Recap On Mondays Market Action:
Good evening everyone, hope you all had an excellent and productive Monday. The stock market continue its pullback that started last week when the indices ran into their May highs. This is still “technically” a market rally but the recent selling has definitely put pressure on this rally. This selloff may be in anticipation of Fed Chief Jerome Powell’s speech which he will give Friday in Jackson Hole, Wyoming. This speech will give investors a better idea of what the Feds economic outlook and may contain clues about future rate hikes. We may see lots of sideways action, especially after todays selloff, until Jerome Powell speaks.
SPY gapped down and fell throughout the day without making really any attempt to recover in price. We broke back below Mays previous highs which served a resistance area in early August. With this break and a close below the 21 day EMA, investors should be cautious about opening large long positions. This combined with the increase in volume we saw today means we need to be careful with new or open positions. Hopefully we will see some consolidation around these levels and a push early next week to new highs.
QQQ has a more positive outlook but not by much, the highs from June remain intact as a support zone but we did see a close well below the 21 day EMA. We had slightly less selling volume today but have still not seen any days recently with strong buying volume. QQQ is definitely acting stronger than SPY at the moment but both indices are telling us to be cautious.
Recap on recent positions:
I am currently sitting completely in cash. My lost position was in Apple (AAPL) but I was forced out Friday at my buy price.
Potential Setups:
If you read the ETF and Market Evaluation for 08/21/2022 posted yesterday you will notice many stocks that are doing okay in this environment are in familiar sectors.
Viper Energy Partners (VNOM) had a huge day today moving up 5.85% on a large volume increase. It stopped just short of its most recent high and has a potential buy point of $31.90. If this triggers and you choose to buy be careful if the market is not acting well. The major indices can play a large role in how an individual stock moves.
Vertex Pharmaceuticals (VRTX) has a small base with a buy of $306.00. This base is somewhat far from where VRTX closed so if we see this trigger it will need to be associated with heavy volume and a good market.
There are very few other stocks setting up with high probability trades. Todays decline hurt many stocks regardless of sector. It is interesting however that the sectors showing strength now, primary oil and energy, are the same sectors that where acting strong back in January and February.
Bringing everything together:
Following todays sharp selloff and Jerome Powell speaking on Friday there are few stocks setting up with nice bases. Buying a stock on a pullback hoping for a bounce off of the 8 day or 21 day EMA is extremely risky at this point. This continues to be a news driven environment and risky positions can quickly turn against you. There are a few sectors that are showing strength but many stocks within them have been damaged by todays selloff. Overall if you open a position you need to be quick to cut losses or take profits earlier than usual.
