Tax Day Selloff
Hello again! I’m back!
I hope you’ve all had a wonderful month of April so far.
After a couple of weeks with a slower schedule and some time off the desk, it's great to be back on track, picking through the market action to see what the story is and what the charts are telling us.
After a period of relative calm, boy, do they have a lot to say.
The Markets
Stocks Struggle to Find Strength
Last week, the major indexes tested critical support levels after selling induced by usual suspects: rates, inflation, earnings, and tension in the Middle East.
SPY touched its 50-day MA for the first time since it crossed above that level in November 2023. QQQ continued to test its 50-day MA, while DIA and IWM both touched their 100-day MAs.
Today, sellers kicked it up a notch, driving prices sharply lower.
SPY is down -1.25% to start the week. QQQ is -1.65% lower. IWM is off -1.46%. DIA held up better, only losing -0.67% for the day.
The short-term bullish momentum is gone. Short position holders are probably feeling much bolder after today. Long traders may be getting weary as many charts flash caution signs.
Is the summer slow down starting early?
Has ‘Sell in May’ jumped the gun?
Or maybe people just needed money to pay taxes after realizing sizable gains last year.
Whatever the case, this is our situation and the one we must trade.
Or, we could step aside until prices get back above the 8 and 21-day moving averages. There’s nothing wrong with waiting for the right environment.
The Charts
SPY with another nasty red candle pushing prices down below support key support levels.
QQQ is just as ugly. However, it is trying to find support for the year-to-date anchored VWAP.
IWM Now we know the continual lack of upside follow-through was a tell.
DIA was a bit stronger today but still got hit by the selling.
TLT Rates are causing some concern as they move higher while TLT goes down.
DXY Just when the Dollar thought about convincing us that it didn’t matter much anymore. Boom! The stock headwind is back.
BTCUSD is down but not broken. The low $60,000s is a very crucial price level, though.
The Trade
Do less.
Conditions are more tricky now than they have been for a while. As mentioned earlier, short-term momentum is gone. Downside risk has increased.
Be ready.
Buying low is enticing. And selloffs like these do bring gifts. We need to continue looking for opportunities. However, it pays to keep the overall market tone in mind. So, when looking for new longs, focus on high-quality setups with excellent reward/risk.
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The Disclosures
***This is NOT financial advice. This is 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”), an SEC-registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.
Statements in this article represent that person’s opinions only and do not necessarily reflect those of T3TG or any other person associated with T3TG.
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 consider this when evaluating the information provided or the opinions being expressed.
All investments are subject to the 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 before making any investment decision.
POSITION DISCLOSURE
April 15, 2024, 4:00 PM
Long: IMNM, VKTX0419C80
Short:
Options symbols are denoted as follows:
Ticker, Date, Call/Put, Strike Price
Example: VXX1218C30 = VXX 12/18 Call with a $30 strike