March 2024 – Top Trading Pros (2024)

// The Market

Today’s Key Themes:

How will the market come off the #NVDA sugar rush from last week?

The company amazed again and beat expectations but now that the numbers are out where do we go from here? Is it possible to go higher from here?

If this is a trade for you, be aware of that Friday reversal candlestick. Buyers failed to follow up after the earnings push from Thursday.

If you were on my trading floor in NYC we’d call the next few days “free.” Not much in the way of economic data or major earnings that could rick the market so it’s all about the order flow and reading the tape.

This means I would typically instruct my traders to be a little more aggressive with position size if their stocks had above average volume.

Basically there’s no black cloud on the horizon. Until Thursday.

Summary of the ‘3-majors:

The #QQQ lead the pack last week carried by the surge in semiconductor stocks but the #SPY wasn’t far behind.

Despite the tech rally the S&P 500 shows the best performance for February. The #DIA is most likely lagging behind because of #AAPL and #BA.

Last week we drew the box for the #QQQ and price action reversed at resistance. “Price discovery” unfolding as the bulls pushed but failed. Something to watch. To be clear, that is not bearish. But it’s sure fun when you have levels mapped out and stuff happens exactly at those levels.

That’s why it’s important to know what you’re looking for. It eliminates the randomness of price action.

– Headline News:

Previously I mentioned “until Thursday.” That’s when we get the Core PCE report. Thursday morning 8:30AM.

Important to know this in order to make informed decisions around your swing trades. The Personal Consumption Expenditures is the Fed’s preferred gauge to measure inflation. We’ll get the Month over month reading and the year over year reading.

On top of that we get the numbers for initial jobless claims. So Thursday morning means you need to make swing trade decisions on Wednesday. In other words, if you have an open position are you comfortable with holding it through data that could move the market in a big way?

– Earnings Highlights: I’m watching #AMT on Tuesday. The stock shows bearish order flow for the last couple of months as the market rockets higher. If the numbers are bullish we could get a nice pop for the next 3 months off the reversal.

#LOW #EBAY and #FSLR report Tuesday as well.

One interesting announcement will be #NCLH. We had a short position last week in #RCL which began two weeks ago after disappointing earnings. But out of nowhere they adjusted guidance higher.

A lower priced stock that could get a pop this week.

// Sector Rotation

Last week was nothing spectacular despite the big news. Not one sector hit significant performance metrics for the previous 4 weeks, five days (different from Monday through Friday since the market was closed Monday) or Friday.

Quite honestly the last four weeks are less than spectacular despite the headlines. Really shows us how much a few stocks affect the indices. Which is why we talk about market breadth so much.

So far the rally is not broad based, but it’s encouraging to see other sectors starting to show strength.

Tech topped sector rotation for last week but industrials and basic materials kept up the pace.Each posted a 2 percent plus gains for the week.

The picture for the month of February shows the #SPY is at the top with industrial, healthcare and communication services pretty close.

A good example in #XLC showing price discovery at the 80 level. Nothing new here until it breaks the 78-80 box. Bullish until otherwise.

Our custom metrics validate these numbers but two other distinctions pop out.

Consumer cyclical is also showing stacked order flow and technology shows negative numbers for the last five trading days despite the #NVDA surge.

Again, not calling a top but when the car ahead of you hits the brakes you need to be prepared to make a decision.

#GE and #WM carried the industrials higher but both are beyond an optimal entry but there’s a few on my radar for the week.

Airlines popped above obvious resistance and could see the same bullish tone announced by #RCL, Royal Caribbean and the raised guidance.

United Airlines and the 44 level is the trade we called last week and it’s still close enough to consider for a new swing.

#IR and #ETN are both in my list too. Ingersoll Rand needs to get back above 92 for a new entry.

Healthcare and consumer cyclical show strength but not easy to find optimal entries heading into Monday.

#GEHC broke out to new all-time highs last week. It’s a great stock to watch but more of a tracking journal idea (future play). The stock needs to pause to set up better risk reward.

It looks like the average true move is roughly nine dollars so a risk below three for a new swing trade is what we’re looking for.

#BALL (consumer cyclical) shows a solid bullish gap after a pause and worthy profit potential to the next major resistance level.

If you’re looking for something in tech this week, which I feel is all based on how #NVDA trades this week, we have a post-earnings play. I’m watching #SQ after reporting and beating expectations.

Back above 80 is the level for a new swing.

// Industry Groups

Semiconductor stocks are obviously benefitting from the AI boom. #AMD is most likely the next stock to see a bullish run. Mostly because of the price. #NVDA and #SMCI are highly priced for many people.

Others in the group on my watchlist include: #NXPI #LSCC #TSM.

In healthcare, drug manufactures show stacked order flow. #CTLT #LNTH #ZTS #JNJ.

#ZTS, Zoetis and the 200 level is one to set an alert for this week.

The volatile energy sector is in play but because it’s more of a geo-political play it’s one you really need to watch the headlines.

Stocks in the Oil & Gas E&P group include: #AR #EQT #MTDR #SM #PXD #RRC #CNQ #HES.

Recent Earnings Summary:

• Earnings Per Share (EPS): EQT reported an adjusted EPS of $0.48 for the fourth quarter, which was in line with the Zacks Consensus Estimate. This performance reflects a stable earnings outcome for the company.
• Net Income: The company reported a net income of $501 million for the fourth quarter, which is a significant figure indicating the company’s profitability during this period

// The Market

Stocks took a much needed break after last week’s earnings and ahead of Thursday’s economic data.

We received some questions about the inflation data this week and the difference between the CPI (Consumer Price Index) and the PCE (Personal Consumption Expenditures). There’s some confusion about what it means when the Fed says they want to get inflation down to 2 percent.

The Federal Reserve measures inflation primarily through the Personal Consumption Expenditures Price Index (PCE), which is produced by the Bureau of Economic Analysis (BEA) using data on prices from the Bureau of Labor Statistics (BLS).

The PCE price index reflects changes in the prices of goods and services purchased by consumers in the United States and includes data on all consumption items, not just those paid for out-of-pocket by consumers.

The Fed also considers the Consumer Price Index (CPI), which is the most widely used measure of inflation and is produced by the BLS. The CPI measures price changes faced by urban consumers, who represent a large portion of the U.S. population.

However, the Fed prefers the PCE price index because it covers a wider range of household spending and is believed to be a more accurate reflection of price changes over time due to its formula using updated data and accounting for substitutions between similar items when one becomes more expensive.

Despite all of the AI hoopla, the #SPY remains above the tech driven #QQQ for February. By nearly a full percentage point.

Don’t get me wrong, tech by no means reversed, but slowed down. This is something many traders get wrong which is “If it’s not a long then it’s a short” (a bet on the stock going down). That mindset cost me a small fortune early in my career.

Great traders are looking for a new entry to buy, not short.

== > We had a great question on last night’s coaching call.

To keep it high level, each night we scan for stocks trading above average volume. We’re looking for clues that the institutions have a big order.

There’s four primary signals to know:

1. Accumulation.
2. Distribution.
3. Fuel.
4. Exhaustion.

Accumulation = after a downtrend a stock moves into an extended sideways channel and inside that channel we spot days of heavy volume.

Distribution = after an uptrend a stock moves into an extended sideways channel and inside that channel we spot days of heavy volume.

Fuel = a large volume breakout or breakdown from a channel with a large bodied candle. This is generally the start of a new move and an entry signal.

Exhaustion = a large volume candle with a large body after an extended period of buying or selling. This is generally the end of the move and the stop loss should be trailed tighter to lock in profits.

I thought it would be fun to see this in action using the recent charts of #COIN.

To most traders, the sideways channel looks “boring.” But when we dive deeper, and track the action, we see the volume spikes.

This is the kind of stuff that ‘s really fun to learn. It’s kind of like seeing through the noise. What should be obvious is that accumulation or distribution is not a moment but institutions working orders.

// Sector Rotation

Over the last two weeks the #DIA (ETF that represents the Dow Jones Industrial Average) has take the number two spot behind the #SPY.

Likely due to the surge in financials, industrials and healthcare. Energy, although influenced by geo-political factors, shows bullish order flow too.

Russia recently banned gasoline exports for six weeks. Not sure how much we rely on that supply but it’s interesting to know.

The #GE swing trade (industrials) just keeps on giving. We booked some profits and trailing the balance.

Credit services companies showed solid bullish stacked order flow, the only one lagging is #PYPL.

With the recent deal between #COF and #DFS the headline news finally matched the bullish trend shown by #AXP #V #MA.

American Express has been a rockstar since reporting earnings. We tend to trade stocks after they report. Much better sleep without the need to guess the direction after earnings.

Other stocks in the sector worthy of our attention include: #WFC #JPM #TRV #ICE.

Basic materials grabbed the top slot for the last two weeks.

We’ve recently mentioned steel stocks #STLD and #NUE. Both are beyond an optimal entry but a must-watch for a new entry in a strong sector.

Two stocks in the sector worthy of a new entry today: #LYB and #DOW. Both stocks paused after a breakout. Lyondellbasell Industries over 100 is a trade worth setting an alert for.

Industrials have a few stocks ripe for new entries. A pause after a recent push higher.

Stocks include: #ETN #IR #BLDR and #UAL.

// Industry Groups

Sticking with financials, insurance continues to see bullish stacked order flow. Property and casualty stocks: #CB #HIG #LMND #TRV #WRB.

Previously mentioned General Electric has some company in the Specialty Industrial Machinery group: #OTIS #IR #EMR #PNR #ETN #XYL.

In healthcare, medical devices companies are posting a solid four weeks of stacked order flow as well: #TNDM #ABT #GMED #ZBH #SYK #EW.

// Swing Alerts

#IR, Ingersol Rand shows a beautiful picture of stacked bullish order flow.

Also, a subtle nuance but the stock also shows what we call “holding the bid” which means the shallow declines imply strong and persistent buying pressure.

A bullish gap after earnings gives us an excellent reference point to read the tape and be patient for when buyers return to support the numbers.

That means we are setting up a new swing above the earnings gap open price of 91.72. Since we don’t know the exact action yet, I’m going to use the recent tests of 90 support as the parameter for the stop loss.

[$92.05 buy stop / $89.67 stop loss / $95.02 add shares / $99.19 IPT / $1.65 ATR]

Recent Earnings Highlights:

• Balance Sheet Strength: Ingersoll Rand remains in a strong financial position with ample liquidity of $3.2 billion, ensuring the company’s ability to invest in growth opportunities and return value to shareholders.
• Guidance Raised for Full Year 2023: Based on the robust performance in Q3 and expectations of continued strong commercial and operational performance, Ingersoll Rand is raising its guidance for full-year 2023 total revenue growth, organic revenue growth, Adjusted EBITDA, and Adjusted EPS.

// The Market

Today’s key themes.

There’s something in investing called “growth appreciation period.”

It means the primary driver for your business growth has a shelf life. The great companies put money into R&D and get ahead of the curve testing new products hoping to secure the next big thing.

For example, Amazon went from books, to everything to the cloud. Each spurring a new growth period.

So what’s Apple up to these days? $4,000 headgear? Not sure that’s big enough to move the needle.

A secret car? Nope. They officially abandoned the idea. Now what? How do they step into the future in a big way? $180 is a big level for the stock.

Why the focus on #AAPL? The stock is part of multiple indices. Look out below if buyers can’t hold this support. This is the downside of large cap stocks holding up the markets.

If they lose their grip, the decline could be fast. Have your stop loss ready. #GOOGL, Alphabet might be the poster child for “what’s next” going wrong.

Summary of major market indices:.

The 3-majors are scraping by this week ahead of tomorrow’s inflation data.

Makes sense with the market grinding higher for seventeen weeks. Are we due for some profit taking? Yes. That’s easy to say. But the underlying factors for the rally haven’t changed. Yet.

GDP was great. Unemployment numbers are great. Job creation is great. And interest rates are eventually coming down this year. Maybe tomorrow’s PCE report will punch a hole in the balloon.

Doesn’t matter. It will be a reason to take some off the table. One report is not enough to turn this cruiseline around. If that happens, the reaction will show how much the bulls really believe the AI revolution has legs.

A decline is healthy after this gargantuan rally. It gives us better risk/reward.

– Headline News:

Things are rosy in crypto as Bitcoin flies higher and nears the 60K level. Some resistance above near all-time highs. Momentum traders will be selling into this move.

#MARA is scheduled to report after the close today. (crypto mining stock)

An important distinction for everyone saying the stock market is a bubble waiting to pop. A couple of AI stocks traded into an enormous, out-sized rally. But how many other stocks are doing the same?

Market breadth stinks. It’s not the everything rally. The market moved higher like a snail, there’s no mania. Big difference.

– Earnings Highlights:

Beyond Meat Rockets Higher After Huge Loss

Beyond Meat (BYND) reported a big fourth-quarter loss late Tuesday. Revenue fell less than expected, though the fake-meat maker guided low on sales. Still, BYND stock skyrocketed overnight as the company announced plans to cut operating costs and other “right-sizing” moves.

Will AI Save Salesforce #CRM?

Margins Rise, But Revenue Growth Continues to Slow: Can AI Help Turn the Tide?

Although it is expected to announce the highest quarterly revenue of all time, the downward trend in revenue growth draws attention.

// Sector Rotation

Technology firmed up a bit outside of #SMCI and #NVDA. Micron, #MU added AI and Nvidia to a headline this week and popped. But it’s too far from an optimal entry.

#AMD stalled in a trading range. Nothing to do here but set an alert for 183.

So where are the opportunities? I still like #SQ and a breakout over $80. A monster bullish gap after reporting likely needs some time to catch its breath but have it in your watchlist.

#SNOW above $235 is in the game plan too. But they are scheduled to report after the close today. I’m waiting for the announcement to trade a potential breakout.

The industrial sector shows thirty six stocks with stacked order flow.

#MTZ is scheduled to report Thursday. A 25 percent move is in the charts with good numbers. A few others mentioned this week remain valid setups: #JCI #BLDR #IR #MAS #UAL.

#ETN a four day pause after a bullish gap. Great price action since reporting. Looking for the next push out of that pause.

Consumer Cyclical (companies we frequent when we have extra money) had a few stocks blast into orbit this week. #LI leads the charge (pun intended).

Let’s not forget #CVNA, Carvana. Why do I mention them? For the next trade. Be prepared. There’s some serious attention here.

#FL, FootLocker offers a solid entry today.

#HLT, Hilton closed as an inside day setting up a new swing today too. Great visual of stacked order flow there.

// Industry Groups

Biotechnology shows ten stocks with stacked order flow. #CRSP coming out of a double inside day yesterday tops my list.

Software infrastructure offers some lower priced stocks with great order flow. And a few with bullish reactions to earnings. #SQ, Block Inc tops that list. Others include: #GCT #HCP #PLTR #TOST #DOCN #FOUR.

GigaCloud Technology has my attention for a $36 breakout. The stock is holding the bullish bias very well since breakout out of a channel last December. Earnings are scheduled for March 15.

// Swing Alerts

We have a bunch of open positions heading into tomorrow’s PCE report. So today i’m looking to hedge a bit with a short (bearish trade).

// Swing Alerts #DKS 1-22-24

[$147.50 buy stop / $142.50 stop loss / $154.56 add shares / $162.50 IPT / $3.53 ATR]

// Swing Alerts #GE 1-29-24

[$132.74 buy stop / $129.89 stop loss / $137.28 add shares / $141.32 IPT / $2.52 ATR]

// Swing Alerts #MMM 2-12-24 *Short Sale*

[$91.96 sell stop / $93.73 stop loss / $87.64 add shares / $86.65 IPT / $2.16 ATR]

// Swing Alerts #AMT 2-13-24 *Short Sale*

[$191.44 sell stop / $195.41 stop loss / $182.78 add shares / $179.53 IPT / $4.33 ATR]

// Swing Alerts #WFC 2-21-24

[$52.69 buy stop / $51.03 stop loss / $54.87 add shares / $57.68 IPT / $1.21 ATR]

#DXCM, Dexcom shows tremendous history of trending for months and the stock recently broke into a confirmed bearish order flow. Without significant support below this level there’s plenty of room for profits on a decline.

