I am feeling pretty sick so this preview is going to be a little light on the recap sections. If you want to find out what happened today, look at stonks superhero and greatest FinTwit user you have never heard of, Maverick's preview for Thursday. It should be out by 3am Thursday morning.
Holding all cash overnight.
I am sick, read stonks superuser Maverick's preview on the frontpage. But I will say that TSLA's earnings had some fluff on the BTC sell to help their cash holdings.
What to Expect?
There is no major US Economic Data this week.
Keep an eye on the DXY and technicals. If you are trader, this is your time to shine.
What Do I Think?
QQQ Technicals - We hit a high overbought mark on the 30 min and the 1 hour. This caused the market to find any reason to sell off and GOOGL gave it the reason. The technicals are now still very close to overbought on the 30 min and 1 hour charts. The 4 hour is now getting close as well to overbought. The daily charts are still neutral, but are leaning to overbought bias.
QQQ Technicals - We had a little pullback at the open. But then we roared up to the big Fib Level, 304.87. Then we say a pullback and never did clear that level.
SPY Technicals - We hit overbought on the 30 min, and the 1 hour. Same story as QQQ, we got the GOOGL news and back down we went. The 4 hour is now getting close as well to overbought. The daily charts are still neutral, but are leaning to overbought bias.
SPY Technicals - We are now comfortably above the big level at 380 for SPY. Next major level I have is 396.33.
WTF is Going On (Version 4 - Repeat of yesterday)?
Wait, so the AAPL news was not bad?
Kind of... it is bad news. But it conveniently was released right when the charts hit overbought conditions on Monday. I think that combination led to the above average selling. The fact that buyers stepped in today and brought AAPL back over 150 is all I need to know about how serious this news is in the short run.
I am so confused... Is the market bullish again?
In the short term, yes it is bullish. A lot of the bearish fears are very much present but they are longer term issues. So this rally has legs for the next few major levels on the indices. Of course, if TSLA comes out with abysmal earnings the market will negatively react. But the odds and conditions are very much in favor of the market bulls in the short term. I am looking to buy the dip for a SHORT TERM play of a few weeks at max. This is still not a market where you are looking for any long term holds.
Ok, what about FOMC next week?
It is pretty clear that the Fed is looking at 75 BPS hike. I know, you know it, and more importantly the market knows it. So the market will move on JPow's words, but as long as the rate hike is not 100 BPS, I expect FOMC to not kill any momentum.
What is the big landmine this week?
It is easy to have bullish blinders on looking at the US calendar. BUT, we need to watch the. international inflation data. If the EU and UK come in hot, the DXY could explode upward. That will mute any rally we can have. So keep an eye on the DXY. If it drops, bulls can expect this rally to keep going. If it spikes, keep on your toes.
Is 75 or 100 BPS coming up next week?
As much as 100 BPS was getting attention after CPI, it appears the Fed is still looking at 75 BPS. A few Fed officials have come out and hinted at support of 100 BPS, but have pushed strongly for the 75 BPS hike. The one member that came out and outright supported 100 BPS, is not a voting member.
Inflation is roaring up, but is it peaking?
The answer here is no and yes. No it is not peaking, but yes the optimism is there for the next report to be cooler due to the ass kicking commodities have taken since late June.
You Keep saying DXY, What is that?
The DXY is the US Dollar Index. This historically has been an inverse indicator for equities and commodities. A weak dollar is good for equities. A strong dollar means a lot of things, and in this environment, it is serving as THE safe haven for all global markets. As other countries see inflation spike and their supply chains disrupted, it is further fueling the strength to the dollar as the only true stable global currency. In the long run though, this is very very bad. But we will get into that in a future post.
THE PLAYS OF THE DAY for SPY:
Scenario 1: We gap down a few points. I am looking at buying the dip here for calls as the overbought conditions on the charts would be worked out.
Scenario 2: We gap up and break over 397. This should put us in extreme overbought territory again on both the 30 min and 1 hour and possibly the 4 hour. I will be cautious with my cash and wait for any pullback that will cool those RSI readings.
Scenario 3: We open flat (+/- 2 points). I will most likely wait until 10am to make a play and see if a trend can be identified. I am still looking for a pullback to cool those readings.
I am now only interested in calls. But only on a pullback. The risk reward for both calls and puts here in the short term are dog shit.