Fair Test: Nothing goes up in a straight line and if you are a bull you want to see how growth responds here after a nice run. You want to see stubbornness in giving up much of the recent rally. You want to see what it's made of. For the tennis analogy from Billie Jean King "pressure is a privilege". This way we can see if this nascent move is for real. For all the recent talk of more participation, breadth thrusts, and seasonality, it really all boils down to PRICE. And market participants who have put their hard-earned capital to work in growth should welcome the bear's challenge to see if the downtrend resumes from here. This will be a litmus test to potentially see how the rest of the year ends up. We spoke yesterday about how the semis are somewhat shrugging off bad news, software has demonstrated overall resolve. And the very bullish MONTHLY candle in July should see some pushback into it, but remember how positive it is going forward. Take advantage of any weakness in tech, specifically with the QQQ into the 319 area. Failure there would obviously have to question the bullish narrative.
Trade List 8/11/22: IWY:
Choose Your Lens: The kitchen sink and then some have been thrown at the semiconductors during this earnings cycle. Of course, we have had warnings from NVDA AMD INTC, and MU. QCOM had a hiccup after earnings itself on 7/28. And what has the chart below of the SMH done over the last one-month period? It has gained 14%. The fund is down "just" 2% this week but still at the moment is still in the upper half of the WEEKLY range, and the prior 5-week winning streak has advanced by a total of 55 handles. The SMH slumped more than 4% Tuesday in the largest daily volume in 6 weeks, and all it did was retest a broken downtrend successfully and find comfort at a now upward sloping 50-day SMA. If you are a bear you must be saying what does the ETF have to do to decline from here? If you are a bull you have to be impressed by the PRICE action. Add to that the action in software and technology looks ready to start leading once again.
Trade List 8/10/22: IWY:
Consumer/Overall Market Risk Appetite Retest: It's no secret that the two biggest components of the XLY are AMZN and TSLA and make up more than 40% of the ETF. So if one watches where they go it could lead to valuable information as they will adversely affect the rest of the consumer discretionary space. AMZN on 7/29 recorded a doji candle after a well-received earnings reaction and I thought that would stall its progress. It overshot that a bit but it looks now like its 200-day SMA in conjunction with that may be too much to bear. Of course, time will tell but it would not be out of the realm of possibility to fill in that earnings gap from the 7/28 session near 123 in the near term. TSLA was also rejected soundly at its 200-day SMA, and both of these made solid runs beforehand so it should not be all that surprising. Other top 5 holdings in HD and NKE fell 2.3 and 3.6% Tuesday. Compare that to the top 4 in the XLP, which I was surprised to see comprise of nearly 50% of the fund, in PG KO PEP and COST and all 4 are above their 200 day SMAs and three north of their 50 days. Feels like some reckoning is coming this week.