I’m using the recent trading range as the criteria for the entry and the stop loss.

[$113.93 sell stop / $119.62 stop loss / $107.83 add shares / $96.86 IPT / $3.10 ATR]

// The Market

– Today’s key themes:

The market hasn’t given up an inch heading into this morning’s 8:30 PCE report. Similar to NVDA earnings last week it feels like everyone is expecting a number that will cause an avalanche of profit taking.

Expecting is such a spring word in the stock market. Everything is driven by what’s expected and the reaction to what actually happens. We’re in the eighteenth week of this amazing rally. “Don’t fight the Fed” is in full force. Despite the amount of expected rates cutt this year going down, the consumer and AI has not slowed down.

But…

Bond yields have been steadily increasing, impacting stock prices as investors adjust to higher rates.

The recent jump in yields following the Federal Reserve’s policy meeting has contributed to market volatility and a cautious, yet optimistic investor sentiment.

The new PCE reading is important for investors as they try to determine how quickly the central bank will begin loosening its monetary policy following the most aggressive campaign to cool inflation since the 1980s.

– Performance of the 3-majors.

As expected (that word keeps popping up) the major indices haven’t moved much this week ahead of today’s inflation data.

Technically the #SPY traded into a nice and neat bull flag, and topped it off on Wednesday with an inside day candle. The perfect setup for today’s volatility.

One thing to note is the #QQQ failed to hold the breakout despite the NVDA earnings.

– Headline News:

Lost in the PCE attention today is the equally important report for initial jobless claims. A lower than expected reading would act like rocket fuel.

– Earnings Highlights:

#SNOW reported and imploded by a whopping 20 percent. Do you need more proof that holding through these earnings are 50/50 at best and the reward to risk is palpable? Snowflake also announced Frank Slootman is retiring as CEO, adding to the plunge.

#CRM, Salesforce beat on earnings, announced a dividend and share buyback, but disappointed on guidance. The key element for investors. The stock pushed lower by just over 1 percent.

Marathon Digital revenue surges 452% in Q4 amid ‘banner year.’ THe stock is down this morning with some profit taking after surging over 75 percent this month.

// Sector Rotation

Consumer cyclical continues to show that we’re okay spending that discretionary money.

Future lower interest rates make it easier I guess. Me, you, we are driving this sector. #EBAY reported solid earnings this week, along with the fast spikes higher in #CVNA and #LI.

#ANF and #DKS are the most prolific trends in the sector.

#ABNB and the 155 level has my attention. After reporting solid numbers the stocks has held just below the breakout.

Technology shows three breakouts on the table for today and one pullback worthy of a new swing trade.

#GCT #SQ and #NTNX. I posted the chart of Gigacloud earlier in the week. 36 is the trigger. For Block Inc, we’re looking for a move back above 80. Which it touched again yesterday but got slapped back down.

#MU, Micron announced some good news about AI this week and Nvidia, and paused for three days. I’m looking for another move higher to follow up those big bullish gaps last week.

// Industry Groups

The number of stocks with bullish stacked order flow decreased this week but that was more a function of the pending news than anything changing.

Software infrastructure stocks offered up explosive moves this week, None bigger than #FOUR. A solid earnings play to track next week.

Others in the group to watch include: #HCP #TOST #NTNX.

Computer hardware put up some big numbers as well punctuated with solid earnings from #PSTG last night. The stock is up 8.5% this morning. Two other stocks in the group with stacked order flow are: #DELL #STX.

Biotechnology stocks are flying but I’m not calling them out today because they are too far from an optimal entry.

// Swing Alerts

Managing open swings today ahead of the news. We’re long and hedged.

After a profitable start to the #AMT short, and earnings that matched our bearish bias, the stock reversed and stopped us out. A weird reaction after breaking down. We “pay the expense” and move to the next trades.

Here are the open positions:

// Swing Alerts #DKS 1-22-24

[$147.50 buy stop / $142.50 stop loss / $154.56 add shares / $162.50 IPT / $3.53 ATR]

// Swing Alerts #GE 1-29-24

[$132.74 buy stop / $129.89 stop loss / $137.28 add shares / $141.32 IPT / $2.52 ATR]

// Swing Alerts #MMM 2-12-24 *Short Sale*

[$91.96 sell stop / $93.73 stop loss / $87.64 add shares / $86.65 IPT / $2.16 ATR]

// Swing Alerts #WFC 2-21-24

[$52.69 buy stop / $51.03 stop loss / $54.87 add shares / $57.68 IPT / $1.21 ATR]

// Swing Alerts #DXCM 2-28-24 *Short Sale*

[$113.93 sell stop / $119.62 stop loss / $107.83 add shares / $96.86 IPT / $3.10 ATR]

// The Market

– Today’s key themes.

The inflation report came in as expected. Basically a goldilocks reading. Not too hot (like the previous CPI report) and not too cold. Just right for the stock market to perceive it as validated data that the Fed will begin cutting interest rates.

I’d say with the slow grind higher in the major indices the Fed has no reason to act any time soon. Ray Dalio says the stock market “doesn’t look very bubbly” but the magnificent seven stocks do.

The AI catalyst rages on as investors begin shifting focus to lower priced stocks. Last week we mentioned the high price of #NVDA and #SMCI would shift focus to the next likely stocks to advance.

After a month of sideways price action #AMD broke out in a big way. We had the community watching the 183.50 level. #AI and #GCT popped too.

We posted for the community to trade the 36 breakout. Solid start to a new swing.

– Summary of the 3-majors performance.

Our main market dashboard is basically neutral this week. Which sure feels like things are in need of refueling. Kind of like you’re still driving forward but you took your foot off the gas.

Pretty much nothing has changed so this is not a call for a major reversal but likely profit taking. Yesterday’s economic data was what the market wanted, and yet the #SPY opened and closed in basically the same place.

Plenty of trading but after six and half hours the price closed where it started. We call that a melted candle which shows us indecision.

The reaction lacked “separation.” A dominant bullish force failed to show up after the initial reaction. Perhaps a sign that investors are seeing the top of the roller coaster.

Perhaps it’s finally time to make plans for your profit maximizer.

Market News

GE Stock, which seems to be going up one percent every day, hits a new high after the company announced a final diversification. The GE Board of Directors has formally approved the spin-off of GE Vernova, now set for April 2.

A pretty light day of market-moving news heading into Friday. Everyone fixated on yesterday’s PCE report, so we’re in a holding pattern. The next wave of headlines will focus on the March 20 Fed meeting.

Elon Musk Sues OpenAI, Sam Altman for Breach of Contract

Billionaire alleges the ChatGPT maker and its CEO have prioritized profit over benefits to humanity.

– Earnings Highlights:

#ZS, ZScaler reported last night and mimicked the recent earnings mojo from #PANW. A big nasty gap down. This is the cybersecurity industry group. As of now #CRWD is showing relative strength. Crowdstrike is scheduled to report earnings on March 5.

#DELL, Dell Technologies Inc Announces Fiscal 2024 Earnings with Increased Dividend. Reported a year-over-year decline in revenue but increased its net income and diluted earnings per share (EPS).

// Sector Rotation

Tech gets all of the love but consumers are spending on luxury items and travel. #WYNN continued the dance of the earnings gap open price and finally punched back above yesterday.

#HLT, Hilton and #MAR, Marriott show no signs of slowing down. And #RCL, Royal Caribbean recently changed their outlook and raised guidance for the next year.

People are enjoying the spoils of this 18 week bull market.

If you’re feeling your oats and ready to up your risk appetite, #CVNA, Carvana paused for a few days. Not an easy stock to trade with a tight stop loss, but the regards are big if you can manage your emotions.

The stock holds well above the earnings gap and sits inside of what’s nearly a double inside daily candle. One of my favorite breakout plays.

If the market takes a break for a few days and trades lower. I’d like to get a new entry on that decline and above the 68 level.

Sticking with the travel theme, #ABNB, Airbnb spiked above major resistance and closed the day strong.

The next trade looks like 160 to 180 after the first pause above the 155 breakout.

// Industry Groups

Residential construction keeps on going. Other than a decline last summer backed by the “higher for longer” quote by the Fed on interest rates, this train hasn’t missed a beat.

Ater a three month trading range, Lennar tested the 156 resistance again yesterday. Which happens to be all-time highs.

Stocks in the group include: #LEN #TOL #KBH #DHI #PHM.

Watching to see if semiconductors get a pop. #SMCI and #NVDA are in a holding pattern so the risk is manageable. Others to watch include: #AMD #MRVL #LSCC #TXN #ON.

Software infrastructure remains interesting after the #GCT breakout and #PLTR inching closer to major resistance (26) and a potential move higher.

#NTNX with a massive breakout as well after reporting. A solid candidate for an earnings gap trade.

// Swing Alerts

Ingersoll Rand traded sideways for five days just below the earnings gap. Yesterday’s bullish energy candlestick puts the trade in play again today.

Here’s the trade setup as outlined on 2-27-24. We have a much better view of the trading range so we were on point using that as the levels for the trade criteria. I’m tweaking the support just a little lower using the February 27 low.

#IR, Ingersol Rand shows a beautiful picture of stacked bullish order flow. Also, a subtle nuance but the stock also shows what we call “holding the bid” which means the shallow declines imply strong and persistent buying pressure.

A bullish gap after earnings gives us an excellent reference point to read the tape and be patient for when buyers return to support the numbers. That means we are setting up a new swing above the earnings gap open price of 91.72.

Since we don’t know the exact action yet, I’m going to use the recent tests of 90 support as the parameter for the stop loss.

[$92.04 buy stop / $89.22 stop loss / $94.94 add shares / $100.51 IPT / $1.65 ATR]

/ AI Surge Alert

With the broader earnings season now comfortably behind us, the market turned this week to a plethora of economic data that seem to reinforce the Fed’s position to wait just a little bit longer for rate cuts.

We began on Monday with new home sales coming in at 661,000 where the expected number was 684,000. Durable goods orders were down 6.1% as opposed to the expected number of 5%.

Consumer confidence also took a dive at 106.7 versus the expected number of 115. GDP came out 3.2% versus the expected number of 3.3%. The core pce deflator year over year number, that the Fed monitors extremely closely, came in right in line at 2.8% (see below).

Ideally the FED would like to see 2% here:

(Source: Bloomberg)

Lastly, to put the cherry on top, initial jobless claims came in at 215,000 versus an expected 210,000 (see below).

They will never admit it but the FED would like to see this a touch higher.

If you look at all the data that I just showed you you might be scratching your head wondering why some of these not-so-better than expected numbers should bring markets higher.

What these numbers essentially show if you take them all in aggregate is that the FED is on the correct path and that their current “wait and see policy” policy might actually result in the elusive “soft landing” everybody hopes for. That alone was enough to bring markets higher.

I would not hold my breath with the “soft landing” stuff just yet, but this week brought us one step closer, which is why the markets overall reacted favorably.

The NASDAQ 100, in particular, finally managed to make all-time highs alongside the S&P 500. This last push sent the semiconductor group into parabolic territory (see below).

Go short? Definitely not…..but going long makes little sense too. How many more buyers could there be?

Although the strong parts of the market seem quite impressive, there are things that I noticed this week that are a slight cause for concern. Not concerned to be bearish but simply not to go all in with risk.

The more markets get outstretched like this, the more cracks start to appear on the surface. Take for instance the 10-year treasury yield that has been range-bound for quite some time now.

This tight 15 basis point range appears ready to snap to the upside at any moment (see below). A breakout past 4.35% would not bold well for stocks.

Higher treasury yields give institutions cheaper riskless choices as opposed to overinflated equities which have significant downside potential.

As equity prices reach overbought levels and risk-free rates begin to climb that could prove to be the breaking point for stocks.

The second crack in the ceiling is the volatility index or the VIX. VIX futures have been quietly putting in higher lows since December, forming the beginning of an ascending triangle which is also a historically bullish pattern.

This is the second thing that spells a little bit of trouble for equities in the weeks to come. (see below).

On Friday markets were up significantly with the advance/decline line past 66%, but at the same time the VIX was also up on the day by +.65%.

For stock traders this can be a very frustrating market environment since names that have done well over the past several months seem to be running out of steam and are too risky to keep going along.

For options traders, however, it just means we have to switch our strategy a little. Here are a couple of things we can do this week to help us adjust to the current climate:

• Once there’s some bearish Divergence on these high-flying AI names we can begin doing out of the money bear call spreads which profit if the stock remains relatively unchanged, slightly higher, or goes down. You only lose if the stock was to go much higher, which given the current environment is starting to have the lowest probability.
• We can screen for names that are outside of the more popular spaces and look for long opportunities in sectors that continue to have upside potential.
• We can add bearish exposure to a portfolio where relative weakness is obvious because names like this usually continue to fall faster when overall markets begin to fall.
• As volatility slowly increases we can add neutral strategies as well as volatility strategies to capture inflated premiums.

So what is “bearish divergence”? It’s just a fancy way of saying that less buyers are showing up to the party this time around (see below).

When I see this occur on a major index, it tells me there is less buying interest, despite reasonable volume and an outsized bullish closing candle.

This gives me some confirmation that I can begin to take smaller, defined risk counter-trend credit trades that would benefit from little up movement, no movement, or down movement.

When selecting a name that resembles the outstretched semiconductor space, I screened for a name of less prominence than say, NVDA, but with a more massive outsized move that appears less sustainable: AMD (see below):

Edge:

AMD is overbought, parabolic, and the stock will be difficult to maintain current levels since momentum is starting to fade. This trade will profit from small up movement, no movement, or downward movement, only losing if the stock continues soaring through $210 by March 15th.

Target: $210 or anything lower would create a max gain.

Entry: Current levels but you can adjust strike price if stock moves on Monday (see Delta below).

Stop: Consider exiting if the premium moves up by 75% of original price to avoid max loss.

Timeframe: Most likely will hold to expiration to run out Theta decay. Consider early exit if 50% is realized within a few days. Consider exiting if 90% of the premium is realized in the last week of the trade.

Sizing: Max risk % based on your trade plan. Half risk if you use no stop loss.

Strategy: Bear Call Spread (Credit Trade):

SELL AMD 210 ATM Calls DTE 3/15. (Using a Delta of 38)

BUY AMD 215 ATM Calls DTE 3/15.

NET Credit/Maximum Premium Received: $1.42 (est.)

Max Loss with no BUY to Cover Stop: $3.58 (est.)

Rules:

1. Recommended Stop: 75-100% rise in credit amount if taking on your maximum risk size. This will create a 1:25/1 RRR with probability slightly tilted in your favor (62%)
2. Change the strike of the short leg (anchor leg = 210) if stock moves, but select a new strike with the same Delta of around 38).
3. If you change the strike due to price movement, maintain the same $5 difference in each leg of the trade to avoid outsized losses.

Trade will pay full gain if AMD remains below $210 by expiration of 3/15.

In searching for high probability trades this week, the one sector that I came across having the most potential was the healthcare sector.

The reason being is unlike the other groups that just kept going higher, healthcare actually had a nice pullback providing a decent entry point (see below overall Healthcare sector).

Although healthcare failed to make new highs, this mild pull back allows us to look for new opportunities. When screening for names to potentially trade, I came across ATRC, a fairly obscure company that makes medical instruments and supplies (see below ).

With no major resistance until $42, this has room to potentially run.

Edge: The stock is in a favorable sector (healthcare) that just had a nice bull pullback and is seeing order flow entering into the group on Friday.

This stock is in an early stage uptrend based on the chart, and has pulled out of a recent trading range between $32 and $34 on good volume, confirming potential institutional interest.

The stock now sits above both the 20 and the 50 day simple moving averages and is poised to move higher.

Target: $42, and potentially higher.

