The S&P500 remains Trending Down for the Week ending 01/31/2022
We now offer free or paid subscription plans, as of Jan 10,2022
The S&P500 remains Trending Down for the Week ending 01/31/2022
We now offer free or paid subscription plans, as of Jan 10,2022
The Market Algo Newsletter
For the week beginning 01/24/2022
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Our proprietary market algo forecasts the following trends (Risk-on or Risk-off) for the week ending 01/31/2022:
Risk-on:
Copper
Risk-off:
SPY is trending down - Risk off for the week ahead!
VIX-SPY Variance-Correlation: Risk – off -Note that this metric is VERY much biased to the “conservative” focus!
QQQ - Risk-off
VIX and VVIX- both trending upward : Risk-off
WTI- Crude Oil: Risk-off
Reminder: Daniel Riley --Mr TopStep:
https://mrtopstep.com
provides daily updates on the markets: His website & free email newsletter are a MUST!!! —Patrick
Conclusion:
The Bears are still in control. Omicron and rising interest rates continue to weigh on the market.
The Bulls remain on the run.
IMHO - I think the long-term Bull market remains intact, but things are very volatile at the present time – a bumpy ride ahead- at least for the upcoming week, and possibly into February and even March. A tough time to be a Bull!.
I am 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 correction of QQQ remains a temporary bit of weakness in price- possibly a good entry point.
Each week, I indicate the profit or loss, based on this (pretend) entry point. Let’s see where it ends up at the end of 2022!
As of 01/24/2022 this hypothetical trade shows a loss of $48.38 (QQQ was $353.30 at the close on 01/24/2022).
…***…
Market Notes and Commentary:
Howard Lindzon’s Monday- Momentum email - dated 01/24/2022 as always-is a most compelling read:
Good morning everyone.
If you did not have a game plan for this week, you should.
Stocks continue their free fall and crypto has been cut in half over the weekend. If you like smoking Philip Morris is breaking out to all-time highs. The condom and baking soda business of Church & Dwight is also at all-time highs.
As always I did my weekly tour of the markets with Ivanhoff to offer up some plans for people and share what sectors and companies I was watching. I tried very hard to make it entertaining with my shot drinking dog and a bunch of Peloton interruptions.
My focus sectors this week (and the corresponding ETF’s) are the cloud ($WCLD), Software ($IGV), $ARKK, IPO’s ($IPO), $HACK (cyber security) and some signs that we wash out.
You can watch or listen to the video by clicking here and link is embedded below:
Every ecommerce and software stock I asked Ivanhoff to pull up was down 50-80 percent in the last 90 days.
I mentioned to Ivanhoff that there is so much new supply (IPO’s, SPAC’s) and not enough people to properly cover the stocks anymore at the banks. The stocks not part of indexes or large ETF’s are being left for dead with no buying from the index complex.
In the medium to long term I would expect to see a lot of M&A activity in the $1 -$10 billion range in software and fintech. Already Microsoft made a big acquisition of Activision and Take Two of Zynga. That will not be enough to create a bottom in stocks but the corporate development department of the leading Software companies and banks are surely going to be on call.
Here are Ivanhoff’s quick thoughts:
The stock market was only open four days last week but it managed to do selling for eight. There was non-stop selling everywhere. All brief intraday rallies were faded towards the end of the day. Anything that had held relatively well before last week, was hit with a hammer – semis, industrial metals, financials. Oil and gas stocks are the last standing Mohicans but even they are starting to crack. Anything that was already weak, was completely destroyed – biotech, software, Internet retail. I will give you just one example to get an idea of the ongoing selloff – Shopify is down 50% in the past two months. This is not obscure small-cap biotech. It’s a high-growth mega-cap tech stock.
The new earnings season has begun. We judge market sentiment by the reactions to earnings. I haven’t seen so scared and pessimistic market reactions in a long time. Semis were clobbered despite record earnings from TSM and Micron. Financials were hit hard despite rising interest rates and improving margins. NFLX was annihilated because it suggested that future growth might be a bigger challenge. Don’t they always do that anyway? So what gives? One of the bull market’s major characteristics is multiples expansion where due to FOMO and complacency, people are willing to pay higher and higher multiples for most companies’ earnings and sales. The markets are currently in a multiples compression mode. Everything is getting repriced and receiving a lower multiple. The challenge and also the magic of markets is that they tend to overshoot – first to the upside and then to the downside. They don’t just stop in the middle and settle for “fair” prices.
There’s an FOMC meeting on Tuesday and Wednesday. In previous months, we would see a selloff ahead of the FOMC meeting only to experience a big short-term rally afterward if it becomes clear that Fed’s actions don’t align with their hawkish words. Something similar might happen next week. All major indexes are down significantly multiple days in a row. A big snap-back bounce, even if for a day, is very likely. Some of the most fierce rallies happen within downtrends – recognize them as such, take advantage of them but don’t overstay your welcome. The trend remains lower. Stay nimble or stay on the sidelines.
I will spare you any more reading.
Hopefully our video discussion above helps you formulate a plan for how to think about the current bear market in technology stocks.
