Our View
Stocks Finish Week With Strongest Gains Since 2020
There are 9 trading sessions until the end of the quarter rebalance. I have been on top of the rally — the last four days may have been one for the record books — but the volume is a third of what it was the week before last. That said, one of our favorite trading rules is called “thin to win” — grinding out gains in a lower-volume tape.
Last week, JPMorgan forecast the S&P 500 would end the year at 4,900, about 10% above Friday’s close, saying that markets “have now cleared the much-anticipated Fed liftoff with policy likely as hawkish as it gets.”
I think we all know raging inflation and the war in Ukraine remains a major stumbling block for the S&P, along with the full effects of the Russian sanctions.
Some people think Powell missed this chance to raise rates 0.50%, but this week we should get more clarity. Fed Chair Jerome Powell will speak at noon ET about the economic outlook at the annual conference of the National Association for Business Economics and participate in a virtual panel discussion.
Several other Fed officials are set to make speeches during the week too.
Our Lean
The Monday after the March quad witch session has been up 16 / down 21 of the last 37 occasions. In other words, not great. With the ES up 8.1% from its low to the high in the last four days and the Nasdaq up 11.6% in the same stretch, my lean is to sell the rallies.
The volumes have been low the last few days so we want to use tight stops.
Daily Recap
The ES traded down to 4364.50 on Globex and opened Friday’s regular session at 4388.25 After a near 10 point dip, the ES rallied up to 4416.
From there, the ES dipped down to ~4392, rallied to a new high of 4417.75, then dipped to a higher low of ~4399. After that, it was off to the races. The ES rallied to 4432 at 1:15, then traded sideways until 3:00, when it broke out over 4434.
The ES rallied up 4450.75 as the 3:50 cash imbalance showed $2.7 billion to sell, then traded 4453.50 on the 4:00 cash close and settled at 4465 on the 5:00 futures close, up 63 points or +1.43% on the day and up 7% on the week.
In the end, the 324 point rally over the last 4 sessions now puts the S&P near the 50% retracement level for the entire correction (at 4455). In terms of the ES’s overall tone, it was extremely firm all day. In terms of the ES’s overall trade, volume is always lower on the big short-covering rallies. That said, total volume was 1.4 million contracts traded.
Technical Edge
- NYSE Breadth: 69% Upside Volume
- NASDAQ Breadth: 78% Upside Volume
Game Plan
After we got the “buy the news” reaction to the Fed — and after four strong upside days into Friday’s close — we are looking for the market to cool off a bit.
As a long-term bull, I hate saying that. However, there are still some caution signs on the track and we’ve had a big move into a potential resistance area.
I’m all for being wrong and seeing a stronger recovery, but from here let’s see if the market cools off a bit and more importantly, where it finds its footing if it does cool.
In that light, Sunday night’s video covers our layout on the S&P 500 (ES), Nasdaq (NQ), Crude (CL), Gold (GC), XLE, ARKK, NVDA, F, EXPE and ABBV.
Go-To Watch List
*Feel free to build your own trades off these relative strength leaders*
Numbered are the ones I’m watching most closely. Please look at these closely.
- BMY — Trimmed ⅓ to ½ here. Look for $73.50 to $75 next.
- BRK.B — Hit $342 trim spot. Another trim at $350.
- VRTX — Trimmed ⅓ at/near $250. $254-$255 next trim spot (small).
- TECK
- TU
- MKC — same setup as yesterday. Watching $99
- CCK
- Energy —XLE, APA, CNQ, CVX, ENB
- ABBV
- ADM
- CHKP
- AR
- COST — looking for $565 trim spot
- DLTR
Economic Outlook
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