Entry: Current levels are okay. You can wait for a more favorable entry for a pullback into the 20 moving average, but then you run the risk of the order never getting filled.

*Keep in mind, over the course of a thousand trades sometimes the more aggressive entry will be better and sometimes the more conservative entry will be better.

What is important is that you develop a trading plan and stick with it in order to be consistent. In my trading plan I generally prefer a more aggressive entry, so if this stock opens on Monday similar to where it is on Friday I will enter the trade.

I compensate for this extra aggression by having a more conservative exit strategy like when my edge dissipates.

*One caveat to that is that the current spread is $2.85/ $3.50 for my main “anchor” leg, so I will be placing a limit order in the middle of that spread and being patient for a couple of hours. With such a wide spread there’s no sense in overpaying!

Stop: 40% maximum premium loss based on my plan, use proper stop orders based on your pre-existing trading plan.

Time frame: Until the $42 target is reached or unless the edge that I laid out above somehow diminishes. This could include a breakdown of the moving averages, a breakdown of the overall market, or breakdown of the sector. I am happy to exit early if the justification for getting into the trade is no longer there.

Sizing: Due to the wide spread of this trade, I will only allocate 75% max allowable risk capital in total since exiting early could be challenging. This is prudent risk management!

Strategy #1: Straight Call:

BUY ATRC 35 ATM Calls DTE April 19th.

Total cost/ total risk with no stop: $2.85/$3.50 (est).

Total reward: Unlimited, But with a $42 Target, I am targeting 2.5:1 reward to risk ratio.

Strategy #2: Vertical Call Spread (less aggressive and with a defined target but lower cost):

BUY ATRC 35 ATM Calls DTE April 19th.

SELL ATRC 45 OTM Calls DTE April 19th.

Total cost/ total risk with no stop: $1.90/3.05 (est.)

**limit order order preferred due to wide spread.

Shifting gears into a sector group that I have not traded in a while are the asset managers. Although financials managed to make new highs this week, many of the publicly traded asset management firms have underperformed up until now.

As the market breadth continues to improve to 63% S&P 500 names above their 50 day simple moving average, I suspect this group is poised to rebound as well (see below).

Source: Bloomberg

One name that showed up as receiving some positive order flow is T Rowe Price (TROW) (see below).

Edge: The stock is in a nice uptrend above both major 20 and 50 day moving averages and is in a part of the market that has been extremely strong this week.

Asset Management Services, although in the financial sector, have been lagging until recently. This stock does not have much resistance until it gets to the $125 level. With implied volatility extremely low in this name of around 22%, this makes a straight call the most viable option strategy to select.

Target: $125 and potentially higher.

Entry: Current levels are okay or depending on your plan you can wait for a pullback closer to the 20-day moving average and set an alert.

Like I mentioned earlier it’s important to stick with one type of entry style. Over the course of hundreds of trades the results tend to even out. The important thing is to stick to one thing you are most comfortable with.

Stop: 30% maximum premium loss based on my trade plan. I’m using a tighter stop because implied volatility is low . I’ll also exit the trade early if my perceived “edge” no longer exists.

Time frame: Until Target is reached of $125, and based on how quickly it reached the target and overall market conditions, I may seek a higher secondary target.

Sizing: Full risk size is okay. No earnings catalyst in sight and no expected changes in volatility.

Straight calls will capitalize on both volatility and price movement to the upside.

Strategy: Straight Calls:

BUY TROW 110 ATM Calls DTE April 19th.

Net cost/ Max loss with no stop: $5.50/$5.70 (est.)

Max reward: Unlimited but a fast move to $125 could potentially be a 3:1 risk to reward ratio.

In conclusion:

This week ahead we have some earnings out of Target and Crowdstrike which although the majority of names have reported, can potentially move different parts of the market.

We also have Chairman Powell speaking in front of Congress in the middle of the week, and finally we have the all-important payroll numbers coming out on Friday.

As markets continue to drift higher it’s Important to realize that shorting a market like this or trying to fade the top of a large rally is one of the easiest ways to lose all your money.

Being bullish as rallies continue to get into the later innings doesn’t always feel good but it is almost always the right trade. With options you can take a counter Trend trade with defined risk like I showed you with AMD, but as always it’s important to build out your Edge.

Trends tend to last longer than we expect and rallies can become irrational before they correct themselves. The charts will ultimately tell us when being bearish makes more sense but for now It’s best to keep on buying.

There will be a day in the future when the charts tell otherwise and that might be followed by a week of drawdowns. If following an uptrend means being profitable for months on end with just one week of a couple of losing trades, I’m happy to stay on the bandwagon for as long as I can.

// The Market

Today’s key themes:

A Goldman strategist says “this time is different.”

Typically that means we’re in trouble. When Wall Street says we’ve never seen this before, that’s code for “I’m ignoring the red flags and I don’t want it to stop.”

But is this time different? Is this a tech bubble?

Others are making the case that #NVDA, Nvidia stock is actually reasonably priced.

“We can’t call it a speculative mania because it trades at lower P/E than it did a year ago. Nvidia is talking the talk and walking the walk,” said Joseph Zappia, principal and co-chief investment officer at LVW Advisors.

What about the “lack of market breadth?” Others argue this can’t last because the Magnificent Seven stocks carried the markets and if they reverse look out below. (Note: Many are calling it the Mag Four now that Alphabet, Apple and Tesla have struggled during this bull run)

And others scream that inflation is “sticky” and investors have become too giddy over fast profits. Fear of inflation heating up again and the possibility that economic growth could slow. Causing even more indecision.

All of this leads to one major conclusion.

Stop predicting. The best of the best have different opinions. Stop forecasting. Just pay attention and have rules.. And follow them.

Everyone is guessing what’s going to happen next. The truth is nobody knows. Need more proof?! Okay here you go.

An inverted yield curve “typically leads to a recession.” History is the proof.

An inverted yield curve is a financial phenomenon where long-term interest rates are lower than short-term interest rates.

This is unusual because typically, investors require higher returns for lending money over a longer period due to the greater risk of inflation and other uncertainties over time. When the yield curve inverts, it suggests that investors expect the economy to worsen in the future.

Everyone, a lot of smart people including Michael Burry of the Big Short fame bet on a hard landing last year, the economy crashing.

And it didn’t.

So many opinions and yet stocks continue going higher. Eighteen weeks to be exact. Trends like this don’t come along too often which is why you must simply pay attention and stop being afraid or trying to predict.

Having a system for when to buy and sell is more valuable than having a crystal ball. What can a system do for you? Probably the most important thing is to eliminate emotional decisions. “If this happens, then do this.”

Take our profit maximizer for example. #GE, General Electric stock has triggered one exit signal with this strategy in seventy nine trading days.

Moral of the story? When you have a system you have control.

– Summary of the 3-majors:

Year to date the Nasdaq gained 10.69%. Most people would love to see that in a year, never mind two months. Thank you AI. It looked like things were slowing down for a couple of weeks ahead of key economic data. But nope.

The PCE report (the Fed’s preferred measure of inflation) came out last Thursday and it turned out the market was simply refueling. It was almost perfect. Print that out.

• A bullish gap,
• A bull flag,
• An inside day,
• A bullish gap.
• A well-bid candle
• Closing near the highs,
• At all-time highs.

– Headline News: Jerome Powell is scheduled to speak twice this week. Wednesday and Thursday. Both days at 10AM. I wouldn’t expect any earth shattering news but it’s something we need to know is on the calendar. Especially if you’re a day trader.

A big report scheduled for Friday 8:30AM is one that can move the markets. Nonfarm payrolls. Need to know if you’re holding swing trades. It’s one of the most watched indicators that provides clues about consumer spending, and therefore the actual strength of the economy.

– Earnings Highlights: #PANW and #ZS got clobbered recently after reporting. Let’s see if we make it a triple crown this week with #CRWD scheduled to report after the close on Tuesday. Three stocks in the same industry group that moved in sync the last 12 months. And the only stumble we’ve seen in tech for a while.

#TGT, Target is on the calendar Tuesday as well. A nice slow grinding bullish trend since reporting last quarter. The next major resistance is fifteen dollars higher.

// Sector Rotation

A good visual here is that the rally is not broad based. The last four weeks required staying on top of order flow and being nimble. You can see the back and forth even in tech. Green to red, neutral to green again.

Consumer cyclical continue to shine as we continue to spend. New highs in the stock market created many new 401 K paper millionaires.

That’s good.

The bad is most of them have absolutely no idea how they made those gains. So of course many now believe that 10 percent in two months is normal. Get ready for the screams of disbelief when the markets see some real profit taking.

Retail stocks in consumer cyclical show amazing bullish stacked order flow. None bigger or better than #ANF. Yup, Abercrombie and Fitch. Earnings are due Wednesday.

#CROX, #LOW and #DKS each show order flow worthy of our attention this week.

But it’s #EBAY that shows the best swing trade setup in the sector. After reporting the stock paused for three days giving us a new optimal entry.

Healthcare and Industrials posted a solid February.

[Healthcare] Some volatile plays here recently. None more than #VKTX. An inside day but anything but an order flow play. It’s all news driven. I’d be cautious with trading this with stocks. If my nephew was asking me I’d tell him to buy options and only risk a certain amount of the premium.

None stronger or more healthy than #GEHC. Also an inside day, just in front of all-time highs.

#TGTX, TG Therapeutics pushed higher after reporting, similar to last quarter which unfolded nicely for the bulls. Looking for the same type of trend as long as it holds above $16.

[Industrials]#GE and #CAT are both beyond our entry area but they’re doing a nice job of leading the way. For new swings here consider #IR #MAS #CARR.

On the tech side, #AMD is beyond the $183.50 optimal entry, and congrats if you got the #GCT $36 breakout. Look to add, it’s the right play for the moment.

After recent news #MU is worth looking at this week for a new swing.

// Industry Groups

Impossible to ignore the residential stocks breaking out together. None more prominent than #LEN, Lennar. Create a watchlist for the group: #KBH #PHM #DHI #TOL.

Computer Hardware stocks caught a bid too as #DELL exploded higher after reporting and claiming to have excess demand for new AI servers. We need a good entry so I’m holding off for now but it’s a must watch this month.

Others include: #PSTG #WDC #STX #ANET #SMCI.

Obviously semiconductor stocks but as mentioned a few are too far from a good entry. But we dug deeper and have stocks worth a trade this week.

#QCOM #LSCC #ALGM #TSM.

// Swing Alerts

Two new swings for today, the first is a decline after solid earnings. Technically it’s a snapback trade, but works as a standard swing too.

#BBY, Best Buy shows $8 worth of profit taking after earnings, but held the previous breakout level as support. A closer look shows the 78-79 level as the “price discovery” before the breakout.

Because the Friday candle was beyond the normal, I’m using that two dollar range for the swing trade setup.

[$79.46 buy stop / $76.54 stop loss / $83.60 add shares / $88.22 IPT / $2.30 ATR]

// The “Snapback” trade is an early entry and requires a lower open and a rally back to Friday’s low. You’d need to be able to watch prices after the market opens for this setup.

If the stocks pushes down and bounces back, today’s low would be the stop loss, and Friday’s low would be the buy stop entry.

Trade Two: #WM< Waste Management.

Pretty solid view of stacked order flow, and a clean EGOP setup (Earnings gap open price). Follow that up with a nice bull flag/pause in the industrial sector and we have a trade that checks off a lot of boxes.

The stock also gives us a bullish u-turn entry.

[$206.45 buy stop / $203.07 stop loss / $211.40 add shares / $216.59 IPT / $2.75 ATR]

// The Market

– Today’s key themes:

Retail investors control the open. Institutions control the close.

A trading firm in NYC built a huge business off of this singular idea. Their strategy was to scan for strong stocks, above average volume and a pending close near the high.

They would buy the close and sell the open. So essentially their traders worked the last hour of the day and the first hour of the day. A pretty good gig. Obviously there were more filters to the criteria but it was brilliant.

For most of the current eighteen week rally the stock market closed strong. At the very least there was very little selling into the end of the day. That changed yesterday. It was one of those moments where you sit up in your seat and notice something happened.

This mattered. Buyers did not “hold the bid.” Sellers tested the waters and this time their foot sank in. I’m not calling a major reversal, but it’s time to put on the big-boy (big-girl) pants and take responsibility for your profits.

A nice problem to have when your stocks rally 20 % in three days, but now it’s time to have a plan. Sure it feels like the market always goes up. And this is amazing, incredible even. But eventually the lollipop ends and you need to brush the sugar off your teeth.

Make a choice now. Momentum profit maximizer or trend profit maximizer. And stick with it. Don’t second guess yourself.

– Summary Of The Three-Majors

A closing price near the low is something to notice, but it’s not quite distribution yet. Viewed through the lens of a heavy volume day, the #SPY didn’t see the volume. So we’re left with a “melted candle.” Which we know as indecision.

The only heavy volume bearish day we’ve seen was the hot CPI report on February 13th. Seems like conflicting analysis doesn’t it? No. It’s how professional traders prepare.

Great trading requires that we know what we want to see, and what we don;t want to see in order to make decisions. Is it still valid? How do I know if it changed?

Constantly answering these two simple questions puts you in charge of the outcome. SO yesterday traded in to indecision. Let’s see if today trades into distribution. I’m not “wanting it,” I’m just laying out my scenarios.

We’d rather be prepared for an opportunity that never comes, than not be prepared if it does. (Indecision or melted candles = when a candlesticks opens and closes near the same price. A small bodied candle).

– Headline News:

Sergey Brin co-founder of Google addressed questions about the launch of Gemini and admitted they made mistakes. And discusses if AI will hurt the search advertising business.

Houston we have a problem. After rocketing higher for three days #AMD, Advanced Micro Devices hit a US government roadblock in attempting to sell an artificial intelligence chip tailored for the Chinese market.

Related; During last night’s coaching call Tim H. asked about the price action in #AMD and we discussed looking deeper than the individual stock and into the industry group. We spotted heavy volume indecision in nine semiconductor stocks!

Not a shock but Fed Rate Cuts Are On Hold Because Of The AI Stock Boom. Easing policy too soon, Powell said, “could result in a reversal of the progress we’ve seen on inflation and ultimately require even tighter policy.”

Periods after a recession and the dot-com bubble era are the only other episodes since WWII when stocks rallied this fast: Deutsche Bank.

– Earnings Highlights:

#TGT, Target is scheduled to report before the market opens today. Target is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat.

Something note here, #TGT traded into a bearish distribution day. Could just be hedging ahead of the earnings report. But it’s good to notice these things.

#CRWD, Crowdstrike is scheduled for after the close. The two other leading stocks in the Software infrastructure industry group got knocked lower after reporting. Let’s see if #CRWD can buck the trend. If it does that’s a solid candidate for an EGOP trade. Relative strength is one of my favorite patterns to scan for,

// Sector Rotation

A solid end of day report card for sectors other than technology. Interesting to note how Real Estate perked up after many of those leading stocks were in bearish order flow. #AMT is a great example of the speed of the reversal.

Also a nice visual for being disciplined with your stop loss. We had this as a short sale and had a profit after the earnings report, but, well you can see what happened next.

Your first loss is your best loss. Don’t second guess it’s simply too expensive. Kind of makes sense for this sector to rally with the expected interest rate cuts this year.

Other stocks to include in your watchlist include: #DLR #CCI #IRM and #HASI.

Technology is obviously in play, the challenge is finding an optimal entry. There’s a few to consider today.

#FOUR, Shift4 Payments exploded after reporting and sits as an inside day above the previous breakout level. Typically a solid place to start a new position.

Make sure to have an alarm set for #PLTR at 26. I think everyone is watching this level. The recent earnings report was universally liked. This is one to stalk.

#BBY above $78 is on the table today too.

Not a technology stock but we mentioned #CAVA on last night’s video game plan. I have not traded this stock yet but impressive price action in getting back to all-time highs. Very similar to GE Healthcare.

CAVA is reasonably priced and has decent volatility. Something to start watching.

