Stock Rally Verified
Stock Rally Verified
November 11, 2022 Weekend Market Review
The internet has a new status symbol. Blue Checkmarks have been all the rage this week as Twitter rolled out the "pay to verify" program in an effort to weed out bots, spammers, and impersonators.
The stock market also has a new status symbol. The intermediate trend in $SPY is up. Give it a Blue Checkmark and stamp it Verified. You don't even have to pay $8.
In the Mid-Week Market Update, I noted;
"heading into tomorrow's CPI report.... we know inflation data will set the mood for the rest of this week, and likely beyond that."
and
"The significant "lines in the sand" are still the yearly lows and Nov 1 high for SPY."
I didn't think we'd see the Nov. 1 high taken out in one day, but here we are. Inflation came in a bit lighter than expected and stocks had one of their best one-day advances ever.
The US Dollar is also falling also. As a reader of this report for any length of time, you know that we've been watching that as a key ingredient of any sustainable stock rally.
The Charts
DIA - I feel obligated to include the Dow 30 here as it leads the way higher. It’s above all the key moving averages and less than 10% from the all-time high.
SPY made the higher high and higher low we were looking for. It’s back above the 8/21/50 moving averages. Intermediate uptrend verified.
QQQ has some catching up to do relative to the other indexes. But it’s above the 8/21/50 moving averages and the 284-285 support/resistance zone.
IWM is also above all the key moving averages. It does have a potential reversal candle today. And 190-191 has been an important price level in the past.
DXY - The Dollar is down over -4% since the 11/10 CPI report providing a tailwind for rising stocks.
VIX continues to fall
Bull and bear case
The pieces of the bull case seem to be aligning.
Falling dollar - see DXY chart above
Cooling inflation
Seasonality and the mid-term election cycle, which J.C. Parets puts very simply here, are favorable.
Next up we'll be watching 200-day moving averages, and [Could it really be?] all-time highs. That's right. DIA is less than 10% away from its all-time high. The number of individual stocks making new highs is increasing too.
I wouldn’t expect a straight trip up from here. At this point prices are very extended above their short-term equilibrium, aka the 8 and 21-day EMAs. Some retracement or a pause for a few days allowing the EMAs to catch up wouldn’t be surprising here.
The bear case hasn't changed. Interest rates, inflation, war, and all the rest are still concerns. Surprises in any of those would have an impact.
Interestingly the apparent destruction of the cryptocurrency space doesn't seem to be having much of a bearish impact on stocks so far. For a while, it was believed that cryptocurrency appetite was a good gauge of risk appetite. That may have been true. But it doesn't seem so now as the relationship between stocks and bitcoin decouples. In other words, stocks are going up even as crypto goes down.
What I'm reading
All of my reading time this week was spent with my own trading plan.
Periodic review and evaluation of any business plan is a good idea. How else would we learn and adapt?
I'll likely write more about that soon as I analyze and update my system.
From Twitter
Real-time updates.
Everyone feels like this sometimes.
Patience is still key.
Anything else?
Good trading needs filters.
There has never been a better time nor more free resources available to learn a new skill. Everything you need is at your fingertips, only a few mouse clicks or screen taps away. Opportunity is everywhere.
There is so much information, so many stocks to trade, so many people sharing their opinions and observations, and so many traders posting win after win on social media (rarely are the losses shared) it can make trading (or any new skill) look easy.
It’s not.
Up to a point, more is better; more education, more knowledge, and more experience.
But after achieving a certain level of competency the formula switches.
Less becomes more.
Fewer (but more useful) indicators on your charts
Fewer (but more insightful) research reports to read
Fewer (but better planned) trades
I read recently that to improve your trading you should:
Do it less. Do it better. Do it bigger.
I can not remember to whom that quote should be attributed. But I will find and share it here.
It means to focus on what you do best and cut out the rest. Done well, that should result in less stress and more profits. What an enjoyable result that would be.
To get there we must have a process for filtering out the noise. We must curate our lists carefully and steer clear of distractions.
Notice what helps. Notice what doesn't help. Eliminate that.
We all have limited time, attention, energy, and capital. We must not let go of it cheaply.
This does not mean to never try something new. That is how we find better.
It does mean that we don’t have to force things that aren’t working.
Thanks always for reading, subscribing, and sharing with your friends and family.
I hope you have a fantastic weekend. Don’t forget, Weekly Charts on Twitter tomorrow morning. Chime and let me know what you think.
Cheers.
***This is NOT financial advice. NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.
Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”) a SEC registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.
Statements in this article represent the opinions of that person only and do not necessarily reflect the opinions of T3TG or any other person associated with T3TG.
It is possible that Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual or it may reflect some other consideration. Readers of this article should take this into account when evaluating the information provided or the opinions being expressed.
All investments are subject to risk of loss, which you should consider in making any investment decisions. Readers of this article should consult with their financial advisors, attorneys, accountants or other qualified investors prior to making any investment decision.
POSITION DISCLOSURE
Long: COIN1118P45
Short: COIN1118P40
Options symbols are denoted as follows:
Ticker, Date, Call/Put, Strike Price
Example: VXX1218C30 = VXX 12/18 Call with a $30 strike