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A few trades to eyeball
Lets start with the broad market here
SPY solidified its medium term bullish stance after oversold conditions near the 200 week moving average. The reversal from Thursday's down move was characteristic of typical underweight conditions across equity markets. I know the easy thing to say is, "hey, this is all AAPL's doing"
Well, sure. Ok, but we did point out for weeks how the AAPL/SPY ratio was breaking out and retested a very important level. Was it any surprise that AAPL had some serious strength? I don't think so.
But what does it mean now? Well, as technicals we should follow a systematic approach to trading a squeeze and under positioning in the market. What I like to do is use the 9/20 EMA on these types of situations. I think it's very likely that we will start to see down opens more often. I would be looking at trading SPY to ride the trend against the shorter-term moving averages which offer a high hit rate and great risk reward if the market will continue to squeeze upwards.
With regard to why I think the market will continue to squeeze, take a look at some of the really beaten down tech names. Most of these are all showing clean reversal patterns and higher lows off key bases.
But what about inflation? The bonds are getting killed right? Well, I wouldn't put much merit into XLE unless crude really starts ramping higher. It hasn't moved in months and in fact down decently despite headlines on the geopolitical side still being very active.
My feeling is that as soon as markets are deemed more safe, this alpha in energy will become negative beta very quickly.
And if that is the case, these bonds could be a monster trade on the long side. We already saw decent buying last week. Does this mean that the trend is now completely over? No way, it is a technical nightmare but I think we can keep an eye on energy closely to understand when and how to lever up a long bond trade.
So what's my gameplay this week? Buying down open in meme/stocks/bonds assuming energy stays flat and we hold short term moving averages. That is really it. If it doesn't work the second time, we can pounce on the short side on some of these names. MRNA for example stands out as something that got a ton of buying last week that is susceptible to this trading going wrong.
Ears to the ground. See you all on Discord