// Industry Groups

Basic materials showed solid performance the last four weeks so it makes sense to dive deeper into industry groups in the sector.

This is not an easy group to trade, typically moving averages are better than to expect momentum plays.

Specialty chemicals offers the most stocks with stacked order flow: #OLN #LYB #LIN #EMN.

Asset management stocks trended nicely for the last six months. A little sideways action recently but a nice breakout in #TROW yesterday. Nice call by John on the Saturday swing trade session.

Other stocks to watch here include: #CG #NTRS #KKR #BX #PFG and #APO.

// Swing Alerts

Since it looks like the market is starting a much-deserved break, I’m lowering the initial position size for today. A decent decline can lead to great entries in a couple of days.

#DG, Dollar General shows a nice breakout, and solid profit potential and is worthy of a starter position for a new swing trade.

Earnings are scheduled for March 14, so we have some time to play for a headstart on a winning trade. If we have an open position at that time we’ll discuss it the day before.

Target reporting today could give us some clues for retail/discount store stocks. The inside day setups are one of my favorites so it’s hard to pass up this trade. A healthy average true range of $3.60 could make for a nice winner too.

[$150.66 buy stop / $146.74 stop loss / $157.14 add shares / $162.42 IPT / $3.60 ATR]

// The Market

– Today’s Key Themes:

Futures bounced back after yesterday’s decline.

Anticipation around Jerome Powell speaking the next two days should set the tone for the remainder of the year.

Earning season has wound down, so we’re mostly focused on the economic data for the remainder of the month. With Powell Wednesday-Thursday and the employment figures on Friday, we have a nice 1-2-3 punch of anticipation baked in.

Be sure to make decisions on open swing trades Thursday before the market closes.

– Summary Of The Three-Majors:

Yesterday felt like a massive bearish day but that’s only your recency bias. Although the #SPY traded down by one percent but the volume was normal. Even slightly below average. For a distribution day we typically look for one percent or more and a significant increase in volume.

The one thing to notice is that it is going to be easier to break the trendline because of the pattern of one up day followed by a week of sideways. Things will get interesting when that happens.

– Headline News:

Federal Reserve Chair Jerome Powell is expected to tell Congress this week that the central bank is committed to a cautious stance on interest rates. There’s that word again. Expected. The market isn’t expecting anything new in his presentations the next two days. We’ll see.

The European Central Bank meets this week to announce their decision as well. I’m sure plenty of tap dancing around a few key words will be the show in both places with algos ready to pounce on every syllable.

Profit taking across the markets today but Nvidia stood out as the only tech stock among the “Magnificent Seven” to see gains. Apple and Tesla remain bearish until new news hits the wires. Both are great for active trading right now.

– Earnings Highlights:

#CRWD, Crowdstrike was the big earnings report for Tuesday. After their industry compadres #ZS and #PANW imploded that the markets were wary of a trifecta. But wow, the opposite.

The stock is flying and as of this moment up 23 percent. This launches the stock into all-time highs.

Profitability: CrowdStrike achieved record GAAP profitability and a record free cash flow of 33 percent of revenue. Operating income for the fiscal year grew by 86 percent, reaching 660.3 million or 22 percent of revenue. Gross margin increased by 282 basis points year-over-year to 78 percent.

Acquisition: CrowdStrike announced an all-cash deal to acquire Flow Security, a cloud data security provider, expected to close in Q1 FY25. This acquisition aims to enhance CrowdStrike’s cloud data protection portfolio.

// Sector Rotation

Consumer cyclical and Industrial stocks continue to offer an alternative to the Tech FOMO trade (fear of missing out).

Healthcare took a shot to the chin yesterday with a big number of stocks reversing. A solid visual of stacked order flow spreading across a sector for a day. Something we watch across time frames. We’ll watch to see if that spreads over days / weeks.

Basic materials certainly perked up the last four weeks. But the chart shows we’ve been here before. Basically the $89.50 level comes in as major resistance. A spike higher and this tracks as the fifth time the #XLB ETF tests this level.

Gold stocks rallied the last couple of weeks breaking bearish order flow. This week with convincing bullish gaps higher. Trading commodity related stocks can be tricky and requires a different trade management. Such as a moving average crossover system.

They’re not exactly momentum stocks like technology.

Other stocks to watch in the sector include: #OLN #CRH #LYB (inside candle trade setup after a breakout) #SHW and #DOW.

Consumer cyclical offers up a few entries for today too. #SE after reporting traded into an inside day. The stocks rested at two significant reference points. We can be sure price discovery takes place here. If the bulls win there’s some room to go higher.

The first is the gap fill from August of 2023. And the second is the earnings gap open price.

#EBAY and #AAP both popped and showed relative strength in a sea of red yesterday. A good sign for both companies.

#DRI and #KMX both paused, setting up new swings. Plenty of opportunity remains in this sector. We can add #EAT and #YUM to the list.

Real Estate tops the list for the last five days but the few we would consider reversed hard from bearish border flow so they are beyond the optimal entry and first stage order flow. Not the spot for a new buy.

The first pause however, yes. Stalk this one.

// Industry Groups

Banks, both diversified and regional are in play. Our #WFC swing trade added shares and is nearing the initial profit target. We’re prepping for the profit maximizer.

#JPM, JP Morgan another one percent higher in the midst of the market drubbing.

Other stocks to watch here include: #EWBC #CFG #SNV #USB #MTB #WBS.

Energy can be tricky and we’re in the will she or won’t she place again for an #XOM breakout. Oil & Gas Midstream has two stocks with excellent bullish order flow worth watching for a new entry: #TRGP and #OKE. Both are reasonably priced.

// Swing Alerts

// Swing Alerts #DG 3-5-24

[$150.66 buy stop / $146.74 stop loss / $157.14 add shares / $162.42 IPT / $3.60 ATR]

// Swing Alerts #WM 3-4-24

[$206.45 buy stop / $203.07 stop loss / $211.40 add shares / $216.59 IPT / $2.75 ATR]

// Swing Alerts #IR 3-1-24

[$92.04 buy stop / $89.22 stop loss / $94.94 add shares / $100.51 IPT / $1.65 ATR]

// Swing Alerts #WFC 2-21-24

[$52.69 buy stop / $51.03 stop loss / $54.87 add shares / $57.68 IPT / $1.21 ATR]

// Swing Alerts #GE 1-29-24
[$132.74 buy stop / $129.89 stop loss / $137.28 add shares / $141.32 IPT / $2.52 ATR]

// Swing Alerts #DKS 1-22-24
[$147.50 buy stop / $142.50 stop loss / $154.56 add shares / $162.50 IPT / $3.53 ATR]

#ABNB with a bullish u-turn above the previous breakout level offers a solid setup today. Nice price action since reporting and with sector backed strength this one doesn’t need a ton of explanation.

We’re looking for the breakout buyers to step up and the u-turn to trade higher.

[$160.97 buy stop / $155.15 stop loss / $169.88 add shares / $178.43 IPT / $4.95 ATR]

// The Market

– Today’s key themes:

Jerome Powell implied the economy is still too hot.

He said that the Fed plans to lower interest rates this year if inflation gets closer to their 2% yearly target. He’s optimistic about the U.S. economy, saying we’re not close to a recession and pointed out that the economy grew by more than 3% in 2023, which is almost double what’s considered steady growth.

He mentioned that the economy is still doing well at the start of this year, expecting it to grow by 2% to 3% in the first few months.

However, Powell said they need to see more proof that inflation is cooling down before they ease up on their policies. Doesn’t sound like they plan to cut any time soon.

Gold prices soared to unprecedented levels, marking the seventh consecutive day of gains.

Gold’s recent price surge is a multifaceted phenomenon driven by geopolitical tensions, the anticipation of lower interest rates, and widespread monetary uncertainty. These factors bolstered gold’s appeal as a safe haven asset, attracting investors seeking to protect their wealth amidst volatile economic conditions.

Central banks around the world have played a significant role in this trend, with notable purchases.

So if the economy is so great why are big players loading up in a “flight to safety?

The stock market has shown remarkable resilience in the face of rising bond yields, a situation that has puzzled many investors and analysts. While some attribute this trend to the formation of a bubble, particularly in stocks related to artificial intelligence,

The Wall Street Journal offers a different perspective. They suggest that the underlying reason for the market’s buoyancy could be attributed to significant productivity gains within the economy.

So it’s a battle between economic data that’s too good, AI mania and the Fed keeping things from getting frothy.

– Summary of the Three-Majors:

The #DIA and #QQQ are negative for the week and the #SPY is hovering around break even. The pattern of advance then sideways for a week continues. And the pattern of not going down does as well.

Some people are frustrated with volatility and getting stopped out too soon on good ideas. Trust me you’d rather have volatile moves than be bored out of your mind. This is amazing. Get back in if the trade is still valid.

– Headline News:

Trade the news or trade the charts? #PLTR hit the $26 level we’ve stalked for a while. Being long is the play.

Palantir Technologies’ stock surged after the company announced securing a $178.4 million U.S. Army contract focused on artificial intelligence (AI) and machine learning (ML) technology. The contract will fund the Tactical Intelligence Targeting Access Node (TITAN) ground station system.

Despite the contract win, some analysts remain neutral on Palantir’s stock, noting that AI has not profoundly impacted the company’s consolidated revenue trajectory.

Could Tesla lose money this year? Margins. I’ve been saying it for a year now.

Morgan Stanley, led by analyst Adam Jonas, has revised its outlook on Tesla, indicating a more cautious stance towards the electric vehicle giant’s financial performance in the near term.

The investment firm has lowered Tesla’s price target, reflecting concerns over the company’s ability to maintain profitability in a rapidly changing economic and competitive landscape.

The revision comes amid Tesla’s aggressive pricing strategy, which, while aimed at boosting market share, could potentially erode margins and profitability.

– Earnings Highlights:

Two chip stocks, #AVGO and #MRVL, #COST and #KR are scheduled to report today.

Costco is trading at all-time highs ahead of the announcement which is scheduled for after the close.

Marvell Technology, Inc. (MRVL) is expected to report earnings for the current quarter (Jan 2024) with a consensus EPS forecast of $0.46 according to analysts. The company has a history of beating EPS estimates and is anticipated to maintain its performance.

// Sector Rotation

The basic materials four week rally continues. Still waiting on that big breakout through the quadruple top we posted yesterday.

Energy prices rallied and coming into Thursday we have a few steps in the sector. Notably #CNQ and #MPC are poised for a new leg higher.

Earnings gaps are the plays today for tech stocks.

#DELL #OKTA and #NTAP each exploded higher and set up new entries. Four days after reporting Dell Technologies sits as an inside day. Of course they mentioned “AI” when they reported so the bloom is fully charged in that onion.

The conservative #DELL play here would be to pass on the inside day breakout and wait for the stock to get back above the earnings gap of $124.67.

Breakout mania today.

Industrials have a few stocks on the bubble as well. Even #UPS shows signs of bullish life.

Other breakout setups in the sector include: #MTZ #XPO #NVT #AER #TRU #EMR#PCAR #BLDR.

#WM, Waste Management sits inside a box looking for a new push higher. The stock supported the earnings gap to perfection.

// Industry Groups

We’re starting to see market breadth improve a little across industry groups. The semiconductor dominance, while great, needed some support from other areas to maintain this rally.

Biotechnology continues to see outsized gains but the moves can be volatile so I’m holding off on posting new ideas in that group for now.

Software infrastructure shows three stocks in play: #TOST #PLTR and #CFLT.

Gold stocks mentioned this week include: #AEM #NEM #WPM. Two out of the three are bearish but worth building a watchlist while the group is catching attention.

Oil & Gas E&P shows the largest number of stocks with stacked order flow for an industry. #CNQ leads the way with a healthy 8.5% for the last five days.

Others include: #OVV #SM #PXD #EQT (still waiting on this one after breaking the bearish order flow) #EOG #FANG #MTDR.

// Swing Alerts

#GEHC, GE Healthcare sits in a clean pause near all-time highs. The stock also shows a persistent trend since reporting on February 6. A really nice visual of the EGOP trade. (Earnings Gap Open Price Trade)

I’m using the trading range of the last four days as the criteria for the swing trade. Based on the last few bullish swings it looks like the average true move is around $10.

Healthcare lost a little of it’s shine the last few days but the #XLV bullish order flow remains in place.

Here’s how the trade maps out:

[$94.56 buy stop / $90.10 stop loss / $98.88 add shares / $107.94 IPT / $2.40 ATR]

// The Market

– Today’s Key Themes.

Copy and paste. “S&P 500 hits new highs…”

Enjoy it while it lasts.

This bull market rally keeps making all-time highs and should get another boost today from the employment numbers due at 8:30AM.

Federal Reserve Chair Jerome Powell spoke twice this week, and implied the Fed is getting close to lowering interest rates. Unless this number is incredibly out of line, the markets should see another record day.

The year-to-date performance of the leading stocks is staggering. To give you some context, most stocks have hit their annual targets in the first quarter.

The price target for #GE was raised again. A stunning, and persistent bullish bias fueled by the final GE Vernova spinoff. (Expected to happen April 2) The volume expansion yesterday looks like exhaustion so if you’re long this stock be sure to have a trailing stop loss in place to secure these amazing profits.

Pretty much everyone I’ve spoken to says this rally is due for profit taking. The problem is everyone has felt that way for six weeks.

Two big lessons here. This is EXACTLY what the profit maximizer is intended to do. Which stops you from guessing when the trend is over. Everyone focuses on when traders don’t work. How about when they do? Are you disciplined in the winners too or do you run for the hills at the first sign of red?

The second lesson is one of experience. Experience that you must internalize. We’re now finishing up a nineteen week rally. The #SPY has only one well-offered candlestick in that period. And that was the first week of 2024 which many say was “selling for tax purposes.”

This is amazing, but not normal. I can hear the screams now when your stocks do anything but go up every day. Get some perspective now and you’ll thank me when we finally see some real profit taking.

The economy is humming along, the Fed is supportive and about to make moves. The markets are good. Enjoy the ride but be smart and look both ways.

Here’s a different point of view from billionaire investor Howard Marks.

– Summary Of Three-Majors:

Markets kicked into overdrive as the AI catalyst seems to be the only headline story that matters. Seems like a one percent gain every day. I’m starting to get a cavity from all of this sweetness.

Hard to believe but the #SPY outperformed the tech heavy #QQQ this week. #NVDA nearly gained a trillion dollars in market cap this week!

One of the biggest differences between trading today and the dot-com era is the swings. Back in 1999-2000 the daily swings were crazy. Hundred dollar moves down in an hour followed by 200 dollar moves higher by the time you grabbed your Starbucks.

We’re not seeing that right now. Which trust me is easier because that type of movement created the mother of bad habits. Averaging down on a trade. When the music stopped, million dollar accounts were averaged into oblivion.

More proof that this is a glorious time to be a trader.

– Headline News:

Other than the State Of The Union, there’s only one big story to focus on today. And it happens before the market opens.

The upcoming nonfarm payrolls report is anticipated to show a growth of 198,000 jobs and an unchanged unemployment rate at 3.7%. Despite a potential slowdown from January’s significant job growth, the labor market remains robust, which could influence the Federal Reserve’s interest rate decisions.

Key Points

• Economists predict 200,000 jobs added in February.
• The unemployment rate is expected to stay at 3.7%.
• The job market’s strength persists despite high interest rates.
• Wage growth is still slightly above the Fed’s comfort level for inflation.

Source:

– Earnings Highlights:

#MRVL: Marvell Technology, Inc. announced its financial results for the fourth quarter and fiscal year 2024, showcasing strong performance driven by AI growth in its data center end market.

The company reported fourth-quarter revenue of $1.427 billion, exceeding the mid-point of its guidance. Despite a GAAP net loss, non-GAAP net income was robust, and the company is optimistic about its positioning in the AI technology sector.

A discrepancy between GAAP (loss) and non-GAAP figures (gain) can be attributed to specific adjustments, including acquisition-related costs and stock-based compensation expenses, among others.

