyone? - or skulk off for a while back to that 0.236 where it can lick its wounds - we think that maybe these single stock names can see some money flow out of the majors and into their own stocks. Examples are manifold but include Cloudflare (NET), Fastly (FSLY), ZScaler (ZS), Twilio (TWLO) and others.
So, this is how we’re playing it in staff accounts. We cut about half our holdings in these new cloud generation names during November, sensing a correction was due; it was, and we dodged a couple bullets. We then moved back to being fairly fully invested but focused on a smaller number of stocks that we felt confident in, buying back in at materially lower prices than where we sold that half. We’ve darted in and out of TQQQ a couple times and banked gains. And now, we make like Big Money and wait. See what happens. We think this can work, that we can see a pickup in these names to generate some gains for us and we don’t have to do something too scary like go short the Nasdaq or load up on levered-long-Nasdaq etc.
As always we post all this stuff as it happens - actually before it happens, Minority Report style, in our Growth Investor Pro service
***--------***
Swing-Trading:
I am illustrating P/L (Profit/Loss) results of Ed Barsano’s algo in a paper-trading acct
Check out my P&L at this link – using Ed Barsano’s free Algo- no software to download: Just set up an account at TDAmeritrade- I Love the algo!
Here is the link:
https://gobabytrade.com/gobabytrade_b0c29d35_0
Email Ed Barsano if you have any questions:
As of market close on 01/03/2022 - All data is USD!
Initial equity in the paper account: $7000.00 USD
Stock Price Shares Total Profit/Loss (pending & completed trades ‘ results)
RUN 35.42 60 -340.07
NVDA 300.75 5 +339.68
PAAS 24.31 70 +149.04
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