Have a great week.
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Howard Lindzon
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Dave Banister, Chief Analyst at The Market Analyst
(email: Dave@themarketanalysts.com)
has some interesting information he shared in his Jan 09, 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
Dave’s Market Notes and Commentary:
He shares LOTS of actionable recommendations in his SRP newsletter:
The most recent weekly report- dated 01/09/2022 is reproduced below:3
Market Notes and Commentary:
Rough waters of late. The NASDAQ 100 finally took it on the chin, and often during a market correction we can’t bottom until “The Generals fall”, an old Wall Street axiom. With the NASDAQ 100 ETF at a triple bottom pattern, near term reversal is important or we could correct further. Sentiment is dialed in at 52 on the CNN reading which is right in the middle of Fear and Greed so that is not of much help in calling a firm bottom just yet.
Banks, Brokerages, Oil and Gas are leading right now, some of which are in the weekly swing trade ideas list at bottom of this report.
This week several charts, I’m also including CRYTO assets Bitcoin and Ethereum and their long term charts are calling for a near term tradeable bottom here. Sentiment for Crypto is at an extreme fear reading of 10, the lowest since July 21 lows and lowest reading in over a year, typically the right time to buy. This should be the year that institutions get involved more aggressively. To wit, we just saw KKR lead a series C round in Anchorage Bank (Crypto/Digital) with a 3 Billion valuation in late December, a nod of institutional approval of this asset class.
3x ETF is flat going into this week as well as SRP and Futures services
He has some stellar results of past trades—posted on his website!
– I LOVE it!!!
I also subscribe to The Cestrian Stock Bulletin – free:
https://newsletter.cestriancapitalresearch.com/add_subscriber
They have a paid plan on Substack- only $9 per month:
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They have samples of their newsletter posts on Substack, along with links to other newsletters they offer:
I plan to subscribe to their newsletter, with funds from my paid subscribers here at The Market Algo NL.
The Takeaway (last few paragraphs) from their 1/24/2021 NL IMHO is prescient of the Bull Market that awaits to again materialize - - that underlies this short term (again IMHO) sell off/correction):
You know we've been around awhile here at Cestrian and we remember NFLX on each and every occasion it committed those acts of self harm. Indeed in one of the early transgressions the company raised money as a public company from the growth equity shops that had funded it as a private business. Everyone felt pretty good about that a couple years later. Apart from JimmyStoxx's father, who SOLD in fear when it dumped. Which is why JimmyStoxx himself is furiously daytrading from the basement, not living in inherited luxury busily spending it all in a bid to out-Gatsby Gatsby.
Our best guess about what is happening right now is straight fear. Stocks have been up a lot, so, they must come down a lot. Sell to lock in gains, sure, then, sell because everybody else is selling (JimmyStoxx and momentum algorithms alike), then, sell because you have a margin call about to hit your desk. This isn't a rational response to a modest rate rise nor a moderate rate of tightening. This is just fear.
How you respond to this depends on two things in our view.
One, the timeframe over which you invest. If you have a decade-long view of when you plan to liquidate an account, then this is a buying opportunity, we are pretty sure of that. If you need the money next week? You have other pressures to consider. Nobody can tell you what to do then - stocks could be up or down next week, no-one knows.
Two, the depth of your liquid cash resources and/or margin facility vs. your securities book. If you have most all your money in securities and not in cash, then, again, you may have short term concerns on your mind. If you're heavily in cash, you can think longer term.
The most important thing to do right now in our view is, sit back and think. Don't get swept up in the fear. Think about your time horizon and your liquidity and act accordingly.
If you want our house view - and it's only our house view and it is Quite Possibly Wrong (new slide header we'll start to use, bit more confident than, Probably Wrong) - this isn't the Ende of Dayes for growth stocks. We think a year from now, growth will be up. So in our long term staff personal accounts we're positioning accordingly; we'll continue to harvest value names to take gains, and rotate that capital into growth names at these lower prices. In a year or whenever seems right, we'll likely do the reverse; take some gains from growth names and put that into value. (Growth Investor Pro members saw us buying value through 2021 - not perfectly of course, we went too soon on T, didn't buy enough NOC, nothing ever can be perfect - but we said in that service at the time, this is a hedge against growth going south so we're adding value. And you saw us sell growth in Q4 2021 - HUBS, CRWD, NET and others - to pocket those good gains).
OK folks - probably another tough week this week, so, good luck to all, and if we can leave you with one thought it is: think for yourself and do so calmly.
Cestrian Capital Research, Inc - 24 January 2022.
Disclosure: Cestrian Capital Research, Inc staff personal accounts hold long positions in, inter alia, TQQQ, NFLX, T, LHX, NET, DOCU.
You’re a free subscriber to Cestrian Tech Select. For the full experience, become a paid subscriber.
***--------***
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 01/24/2022 - All data is USD!
Initial equity in the paper account: $7000.00 USD
Stock Price Shares Total Profit/Loss (pending & completed trades ‘ results)
RUN 26.90 102 -966.52
NVDA 233.07 12 -152.84
PAAS 22.71 97 +98.15
**************
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