// Read More

// Sector Rotation

Sector strength keeps improving and should see stellar performance metrics for the week. Technology and basic materials continue to maintain buying pressure as the gains stack up.

This market is like a weather report in South Florida. “Hey everyone, good morning. It’s going to be sunny again and 90 degrees.” The temp goes down to 85 and Floridians say it’s cold.

The “problem” remains the same.Market breadth. I dn;t want to sound like a Debbbie Downer but we need to pay attention to this. If AI or the semiconductor stocks get any bad news the market will crash, crash hard, and crash fast.

Not saying it’s coming. I’m saying be prepared. Any down move will feel like a big move. An actual big move down will feel catastrophic. And most will freeze because “stocks always go up.”

That’s not a plan.

Despite the sunburn there’s a few tech stocks sitting at optimal entries.

#SMCI tops the list. Basically sitting in a two-day trading grange and poised for a new move higher.

#AMD #PSTG #AMAT #APP and #WDC too.

Basic material is looking at a couple of noteworthy breakouts this morning.

#CF #DD #DOW #OLN and a change for trend in #AA supported by consecutive bullish gaps.

// Industry Groups

Oil & Gas Refining & Marketing shows some bullish action worth watching. #PBF #MPC #VLO and #PSX.

Of course semiconductor stocks. But the problem for new trades is many of them are beyond the optimal entry. #INTC #RMBS and #AMD are in play today.

#GE lifted the specialty industrial machinery group and along for the ride we have: #PNR and #OTIS.

Computer hardware stocks paused this week and actually have a few near a solid entry: WDC #DELL #NTAP #PSTG #ANET.

// Swing Alerts

With the economic data coming out this morning and a the continued bullish tone yesterday’s #GEHC swing trade setup remains in play.

#GEHC, GE Healthcare sits in a clean pause near all-time highs. The stock also shows a persistent trend since reporting on February 6. A really nice visual of the EGOP trade. (Earnings Gap Open Price Trade)

I’m using the trading range of the last four days as the criteria for the swing trade. Based on the last few bullish swings it looks like the average true move is around $10.

[$94.56 buy stop / $90.10 stop loss / $98.88 add shares / $107.94 IPT / $2.40 ATR]

/ Options Insights

Markets Rally after Powell’s testimony, make new highs, then immediately reverse course.

Things to watch for the week ahead:

Markets:

After a sharp sell-off on Tuesday going into Powell’s testimony before Congress, the markets neatly rebounded off of the 20-day moving average and happily continued their uptrend for two sessions until a pretty dramatic reversal on Friday (see below).

Friday’s dramatic reversal began close to 11 am which allowed markets to digest the mixed payroll data that came out on Friday. The conflicting report the employment data gave us of high non-farm payrolls of 275K vs. the expected number of 198K, combined with rising unemployment of 3.9% vs. 3.7% was enough to draw in some lower-rate optimism, but not enough to sustain any lasting rally:

Once that reality wore off, the market reversed sharply, giving us a net negative week for the first time in quite awhile:

S&P 500 intraday closed nearly at the lows of the day:

Source: Bloomberg

In all the names that seem to reverse course on Friday, none had more of a violent reversal than Nvidia (see below). Friday’s price action represented a 10% intraday swing! Other names like Advanced Micro Devices (AMD), which I mentioned in last week’s letter, performed much the same way, which I still remain in on the “neutral to bearish” side.. This type of “exclamation point” on heavy volume at the end of a rally shows at least some recognition that things are getting top-heavy.

Top Heavy :

Finally the last thing to mention is the dramatic spike in Gold that we saw last week closing up 4.63% on the week (see below). A move like this implies a surge in institutional order flow (and in sovereign nations like China), going to all-time highs of $2,200. This heavy-volume move shows a surge in interest from these institutions or “entities” as they anticipate dollar weakness and interest rate barring assets like bonds to yield lower in the not too distant future.

Geo-politcal tensions, two wars, and a contentious election cycle fast approaching are other contributing factors. This unexpected move (see below) re-enforces my desire to risk a bit less this week, exit profitable bullish trades, get a bit more defensive, and add some bearish exposure for Monday..

Putting in this surprise high of $2,200 before backing off.

Some were expecting the catalyst to come this week to cause a market correction, but one thing in my experience tells me that uptrends tend to last longer than people think. It’s rarely the heaviest straw that breaks the camel’s back but at some point the market will know when enough is enough.

With this Friday being almost the opposite closing candle as last Friday, next week’s price action will be extremely important not only to gauge sentiment, but potentially new direction in some areas as well.

Sector analysis:

So now the good news, Despite the choppiness of last week, net sector quality actually improved slightly as winning names expanded and market breadth improved. Highflyers took a much-need backseat to other groups that contributed to a net increase in names above their 50-day moving average (see below):

Names above the 50 SMA began to approach 70%.

New sectors that reclaimed and maintained their moving averages included real estate and utilities (see below), deserving of a higher grade than the previous week. At the same time, sectors such as Consumer, Financials, and Industrials remain strong.

The VIX, or “fear gauge” as people call it, put in a new pivot low and continues to put in higher lows since the beginning of the year.

As an option trader it’s a gauge we must watch carefully and the longer the rally lasts my sense is the VIX will continue to start drifting higher as institutions look for protection in the later innings of this rally. (see below)

Buyers are stepping in and going long volatility earlier each time.

Strategy:

This doesn’t mean we shouldn’t be net bullish. It simply means continuing along the same path we had last week, but with a bit more caution and a more defensive posture:

• Find sectors and pockets of the market that are in an uptrend but still have room to run. This includes energy, utilities, real estate, and Industrials.
• Avoid going along areas of the market that are overbought since they can fall quite harder when markets do decide to correct. Avoid aggressive counter-trend trades at this point, but for the Tech and Semiconductors start looking at bearish credit spreads.
• Look for underperformers in underperforming sectors that are already showing signs of the weakness. Those names will likely accelerate if the market was to decide to correct. In other words, be net bullish, but begin adding more bearish trades. Since the overall trend still remains up, bearish trades should still have conservative targets and be taken off when those targets are reached.
• With volatility being relatively low, straight calls and puts as well as debit spreads are the tool of choice. If the volatility environment quickly changes, however, be prepared to add credit spreads and other strategies on volatility spikes that can quickly compress.
• Since markets failed to break out this week of their range, we can also begin to look for non-directional choices to round off a more balanced portfolio this basket this week. Remember with options we have three choices and sideways or direction agnostic is a valid strategy!

Some trade ideas:

Datadog, Inc. (DDOG) $ 121.31

Technology, (infrastructure software)

Bearish

Edge:

With technology names beginning to show signs of weakness and DDOG already putting in a double top with lower highs prior to the weak price action in technology, this name has shown relative weakness compared to its peers. From a technical standpoint, the stock has also traded below both of its major 20 and 50 day moving averages, implying institutional pressure and outflow surges in the name. Since the overall market remains in an uptrend I will look to have a conservative downward target until the market shows me otherwise.

Target: Near term support of $110 to $111.

Entry: Current levels are okay but consider not entering the trade If the stock opens above the 20 day moving average.

Stop: This should be based on your trade plan and risk tolerance. For me I will place a hard stop at 40% net premium loss. I will also consider an early exit if the above edge is no longer valid or market conditions change drastically to the upside.

Time frame: Until target is reached.

Sizing: Full risk unit is okay for this trade since earnings have passed and there are no unexpected catalysts. Again full size is based on your individual account size and trade plan. As a general rule I don’t like to risk more than 1 to 2% of my account size on any single trade.

Strategy: Vertical put spread

BUY DDOG 122 Put DTE April 5th.

SELL DDOG 110 Put DTE April 5th.

Net Cost/Max Risk with no stop: $4.09 (est.)

Max Gain on April 5th: $7.91 (est.)

Head and Shoulders showing weakness prior this week.

Albemarine (ALB) $118.33

Basic Materials, (specialty chemicals)

Neutral/Mildly Bullish

Edge:

The stock was in a long-term downtrend as the basic material sector was out of favor for quite some time. Currently the stock price is leveled off and is trading in a tight range with moving averages coming closer together.

Anticipating markets to be somewhat range bound this week since we backed off of our highs, It’s important to add some neutral exposure to my portfolio. This is a three leg option strategy involving neutral sentiment on the stock for the coming week. Butterflies are designed to capitalize on lack of movement rather than a major move. This trade will reach maximum profit if the stock moves up to $119 which is very close to where it’s currently near.

Target: $119 would be maximum gain on March 15th.

Entry: Monday morning at current levels are okay as long as the stock remains between $118 and $119. If the stock drifts lower or higher I will not execute

.

Stop: Butterflies can be difficult to exit so I will have a loose stop of 50% maximum premium loss.

Time frame: will hold until Friday’s expiration for maximum profit.

Sizing: Since butterflies can be difficult to exit so I will position myself with one half to three quarters maximum risk.

Strategy: Call butterfly

BUY 1 ALB 116 Calls DTE March 15th.

SELL 2 ALB 119 Calls DTE March 15th.

BUY 1 ALB 122 Calls DTE March 15th.

Total Cost/Max Loss with no stop: $.43/.72 (est.)

Max Gain: $2.43 (est.)

Butterfly profit cone, within the blue triangle you have a profit, top of the triangle is max gain.

Norfolk Southern Corp. (NSC)

Industrials (rail freight)

Bullish

Edge:

The stock is currently in one of the most leading sectors (Industrials). From a technical perspective the chart is in a fantastic uptrend sloping higher above both 20 and 50 day moving averages. The stock also showed major outperformance on Friday. Despite a sell-off in the markets, the stock was up 1.64%. Since an earnings gap in January the stock has been on a consistent move higher suggesting institutional surge flow.

Although markets are pulling back this stock has the potential to keep on moving as long as order flow remains strong. The plan is to execute a long call option as well as call premium against it for this Friday in case the market stalls this week and the stock does not move too much. This way the whole position can be re-evaluated on Friday based on market conditions, Sector conditions, and the stocks performance. A new short position at a higher strike and then be added, or the long call can be left alone to move higher.

Target: $262.50 initial target for this Friday March 15th. Will reevaluate thereafter as mentioned above.

Entry: Current levels are okay as long as the stock maintains price above the 20-day moving average.

Stop: Based on your individual trade plan and risk parameters but I will be using a 40% maximum premium loss. Early exit considerations would be if the market sells off sharply and if the above Edge is no longer valid.

Time frame: Will hold until March 15th when the short leg expires and then reevaluate for potential secondary target.

Sizing: This is a fairly liquid name so full risk position is okay but base it off of your risk parameters and trade plan. 1% to 2% maximum loss of your account size is always a good guide.

Strategy: Diagonal call Spread

BUY NSC 255 Calls DTE April 5th.

SELL NSC 262.50 Calls DTE April 5th.

Total cost/ maximum loss with no stop: $7.73 (est.)

Max gain: $3.07 (est.) On March 15th, Unlimited potential thereafter if the long call is locked in place and you decide not to initiate a new short leg.

A secondary target of $265 could produce a reward-to-risk ratio of 2:1 or better depending on speed of reaching the target.

Multiple targets are possible based on the help of relative market strength.

Conclusion:

After failing to make new highs and returning back to its original basing area, the S&P proved that it was a little bit too tired to move to the next levels. This Tuesday we have CPI data coming out as well as Thursday PPI. These data points can prove to be either positive or negative catalysts so I will be watching closely the price action this week to determine if there is an overall shift in sentiment. With the VIX slowly making higher lows coupled with gold reaching all-time highs and massive reversals from some of these popular semiconductor names, it is enough for me to set a more defensive tone to my portfolio. Not bearish, but defensive.

Understanding that individual stocks are not in an echo chamber but rather part of a much larger mosaic is an important concept to understand in trading. Balancing your portfolio based on what the market is showing you is key to long-term success.

// The Market

/ Today’s Key Themes:

Was Friday the start of a reversal or simply the market letting off steam?

Nvidia, the poster child for AI at the money traded into a massive “bearish engulfing candlestick.” A powerful price action phenomenon that happens when the previous day’s high is broken, and the previous day’s low.

Plus, the stock closes near the low for the day which ends the chaos of the day with thunderous selling pressure.

This particular set of circ*mstances typically leads to a significant decline. Buyers of the breakout are caught on the wrong side and early short sellers finally get to say “I told you it was the top!” (Shouting confidently even though you have been wrong for eight weeks)

The problem for those betting stocks will decline? You are facing an immense foe. A technological revolution that has yet begun to change our lives. (Other than the business model damage you are doing to Google’s search/ad business.)

With Friday’s high of the day, #NVDA has nearly doubled this year. Not the last twelve months, but since January 1, 2024. The $500 breakout catapulted higher to $975 as new versions and breakthroughs in AI seem to be unleashed on a daily basis.

Nvidia is today was #CSCO, Cisco System was to the internet back in 1999-2000. The builder of the backbone that makes these wonderful things happen.

A note to those traders screaming in disbelief “What happened?!” Why did my precious #NVDA stock decline so fast in one day?” That can’t happen!

As my dad used to say, “You want the bull, be prepared to deal with the horns.” The amazing bullish volatility, the screaming bullish volatility has two sides to that coin.

Stocks doubling and nearly a trillion dollars in market cap in just over two months is not normal. It’s incredible, but it’s not normal.

So if it’s not normal, what do you do? What should you be thinking?

This isn’t the place for the textbook. We’re off book on this mission. You got a gift. A wonderful, amazing and profitable gift. But now you need to make a decision, and this goes for you crypto-maniacs as well. You need to decide if you are trading these ideas or investing in them.

If you’re trading them it’s time to think about a profit-taking plan. I can tell you that most professional active traders are trading around a core position. They’ve seen this movie before and they know that quick 100% gains are a gift, not a given.

So they aren’t sitting through the decline.

Investors? Wel they have a different agenda. They are putting these bad boys into the 401 K and will gleefully enjoy being a paper millionaire. But there’s a downside.

The longer you hold (or HODL as the kids say these days, hold on for dear life) the greater the chance for a significant drawdown. So prepare for the balloon popping event and know that you’re not trading. SItting through the decline is part of the process.

Two people, same price action, two very different objectives.

If Friday was indeed a reversal, make a choice and don’t second guess yourself. Mr.Market can smell your doubt, and will separate you from your money faster than you can say ChattGPT.

/ Summary Of The Three-Majors:

If I told you the #QQQ and the #DIA were negative for March 2024 would you believe me? Yup. And the #SPY barely above zero for the month.

If I told you the triple Q’s was actually the weakest for the month would that shock you? Unexpected for sure but what do we do with that information?

Wel technology, and specifically semiconductor stocks fueled the raging move higher, we need to pay attention and adjust trailing stops on winning trades. That’s what great traders do, they adapt. Contrary to popular belief, trading is not set it and forget it.

There’s new information after we enter the trade. So we must read it and assess the impact. The good news is that we are a country mile from breaking the uptrend. The bullish order flow remains intact.

But that’s the fourth time the #QQQ tested and failed at the $446 level. The bulls keep trying and they run out of steam.

Remember we’re looking for clues, not answers.

Thursday afternoon we noted “exhaustion” in #GE, General Electric one the strongest stocks on Wall Street. A heavy volume day punctuated by a close near the high, after a significant move. This represents the climactic end to the buying pressure.

It’s not a signal to exit but more of an alarm to get ready. We suggested moving the trailing stop loss higher. Because something changed.

And right on cue #GE staged a massive bearish reversal.

It’s only one day. Just like the #NVDA reversal is only one day. But it was a big one. It’s okay to book some profits. Nobody gets the exact top or bottom. Nice work if you’ve had this swing trade. It’s a massive winner.

If it takes out Friday’s low, enjoy the win.

/ Headline News:

Last week’s economic data, specifically the employment numbers, didn’t shock, which is always a good thing. But the previous good number got revised down. Certainly a curious thing a month later.

The market cheered the previous amount of jobs created which beat the number by a HUGE margin. Only to see the revision marked down by over 100,000 jobs. That’s a pretty big number. So it was a fake high.

This week we have more inflation data in the CPI and 10-year note auction. (Tuesday) and PPI on Thursday. The last Consumer Price Index (CPI) report resulted in a big gap down. That time the market recovered quickly.

Also something to consider when managing open swing trades, or thinking about starting one.

If today’s closes near the LOD (low of the day) ahead of tomorrow’s CPI report, expect me to whittle down open swings.

Source: investing.com

/ Earnings Highlights:

#ORCL, Oracle is scheduled to report after the close today. Kind of a laggard in tech right now. But a fun stock to trade when it’s in play.

A really interesting one to note for Wednesday. #LEN, Lennar the residential construction stock has tended higher for over a year other than a blip last summer. The leading socks in the group are near all-time highs.

Can they maintain the valuations at these levels and beat expectations? Either way it should be fireworks at this level.

// Sector Rotation

The consumer (employment, spending) has supported the arguments for a strong economy the last year or so.

Consumer cyclical stocks trended higher as we spend and spend. But things reversed a bit recently and it’s something to notice.

#TSLA cracking below support sure didn’t help.

Healthcare and Consumer Defensive stocks rallied recently. As did gold.

Hmmm. Clues. Sounds like a flight to quality and away from expensive things we want, but don’t need. A crack in the bull market?

Stuff to notice.

Healthcare stocks to consider for this week include: #DXCM #MRNA #BAX #EW #NTNX.

Dexcom has my attention again after drifting lower, but the stock clawed its way back above the earnings gap. And did so with ferocity,

#HCA and #THC both closed last week at breakout levels and warrant our attention.

A nice two day pause in #NKTX as well.

#MRNA, Moderna can be a tricky stock to trade but it confirmed a new stage one order flow on Friday.

The financial sector shows a few bank stocks with a pause. New swing trade setups for the week. Even #C, Citigroup is trending higher.

Our #WFC swing trade remains in play. The stock closed as an inside day on Friday so we need to pay attention to a breakdown and move trailing stops on the profitable trade accordingly.

#JPM the big dog here also closed as an inside day. Volatility can be expected in the group today.

// Industry Groups

Medical devices offer four stocks near breakout levels.

#TNDM #DXCM #EW and #ALGN. I love it when a group trades in harmony like this.

Software infrastructure took a brief hit on earnings recently but there’s a few stocks in the group worth having in a watchlist this week. #CRWD #PLTR #IOT #TOST #NTNX.

Energy perked up, even #XOM shows a breakout rally.

Stocks in the Oil & Gas Refining and Marketing group show the best relative strength: #MPC #PSX #VLO.

// Swing Alerts

Real estate stocks reversed sharply this quarter. Solid earnings. None stronger than #AMT, American Tower.

The stock sits in a four dollar trading range after a violent bullish reversal. Decreasing volume during the pause makes this stock a great swing trade candidate for the week.

A healthy average true range of $4.92 offers solid opportunity as well.

[$210.14 buy stop / $204.91 stop loss / $219 add shares / $225.86 IPT / $4.92 ATR]

The second trade to begin the week is #STX, Seagate Technologies.

Computer hardware, with leading stocks #DELL screaming higher gives us a nice alternative to the semiconductor stocks.

#STX broke out and climbed nearly ten percent. The decline while on heavier volume than I’d prefer, sets up a solid risk reward. Buying previous support is a classic trade. Adding in the hot industry group should give us a nice trade for the week.

[$95.48 buy stop / $91.88 stop loss / $100.74 add shares / $106.31 IPT / $2.92 ATR]

// The Market

Today’s key themes:

CPI data is scheduled for 8:30AM today. (Consumer Price Index)

The last CPI report produced the large gap down in the #SPY on February 13, 2024. Stocks rebound the next day but today we’re much closer to breaking below the bullish stacked order flow. Meaning we are much closer to triggering trailing stop loss orders.

Here’s what the Fed is looking for when the report comes out:

Analysts anticipate that it will echo the 3.1% annual inflation rate observed in January, potentially quashing any expectations for cuts in interest rates in the first half of the year.

The anticipated 0.4% rise in monthly inflation is largely due to increasing gasoline prices. Meanwhile, core inflation, a key indicator for tracking fundamental price movements, is expected to slightly decrease to 3.7% from the previous 3.9% recorded in the last two months.

Despite these high inflation numbers, officials from the Federal Reserve seem to be adopting a cautious stance towards the data, suggesting they might view the recent figures as part of a larger pattern rather than as a cue for immediate adjustments to monetary policy.

The Difference Between Headline Inflation And Core Inflation

Headline inflation is the broad measure of inflation that includes all items within the CPI, which makes it subject to volatility due to the inclusion of food and energy prices.

These prices can be influenced by factors such as weather conditions and political events, which may not be directly related to the economy’s performance. Core inflation is derived by removing these volatile components from the CPI, providing a more consistent measure of long-term inflation trends.

The Federal Reserve and other central banks often use core inflation as a guide for monetary policy because it is less affected by temporary price shocks.

However, headline inflation is still important as it reflects the actual cost increases faced by consumers and influences cost-of-living adjustments for government programs and wages.

Summary Of The Three-Majors:

The slow grinding trend continues.

Another “melted candle” in the #SPY and the #QQQ but an afternoon comeback keeps the bullish flames burning.

The #DIA staged a solid bullish reversal to close near the high of the day. Which seems surprising since #CAT #BA and #IBM got clobbered. A few laggards got the bullish bug. Maybe #NKE has finally gotten tired of missing out on the rally.

– Headline News:

The “B’s” are going in completely opposite directions.

A couple of weeks ago it looked like #BA, Boeing was finding a bottom and basing. But the bad news continues to unfold and the dam has burst. Not sure how this company is still operating.

This stuff is crazy town.

The FAA’s audit of Boeing’s 737 Max production revealed a troubling picture of the manufacturing process. The audit was prompted by an incident where a door panel detached from a 737 Max 9 during flight.

The FAA’s examination found that Boeing and Spirit AeroSystems did not comply with quality-control requirements in multiple instances. Specifically, Boeing passed only 56 of 89 product audits, with 97 instances of alleged noncompliance. Spirit AeroSystems, which manufactures the fuselage of the 737 Max, passed only 6 of 13 audits.

One of the most concerning findings was the use of inappropriate tools by mechanics at Spirit AeroSystems, such as a hotel key card to check door seals and dish soap as a lubricant in the door fit-up process.

The FAA has not made the audit findings public due to an ongoing investigation into the door panel incident and Boeing’s response.

Bitcoin on the other hand remains near all-time highs and the big bet by #MSTR is paying off in spades. (holdings reach 205,000 BTC with latest purchase)

– Earnings Highlights:

Fresh all-time highs for #ORCL, Oracle. The massive earnings season gap pushes the company into the AI conversation and makes the stock interesting to trade this week.

When it’s in play this is one of my favorite stocks to trade.

Oracle Corporation has reached a significant milestone in its decade-long journey towards becoming a cloud-computing entity, with its revenue from cloud services now defining its core business model.

This transformation is largely attributed to the “enormous” demand for artificial intelligence (AI), which has necessitated the expansion of Oracle’s data center infrastructure to accommodate the increasing need for cloud services.

The company’s executives have underscored the continued robust demand for cloud services as instrumental in Oracle’s successful transition into a cloud company. This strategic shift not only marks Oracle’s adaptation to the evolving technological landscape but also positions it strongly within the competitive cloud computing market, driven by the growing AI sector.

Earnings and Revenue Beat: Oracle reported adjusted earnings of $1.41 per share, surpassing the analysts’ consensus estimate of $1.38 per share.

Although revenue was slightly below expectations at $13.28 billion versus the expected $13.29 billion, the earnings beat and the strong performance in key segments fueled investor optimism

// Sector Rotation

Basic materials and energy joined the part which solves the one major issue Wall Street has had with the AI rally.

Lack of breadth.

So much of the bull market contained in AI related stocks many feared if the Nvidias of the world stalled, the market would come crashing down.

But order flow rotated and we have fresh money heading into new areas. This makes sense with geo-political complications, gold, and energy rallying could almost be assumed.

Crude oil hasn’t quite broken out yet but it’s knocking on the door. Gold meanwhile shot higher as if AI found its way into the metal. #AEM, (gold mining stock) shot higher and sits near a breakout level.

Might need to wait for a pause here to set up a new optimal entry but above 56 is the play I’m stalking.

Two energy stocks in my watchlist today include: #MPC and #OVV. Ovintiv shows great price action since reporting two weeks ago and sits just below a new breakout level.

Throw in yesterday’s energy candlestick and the stock has my attention today with an alert at $51.

On the tech front, #NVDA and #AMD both declined enough to consider new opportunities today. One more day would be better but these stocks have not pulled back that much during the 2024 rally so we’ll take it.

// Industry Groups

With basic material showing strength we dive into specialty chemicals for a few off the path ideas. #IFF #APD #EMN #SQM. Eastman Chemical Company, #EMN over 92 has room to go and seems to have the best trends when it’s in play.

Oil & Gas E&P remains top of the industry group focus as #EOG reversed hard after showing relative weakness for a while. The stock was in our bearish order flow list for months but has definitely found buyers since reporting earnings on February 22, 2024.

Some resistance above but a trip to 136 is in the game plan after solid numbers and a strong sector. Other stocks in the group worth watching include: #NE #MUR #OVV #COP.

// Swing Alerts

Monday’s #AMT swing setup remains valid.

With consumer defensive stocks perking up a bit recently, I’m crafting a game plan for #TGT, Target Corp today.

The company reported great numbers, produced two bullish gaps and has since declined a bit into the earnings gap open price. Technically the daily charts show a “snapback” setup today but with the futures rallying ahead of the CPI report it’s likely we’ll see a higher open. (Rather than the lower open required for the snapback play).

Earnings Summary:
Target Corporation reported strong fourth-quarter and full-year earnings for 2023, with significant increases in both GAAP and Adjusted EPS. The company’s efficiency efforts led to substantial savings, and its cash from operations more than doubled compared to the previous year. Despite a slight decrease in full-year sales, Target’s operating income and profitability improved notably.

The fourth-quarter GAAP and Adjusted EPS reached $2.98, a significant increase from $1.89 in the previous year. For the full year, both GAAP and Adjusted EPS were $8.94, marking an increase of nearly 50% from 2022’s figures.

[$171.44 buy stop / $165.82 stop loss / $179.20 add shares / $188.31 IPT / $4.31 ATR]

// The Market

Today’s Key Themes.

I hope you’re enjoying this.

It’s not often a stock, never mind the entire stock market barely, rarely declines.

Another day another close near the high. Another close near the all-time high. I would say it’s easy to get complacent up here because it sure seems like the AI catalyst has a firm grip on the bull market..

But I feel pretty good that everyone has learned from the recent past. It feels more like everyone expects the inevitable profit taking decline, but very few are saying the market CAN’T go down.

This is a good kind of bubble. Slow and steady. We are now deep into the twentieth week of this rally. Only once has the #SPY produced a lower high on a weekly candlestick.

Again, incredible.

Which begs the question; “Who should you listen to?” The charts or the talking heads?

For the better part of a year the top news story was about a recession. Mostly because of the inverted yield curve. It’s a good argument, you have history on your side. When the yield curve inverts (short term yields are higher than long term yields) a recession typically follows.

Only this time it didn’t. The market declined last summer because the Fed uttered the phrase “higher for longer.” And the market went down. Until it decided it didn’t want to.

The bears had their back broken in one day. November 14, 2023 to be exact.

Stocks declined off the October lows and were lining up to be a “bear flag” poised to make another move lower. But instead of holding resistance, two bullish gaps quickly changed the picture, setting up a pause at resistance. The final resting place for the bears happened at the horizontal line on the chart.

That’s the moment everything changed. Instead of the bears holding the level and pushing things down, a huge gap changed the game, set and match and the bears were sent home crying to their mamas.

In spite of that, we kept hearing recession, recession, recession. Just wait, it’s coming! We’re still waiting.

The moral of the story? Trust yourself. Not the people you see on TV. You have the knowledge to make good decisions. And more importantly, nobody knows your risk tolerance, your goals or the size of your trading account.

Make decisions for yourself.

Having history on your side helps. It does. But you still need to confirm that opinion with price action. Reading the news, being smart, learning more about how the market works is super smart. Never stop learning.

But price is how we pay the bills. Not predictions.

Summary Of The Three Majors:

For the month of March, the #QQQ and the #DIA are both negative. A little shocking since technology is the one lifting everything higher. Has the gravy train slowed down?

Maybe. But remember, slowing down is not reversing. At least not yet. So that means moving up your trailing stops is prudent. Similar to tapping the brakes when you drive.

Any signs of distribution? Well yes actually.

The #QQQ produced two bearish days with above average volume. Interested. Make note of that. The back-cracker would come if prices breakout and then reverse on heavy volume.

When you know what you’re looking for you’re never lost.

Breakout and go? Or breakout and reverse. You have the roadmap. Now let’s simply let things unfold.

– Headline News:

Interest rates are staying higher, thanks in part to yesterday’s inflation report.

So why aren’t stocks tumbling? Don’t think, Just pay attention.

For the moment it seems like the market, and the consumer are okay with paying higher prices as long as everyone is working. Make more, spend more. The American way.

GDP growth, and jobs growth trumpets inflation and higher interest rates for the moment. Let’s hope that AI is the next internet and not the next pet rock. That’s a big burden to carry.

– Earnings Highlights:

Residential construction stocks move very nicely as a group. Many are near all-time highs as #LEN, Lennar gets ready to post earnings after the market closes today.

Here’s your shopping list if the numbers are good: #PHM #KBH #TOL #DHI.

// Sector Rotation

Technology took back the bullish baton the last five days. More specifically the semiconductor names. #QCOM and #NVDA led the pack.

A breakout that’s too obvious to ignore comes from #GDDY, GoDaddy

Don’t forget about the two earnings gap plays on the board too: #SQ and #ORCL. Block Inc. needs to hold above 80, and Oracle needs to hold above 126.

Basic materials continue to hold the bullish bias but you need to know these stocks require a different touch. The candles and the price action are different from the raging tech sector.

Longer term thinking will help you hold these stocks.

I like the trend break and gap into a pause by #AA, Alcoa today.Above 31 is the play here.

Other ideas pausing here include: #LIN #DOW #OLN #SHW.

// Industry Groups

Sticking with the residential construction theme. #TOL #LEN and #PHM each shows stacked order flow across multiple metrics.

Semiconductors of course. The group shows fifteen stocks gaining two percent or more over the last five days. A must-have watchlist.

Software infrastructure shows a healthy list of stocks to trade too. Thanks in part to #ORCL and #GDDY, but others are worth putting into a watchlist: #IOT #HCP #DOCN #FOUR #OKTA.

// Swing Alerts

#PLTR continues to frustrate as it dances around the $26 level we mapped out months ago. After reporting stellar earnings on February 5 things looked right to finally blast through that major resistance and enjoy the ride.

But nope. The breakout play fizzled and we could hear screams from the highest mountain tops “breakouts don’t work!”

The stock has now sufficiently shaken out the weak longs, and is prime for one of those trades. You know the one. “I bought the breakout, it failed. I got stopped out and three weeks later the stock went rocketing higher without me.” ARGH!

Let’s not let that happen. It’s setup so let’s game plan for it. If it goes down again, let it go. If it rallies let’s grab some.

[$25.91 buy stop / $24.07 stop loss / $28.30 add shares / $31.40 IPT / $1.33 ATR]

// The Market

Today’s Key Themes:

New inflation data comes out today before the market opens. (PPI)

In a normal market that might be interesting. But we’re beyond normal these days as the S&P 500 marches towards another weekly gain. And likely a new all-time high.

The next FOMC meeting is scheduled for next week and the odds say it will be a non-event. 99% to be precise that no change is on the board.

Source: cmegroup.com

So where does that leave us for a new catalyst? Earnings season has pretty much wound down. Stocks get to bask in the glow of raised guidance. But that’s in the rearview and most are coasting on momentum at this point, not new buying.

The ten year treasury note yield spiked a bit this week. Not enough to spook the market but it’s something to watch.

We’ve officially entered the friend zone. Nothing exciting but it’s fun to be around you.

Unless AI unleashes something new for public consumption, I’d expect the market to go sideways for a while. Stocks need to digest the bullish percentage moves after earnings.

Expect some trades to be stopped out for a small gain and a downshift into momentum type plays. The only catalyst on the horizon that could shake things up is unemployment.

Not a bad place to be. Obvious order flow without black clouds on the horizon. We get to trade the charts without a “yeah but” in the conversation.

Let’s enjoy it.

Summary Of Three-Major Performance:

The #SPY continues to outperform the #QQQ and #DIA for both the week and the month. Nasdaq is actually negative for the month,

Please remember this, slowing down doesn’t mean reversal. At least not yet.

The #QQQ is stuck in a three week, ten point range and would need to push below 435 to consider a potential change of trend.

We are bullish until otherwise.

– Headline News:

A slow news cycle when TikTok is the big story.

Understanding earnings reports can seem daunting but when push comes to shove it comes down to revenue and profits. And Tesla shareholders got a rude awakening yesterday when the stock received a downgrade to by Wells Fargo.

When a company expects zero growth, it doesn’t matter who the CEO is.

Tesla Inc. is no longer a red-hot growth stock. CEO Elon Musk has said as much.

But even by that new standard — with growth forecasts on Wall Street sinking rapidly — the grim sales prediction from a key Tesla analyst on Wednesday was still shocking. There’ll be zero growth in sales volumes for the electric-vehicle maker this year, Wells Fargo’s Colin Langan said. And in 2025, it’ll be worse yet: volumes will drop.

– Earnings Highlights:

Adobe Inc. (NASDAQ: ADBE) is set to report its first-quarter earnings for fiscal year 2024 today, after the market closes. Here’s what to expect:

• Earnings Per Share (EPS): Wall Street analysts predict adjusted earnings of $4.38 per share, which would represent a 15% increase from the profit generated in the same quarter of the previous year.
• Revenue: Revenue for the quarter is estimated to be around $5.13 billion to $5.14 billion, marking an approximate 10% growth from the year-ago quarter.

Dollar General Corporation (NYSE: DG) is set to report its fourth-quarter earnings before the market opens on March 14, 2024. Here’s what analysts are expecting:

• Earnings Per Share (EPS): Analysts expect Dollar General to post quarterly earnings of $1.74 per share, which would represent a significant year-over-year decline of 41.2%.
• Revenue: Revenue for the quarter is anticipated to be $9.77 billion, indicating a decrease of 4.2% from the year-ago quarter.

// Sector Rotation

Our research shows Healthcare and technology sectors slowing down.

After a terrific bullish rally which began November 2023, the #XLV has transitioned into a PCOT. Potential change of trend.

The following two charts show why it’s important to hit the same idea from different angles for conviction. While the daily charts show a solid uptrend taking a rest. The underlying stocks show a different story.

A negative reading for a few weeks. It’s not enough to cause a quick exit but it’s enough to get you to move up a trailing stop loss on winners.

Basic materials, consumer cyclical and financials remain in play, along with energy. More data to support the argument for improved market breadth.

Without technology ripping higher one would expect a decline but the numbers show order flow shifting to other ideas.

Gold continues to shine. #AEM ripped higher this month and should be in your watchlist for the next optimal entry.

#TECK and #FCX traded into giant energy candles yesterday and #FMC confirmed a break of the previous bearish order flow.

Financials continue to see banks outperforming. #WFC will never be mistaken for #NVDA but a slow dollar is still a dollar.

Credit services remain strong and even #PYPL got into the act with a strong bullish energy candle yesterday. But a deeper look shows that the stock is firmly above the bearish earnings gap and has now filled the gap.

Expect the stocks to pause her before we look for a new entry to buy.

// Industry Groups

Insurance, property and casualty stocks continue the bullish grind higher. #CB #HIG #ALL with #TRV and #WRB near optimal entries.

While the semiconductor stocks take a break, the software application group offers a nice alternative. Our scans show six stocks worthy of a watchlist today. A few are beyond a solid entry but #PCOR #APP and #CRM paused for your consideration.

Software infrastructure received a beating after #PANW and #ZS reported but #CRWD held the fort. #ORCL grabbed the excess order flow but it’s #SQ that has my attention.

We patiently waited for the stock to get back above the 80 level and yesterday the bulls showed up in a big way.

Other I’m watching in the group include: #IOT #GDDY #DOCN #OKTA #NTNX.

// Swing Alerts

GoDaddy shows some nice bullish mojo the last few quarters.

The breakout this week and yesterday’s inside candle, sets up a solid trade with probability, profit potential and risk/reward worthy of our capital.

Add to the mix that it’s in a strong industry group. Plenty to like here, it’s just a matter of follow through. This is one of those small fast losses or a big win.

[$118.94 buy stop / $115.73 stop loss / $123.91 add shares / $125.58 IPT / $2.76 ATR]

2-13-24 Earnings Summary:

GoDaddy Inc. reported strong financial results for the fourth quarter and full year of 2023, with significant increases in revenue, net income, and cash flow. The company’s Applications & Commerce revenue grew by 13% in Q4, and it achieved a net income margin of 103% and a Normalized EBITDA margin of over 29%. The full year 2023 highlights include a total revenue of $4.3 billion, net income of $1.4 billion, and free cash flow of $1.1 billion.

// The Market

Today’s Key Themes:

When I began trading stocks in 2000 #CSCO< Cisco Systems dominated the stock market. The stock was a holding in so many indexes and funds it literally moved before the futures.

Every day, traders in the office would say “#CSCO can’t go down.” Well of course it eventually did. And the rest of the market went with it for the following three years.

Yup, I began my stock trading career with a bear market from dot-com hangover from April 2000 to March of 2003. Maybe that’s why I’m so comfortable shorting stocks.

Today a similar story headlines most blog posts and podcasts, NVDA to the moon! And rightly so. The future expected earnings is off the charts. But at some point a stock becomes priced just right.

Is #NVDA there now? Not sure but we do have an easy way to spot a potential change of trend.

Six years before I became a full-time stock trader I was a commodity trader. Back in 1994 I bought my first price charts and was sucked into the world of trading soybeans, pork bellies and cotton.

Here’s an old issue I saved from 1999. The rest of the charts are in the garage. I look back fondly on those days. There were many afternoons I’d jog a few miles at the local high school listening to commodity trading strategy cassettes on my Sony Walkman.

So what does that have to do with today?

One of the first strategies I learned was called the 1-2-3 top or bottom. It was a trend following system designed to capture big moves at 52 week highs or lows. If you had the patience to hold the winners it worked great.

It’s one of those patterns on charts that once you see it, you can’t unsee it.

#NVDA is forming a 1-2-3 topping pattern.

Now remember it’s a potential change of trend. Don’t sound the alarm but it’s important to have reference points. That’s what makes our strategy of order flow and tape reading repeatable. Knowing what you are looking for is half the battle.

It doesn’t mean sell (yet) it doesn’t mean short, it means something significant unfolded and we need to pay attention.

Another thing I learned in that commodity course was setting initial profit targets. And as usual things were kept simple. We used a 50 percent retracement level as the target.

For #NVDA, that comes in at $735 if we measure the move from the $500 breakout.

Something making this more significant is the increase in volume, and the “whippy” price action. It’s a classic price action. A high and tight pause typically leads to follow through.

A volatile pause on heavy volume is money changing hands as sellers try to attract the last remaining sellers experiencing FOMO (fear of missing out).

Is this the top? Nobody knows but at least now you have a roadmap.

PS. Thank you Ken Roberts for bringing me into this crazy but amazing world of trading.

Summary Of The Three-Majors Performance:

With yesterday’s price action the song remains the same. The three-majors are in a holding pattern for the month.

Only the #SPY is positive, and only by 1.17%

The #QQQ has traded into successive lower highs. Definitely cruising without the foot on the gas. There’s multiple reasons. Fatigue. Need a new AI catalyst. But most likely because the market hates indecision. (see headline news below for more)

Headline News:

Options expiration today. Triple witching. Expect a large number of stocks to have above average volume. End of day prices will get stuck.

Recent inflation data has Wall Street less certain if and when the Fed is going to cut interest rates. The opposite of why the stock market rallied the last two months of 2023.

• Inflation Data: The Producer Price Index (PPI) for February showed a rise that was higher than expected, following consumer prices that also exceeded forecasts earlier in the week.
• Retail Sales: Retail sales for February were weaker than anticipated, adding to the concerns about inflation and its impact on Federal Reserve rate decisions.

Write this down, the market detests uncertainty. Things get choppy and everyone is guessing instead of trading/investing with conviction.

Hotter than expected inflation numbers and employment reports adjusted down by 100,000+ is not good.

Add to the mix #AAPL and #TSLA hitting the skids and firmly below the daily 50 period simple moving average. Both clearly in bear market order flow.

The Magnificent Seven is missing two players.

Earnings Highlights:

Not much on the earnings front today but I am watching two stocks that reported recently for new trades today. #DELL and #ORCL.

Dell declined nearly 20 percent since the earnings day high, looking for buyers to step back up. And ORCL set up Friday as a double inside day. Looking for the earnings catalysts to kick back in.

If you measure the current move in #DELL the stock price sits at the fifty percent retracement level mentioned before.

// Sector Rotation

Communication services tops the list for the last five days but there’s really only four stocks that meet the criteria for bullish stacked order flow: #OPRA #LYV #DIS and #NFLX.

#META was leading the charge but a bearish gap down four days ago took the stock below $500. Still bullish on the stock, just not this week. For reference, the earnings gap price is the level to watch ($460).

Technology continues to slide down the list of the number of stocks with bullish order flow. This is significant.

Healthcare reached a major breakout level and wilted like ice cream on a July blacktop.

Energy remains in play, even the #XOM breakout followed through. Looking for a new entry there next week. It’s beyond the optimal entry today. Move up those trailing stops to lock in gains.

The sector shows twenty three stocks that meet our criteria, it’s smart to make a list of stocks here that meet your goals and resources.

#CVX #OVV and #CNQ are potential new swing trades for now.

Financials have a few stocks worth watching too, notably #AIG sitting in a three day pause. One issue here is the bog dog, #JPM was levied with a massive $350MM fine for inadequate trade reporting. A drop in the bucket for them but something to know.

// Industry Groups

Credit services are still looking good here. #PYPL perking up too. #MA #V (#DFS #COF Merger)

Oil & Gas E&P remains strong but many are beyond an optimal entry. This is a trade for the next pause.

Specialty chemicals continue to pump up the basic materials sector. And Software infrastructure lined up as #GDDY #IOT #MSFT #ORCL and #SQ are in play.

// Swing Alerts

Managing open swings into options expiration day.

No new official swings but I’m watching #DKS after stellar earnings yesterday. A potential EGOP setup. (earnings gap open price).

Also the #ORCL and #DELL plays mentioned earlier.

// The Market

Today’s Key Market Themes:

Stocks paused for two weeks as the market once again proved that indecision causes gridlock.

All eyes on the Fed this week and the decision on interest rates.

Everyone’s got their eyes on the Federal Reserve right now, eager to see what it’s going to say about the economy’s future. The big question on everyone’s mind? Whether the folks who control America’s money supply think it’s time to make borrowing cheaper by cutting interest rates three times in 2024.

So, how do we know what the Federal Reserve is thinking? They use something called a “dot plot.” Imagine a graph where each dot represents what one Federal Reserve official thinks will happen to interest rates.

The last time they shared this in December, most of the dots clumped together around the idea of making it cheaper to borrow money three times this year. This could mean things like lower interest rates on loans, which can help people and businesses spend more.

But here’s the twist: The plot thickens with recent reports showing prices climbing more than expected (inflation), hinting that the cost of living could stay high. This has thrown a bit of a curveball into the mix, making it tricky to guess when and if these rate cuts will happen.

In January, a report called the Consumer Price Index (CPI) showed that prices were 3.1% higher than they were a year ago. This was a bit of a surprise because it was more than what was expected. Even though prices didn’t jump as much as they did in December, they’re still higher than what the Fed wants.

The Fed has a goal to keep inflation around 2%. But since the report showed a 3.1% increase, the Fed said, “Hold up, we need to make sure prices aren’t going to keep jumping like this before we think about making it cheaper to borrow money (aka cutting interest rates).”

So, what’s the big deal? When the Fed makes it cheaper to borrow money, it can encourage people to spend more or businesses to invest, which can be good for the economy. But if prices keep rising too fast, your money doesn’t go as far, which isn’t great.

Investors and economists are on the edge of their seats, wondering if the Federal Reserve will stick to its previous game plan or switch things up because of these new developments.

CHART TALK: Can the Ten Year Treasury note pop above 4.30 % and shift money out of stocks and into fixed income securities?

This is an important chart to watch this week.

Summary Of Three-Majors Performance:

The #DIA (Dow Jones ETF) and the #QQQ (Nasdaq ETF) are both negative for the month of March. The #SPY (S&P 500 ETF) is barely positive, .48% to be exact.

Due for a decline or simply refueling for another move higher?

Two leading sectors, healthcare and technology both show a breakdown in the number of stocks advancing. AFter a two week pause I;m looking for new stocks near an optimal entry but because of the FOMC announcement I’m going in with lowered risk. (less shares)

I think there’s too much indecision at the moment to be aggressive with capital.

Headline News:

With Tesla stock hitting the skids the last couple of months they needed to get back on the positive side of the news cycle.

If the stock cracks $150 the next major support comes in at $100.

Tesla Inc., the electric vehicle manufacturer led by CEO Elon Musk, has announced a price increase for its Model Y vehicles. Effective from April 1, the prices will go up by $1,000. This decision is a strategic move to counteract inflationary pressures that are impacting the automotive industry and to enhance the company’s profitability.

The price hike reflects the broader economic challenges faced by manufacturers, including rising costs for materials and components. By adjusting the price of one of its popular models, Tesla is seeking to maintain its financial health amidst these challenges.

Earnings Highlights:

The market is closely monitoring earnings reports from major companies such as Micron Technology (MU), FedEx (FDX), and Nike (NKE).

// Micron Technology, a big player in the computer chip world, is scheduled to share its latest money report on March 20, 2024. This time around, they’re saying they might have lost $1.91 EPS, which is a pretty big drop from last year of $2.14 per share during the same period.

Analysts however believe Micron is about to hit a growth spurt. They’re predicting that, despite a current loss of $0.86 per share, Micron’s earnings could jump to $6.88 per share next year. (Remember earnings reactions are all about expectations.

Not necessarily the raw numbers.

What’s behind this expected growth? Well, it’s all about making more money and selling more stuff. Analysts think Micron’s earnings and sales could grow by 86.5% and 23.8%, respectively.

Here’s a bit of good news too: Back in December 2023, Micron surprised everyone by losing less money than expected. They reported a loss of $0.95 per share, which was better than what analysts thought it would be. And their sales? They brought in $4.73 billion, up 15.7% from the year before and more than what was predicted.

Looking ahead, Micron’s set to ride the wave of the AI boom, the rush for newer and better PCs, and advancements in robotics. All these tech trends mean more demand for what Micron makes.

// Nike Earnings:

Nike, the giant in sports gear, is scheduled to report earnings on Thursday, March 21, 2024. Our research shows Nike is expected to earn 69 cents per share which is a bit less than last year when they made 79 cents per share. This means they’re not doing as well as before, but let’s not jump to conclusions.

Last time Nike checked in, they actually did better than everyone thought they would. They earned $1.03 per share, beating the estimate of 84 cents per share. Plus, they made $13.40 billion, which is just a tiny bit more than what was expected. A tiny move in revenue disappointed the market and the stock got clobbered after reporting.

Estimates are for Nike’s earnings to jump up by 16.53% next year, which means they could make $4.16 per share.

So, even though Nike’s report this Thursday might show they didn’t make as much per share as they did last year, the overall vibe is pretty positive. With their recent wins and what’s expected down the road, Nike seems to be lacing up for a decent quarter.

// FDX Earnings:

This Thursday, March 21, 2024, FedEx is scheduled to report quarterly earnings. Analysts expect a FedEx EPS of $3.56. Slightly less than reported year over year.

Last time they checked in, FedEx said they earned $3.99 per share, which was also lower than the expected $4.14 per share. And their total sales? They brought in $22.17 billion, down by 2.8% from the year before.

So what’s expected this week? Estimates show a 19.52% jump in their earnings for next year. That means going from $17.62 to $21.06 per share.

Why does this matter? Because FedEx offers clues for figuring out how the global economy is doing. If FedEx is shipping more stuff, it usually means businesses are doing well since they’re selling and sending more goods around the world.

FedEx is also trying to rescue expenses and improve efficiency, which could help it earn more in the long run. So, when FedEx shares its earnings report, it’s not just about numbers. It’s a sneak peek into how the world’s economy might be doing.

// Sector Rotation

Energy and basic materials continued to sprint higher. But more importantly some solid setups for the week.

As the Fed puts financial stocks on hold this week we have a few energy stocks setting up for new swings: #OXY #TRGP #OVV #CNQ.

For basic materials gold stocks rallied and paused as well as steel stocks.

#AEM sits on a $56 breakout level.

And #STLD offered an energy candlestick on Friday with a solid breakout. Keep an eye on #NUE too.

#TECK sits nicely in a two day pause looking for a new move higher.

// Industry Groups

Stocking with Basic Materials, specialty chemicals group shows three stocks with stacked order flow across the last four weeks: #IFF #EMN #OLN.

Oil & Gas Refining & Marketing shows the strongest stocks in the energy sector but they are a bit beyond an entry for today. #VLO #MPC #PSX. Valero with seven straight higher highs is great but we need a good spot to manage risk before a new swing. So these three go into the tracking journal for later in the week.

While healthcare, and the #XLV petered out recently melting into a potential change of trend, healthcare plans have three stocks worth watching this week.

#CVS #CI and #ELV.

Insurance (property and casualty) stocks continue posting a fantastic 2024. Allstate was one of our best swing trades to end last year into January. The stock and the group have “channeled” for almost six weeks.

They are worth a look this week for a fresh breakout. #ALL #CB #HIG #WRB #TRV.

// Swing Alerts

Two ideas for the week, one in technology and one in basic materials.

After an amazing uptrend and outstanding earnings (with those to magic letters “AI) #DELL declined and set up as an inside day heading into the week.

The decline perfectly stopped at the 50 percent retracement level for those of you who are Fibonacci fans. Computer hardware stocks in general are in play with the AI theme as well stocks such as #SMCI #STX #WDC support the group and this trade in #DELL.

The inside daily candle setup is one of my favorite breakout plays. And a very healthy average true range of $5.22 makes this trade worthy of our capital. I’m using Thursday’s low for the stop loss.

[$110.02 buy stop / $103.96 stop loss / $119.42 add shares / $128.23 IPT / $5.22 ATR]

The second swing for Monday is #TECK. Teck Resources.

The pause after the breakout is a textbook setup. The recent 22 percent gain is a bog one so despite the setup I’m using lower initial share size. This is a sector/breakout play that makes sense, but I wouldn’t be surprised if the stock moves sideways for a bit before another advance.

The initial position is so that we can “read the tape” before adding shares. When I had my firm in NYC we would call this a “feeler position.” Limited risk before we “size up.”

[$45.56 buy stop / $44.11 stop loss / $47.83 add shares / $49.92 IPT / $1.26 ATR]

// The Market

Today’s Key Market Themes:

Not much to analyze this morning as the #SPY traded into a nothing burger again yesterday. Also known as a melted candle. A day where the ETF opened and closed near the same level.

On top of that we have a larger trading range. And inside of that range we have a flurry of more melted candles. Basically melted candle city. Thank goodness for individual stocks because the market, while bullish, is clearly waiting on the FOMC decision tomorrow.

Seems to be a good day to review our most important topic. Order flow stacking.

Understanding Order Flow: Order flow is about recognizing where the smart money, or the investors with deep pockets, are active in the market. It’s about tracking their actions to identify the direction in which they are moving the market.

The Importance of Order Flow: Start by noticing the presence (or absence) of order flow behind trades. The significance of understanding whether there is substantial money behind a trade idea.

The Difference Between Order Flow and Liquidity: Order flow refers to the buying and selling pressure over time, which is distinct from daily liquidity or volume. Order flow on monthly and weekly charts shows how long institutions have been active in a stock.

Market Movements Driven by Institutions: The core idea is that stock movements are primarily driven by institutional actions—these are the “footprints” traders should look for. Stocks move because institutions are buying or selling in significant amounts, creating demand or supply that dictates market direction.

Practical Application:
Identifying Smart Money Movements: Traders are encouraged to look for signs of significant buying or selling activity that indicates the presence of smart money. This involves analyzing patterns and volumes that suggest large institutions are entering or exiting positions.

Utilizing Technical Analysis: While traditional technical analysis focuses on trends and patterns, incorporating order flow involves paying attention to the volume and price levels at which significant trades are happening. This helps in understanding the strength behind a move, whether it’s a breakout or a reversal.

Volume and Price Action: Key to practical application is the analysis of volume alongside price action. Traders should look for discrepancies between volume and price movements as indicators of potential smart money activity. High volume at certain price levels can indicate a strong commitment by institutional investors.

Order Flow as a Risk Management Tool: Understanding order flow can also aid in risk management. By recognizing when institutions are moving in or out of a stock, traders can adjust their positions accordingly, potentially reducing risk by aligning their trades with the prevailing institutional sentiment.

Position Sizing Based on Order Flow: The concept of order flow can influence how traders size their positions. If there’s clear evidence of strong institutional buying or selling, a trader might be more confident in taking a larger position. Conversely, if order flow is unclear or absent, a more conservative position might be warranted.

Time Frame Consideration: It’s crucial to consider the time frame over which order flow is analyzed. Long-term order flow patterns may be more relevant for swing traders or investors, while short-term order flow can provide insights for day traders.

Further Reading: 1931 book “Tape Reading and Market Tactics.”

Summary Of Three-Majors Performance:

For the previous ten trading days, none of the three-majors is positive or negative by more than one percent. We are very stock specific right now. And with most of the earnings season behind us right now, that makes performing your end of day scans even more important.

This brings us to an important point. Position sizing and profit expectations.

We spent a considerable amount of time discussing the art and skill of adjusting your capital allocation both up and down on Saturday’s swing trade session.

You can watch the replay here before we take it offline.

Headline News:

Nvidia Strikes Again: Nvidia CEO Jensen Huang unveiled a new AI-focused processor named Blackwell at the GTC conference, designed to significantly advance Nvidia’s AI computing capabilities. Key points include:

Blackwell Processor: The new chip, Blackwell, is said to be multiple times faster than its predecessors at handling AI models for both training and inference phases. It features 208 billion transistors.

Nvidia’s Expansion Beyond Gaming: Originally known for its graphics cards popular among gamers, Nvidia has successfully expanded its technology for broader AI applications, aiming to transcend simple AI tasks.

Challenge and Strategy: Despite Nvidia’s success, its revenue heavily relies on a few cloud computing giants. The company aims to diversify its customer base by facilitating AI system implementation across various industries.

The End of Negative Interest Rates:

The Bank of Japan (BOJ) has made a historic policy shift by ending the world’s only negative interest rates regime and abandoning its yield curve control. In its March 2024 policy decision, the BOJ raised short-term interest rates to between 0% and 0.1% from the previous -0.1%.

The central bank also concluded most of its asset purchases that were part of its aggressive monetary easing policy. This decision led to a sell-off in the yen, a decrease in bond yields, and an increase in the Nikkei stock index after a volatile session.

Yen Strengthening Against the Dollar: The BOJ’s policy shift is likely to lead to a strengthening of the yen against the U.S. dollar.

Historically, higher interest rates in a country increase the return on deposits in that currency, making it more attractive to investors. This demand for yen could cause the yen to appreciate against the dollar.

Earnings Highlights:

Micron earnings release is scheduled for Wednesday after the close so not much to report here today. Instead we’ll move our focus to earnings plays and stocks showing bullish order flow since reporting.

#ORCL screamed to new all-time highs and has now danced around the earnings gap for five days. We call this “holding the bid.”

Williams Sonoma #WSM paused for three days after the giant energy candlestick after reporting. The gap day reading range was too large to justify as an EGOP trade but the new pause makes sense.

Not a trade but a great chart to study “price discovery. The $80 level in #SQ, which happens to be the earnings gap open price, has acted as a magnet for the stock, before and since reporting.

The stock is clearly not a new trade until buyers can establish separation from that level with a clear push and pause. A good visual to avoid getting chopped up.

// Sector Rotation

Communication services leapfrogged to the top of the last five days of trading spurred by the #GOOGL news about their AI into your iPhone.

The stock has now ripped higher for two weeks leading into the announcement, A little sell the news action yesterday. Alphabet has botched the previous three AI announcements, let’s see if they stuck the landing on this one.

Besides #GOOGL there’s some solid ideas in the sector. And a few near breakout levels and an optimal entry.

#LYV #NFLX #META #DIS #DASH.

The Disney trade is near the top of my list for the day. A triple top and an obvious level of $114 for the entry. The Bob Iger turnaround continues to bear fruit.

Energy remains strong but a few of the popular stocks we trade needed to reset for better risk/reward.

I haven’t traded #SLB in a while but it’s resting in a three day pause near a breakout level. Not a momentum stock but worth considering today.

Otters worthy of our attention today include: #SM #MTDR #TRGP #CNQ. The #CNQ breakout and pause looks solid today for a new swing.

// Industry Groups

Banks continue to impress with a persistent grind higher, and with yesterday fresh breakouts. #JPM and #C led the way. #WFC should be considered too (open swing trade)

Medical devices and healthcare plans (mentioned yesterday) offer the best opportunities in healthcare. Stocks to watch include: #TNDM #BSX #DXCM.

DexCom is definitely worth setting an alarm for as the sock claws its way back to the big 138 breakout level. This stock trends very nicely when it’s in play.

Software infrastructure looks solid too #GDDY, GoDaddy on a heck of a five month bullish run. Others in the group to watch: #INFA #NTNX.

// Swing Alerts

The Canadian Natural Resources breakout and pause is too obvious to pass up. But – remember that ahead of the FOMC I’ve decided to lower my risk (capital allocation) until the market gets out of this trading range.

So that means today we’re focusing on a sector specific play. Going one rung up the power pyramid for conviction.

Positive Industry Outlook and Analyst Sentiment

Bullish Analyst Sentiment: Analysts have a positive outlook on CNQ, with several reiterating buy ratings and setting high price targets. This consensus view reflects confidence in CNQ’s growth prospects and operational excellence.

Outperformance in a Challenging Sector: Despite the broader challenges in the energy sector, CNQ has outperformed its peers and the sector as a whole, demonstrating its resilience and strategic positioning.

[$72.83 buy stop / $72.09 stop loss / $76.51 add shares / $79.04 IPT / $1.49 ATR]

// Swing Alerts #ABNB 3-6-24

[$160.97 buy stop / $155.15 stop loss / $169.88 add shares / $178.43 IPT / $4.95 ATR]

// Swing Alerts #WM 3-4-24

[$206.45 buy stop / $203.07 stop loss / $211.40 add shares / $216.59 IPT / $2.75 ATR]

// Swing Alerts #WFC 2-21-24

[$52.69 buy stop / $51.03 stop loss / $54.87 add shares / $57.68 IPT / $1.21 ATR]

// The Market

Today’s Key Market Themes:

Not much to unpack here.

The markets are grinding higher, near all-time highs ahead of the Fed. It’s practically a perfect trend right now. And has been for the previous several months.

From the community comments it seems some traders are frustrated because of the lack of momentum. I can understand that, but a trend with barely any declines?

Hard to complain about that.

But it does provide a lesson in adapting to market conditions. I can virtually guarantee that many will look back on this moment in time and ponder “How did I miss that?”

I’ve been saying for weeks, take good notes. Write detailed thoughts into a journal. Scribble with a crayon if you need to, but learn from this experience.

Look at the weekly charts. Look at the market internals. Look at the relevant economic data. GDP. Employment. Unemployment trends. Consumer prices. Market breadth, which has improved recently)

The S&P 500 for the last six months. What do you see and how can you learn to assess market conditions better?

FOMC Insights

The Federal Reserve’s policy meeting this Wednesday is poised to be a focal point for financial markets, with significant attention on the FOMC’s “dot plot,” which outlines individual members’ expectations for future interest rates.

This aspect of the meeting is crucial as it provides insights into the Fed’s stance on monetary policy and its outlook on economic conditions. Additionally, the Fed will release its quarterly economic update, which will include data on GDP, inflation, and the unemployment rate, offering a comprehensive view of the current economic landscape.

Despite the high stakes and the anticipation surrounding the meeting, the Federal Reserve may not introduce significant changes to its monetary policy outlook. This cautious approach could be attributed to the central bank’s assessment of current economic conditions and its strategy to navigate uncertainties.

The rate decision, to be announced after the meeting, along with the updated economic projections, will be critical for understanding the Fed’s future direction, especially in light of the fluctuating expectations this year.

Interesting Points

• The dot plot is a visual tool used by the Federal Reserve to display individual FOMC members’ interest rate projections.
• It is published quarterly as part of the FOMC’s Summary of Economic Projections.
• Each dot represents a member’s view and is anonymous.
• The dot plot influences market expectations and can impact financial decisions and economic forecasts.

How to read the dot-plot like a pro. NY Times article.

Summary Of Three-Majors Performance:

Lower open for the three-majors yesterday. Profit taking time ahead of FOMC day? Nope. Just pulling over for gas.

Filler up please.

A rock-solid rally ensued after the opening hour ending in a close near the high and a bullish engulfing candle. Price took out the previous day’s low, and the previous day’s high, closing bear the high.

Technically still stuck in a box, but very little signs to expect a bearish reversal.

Oddly enough with all of the AI talk, the #QQQ keeps testing the lower end of the support. A strong close with volume below $435 would be something to note.

Headline News:

Other than the Fed, a light news day. Jetblue, #JBLU is cutting some underperforming routes to spark savings.

Microsoft hired Mustafa Suleyman, to lead the software giant’s efforts on consumer AI products. #MSFT nears all-time highs with the announcement.

Earnings Highlights:

#MU, Micron is scheduled to report earnings after the stock market closes today.

They’re expected to report a loss of $1.91 per share, which is a big drop from the profit of $2.14 per share they had in the same quarter last year.

However, analysts believe things will get better for Micron, predicting their earnings will jump from a loss of $0.86 per share to a profit of $6.88 per share next year. This optimism is based on expectations that Micron’s earnings and sales will grow significantly, by 86.5% and 23.8% per year, respectively.

In their last quarterly report on December 20, 2023, Micron did better than what analysts had expected. They reported a loss of $0.95 per share, which was less than the anticipated loss of $1.01 per share.

Also, their sales were $4.73 billion, up 15.7% from the year before, which was more than what was expected.

Looking forward, the company’s growth is seen to benefit from the increasing demand in artificial intelligence, the need for PC upgrades, and advances in robotics.

// Sector Rotation

I wouldn’t say that technology is weakening as much as other sectors are gaining momentum. Sideways isn’t bearish. It’s less bullish.

Most likely the reason for the market’s persistent grind higher. Capital shifted to other sectors.

Basic materials, energy and consumer defensive deserve our attention.

For basic materials, #CF and #DD both sit comfortable at a breakout level.

Many energy stocks show extended momentum, but a few paused waiting for us to notice. #TRGP #HP and #SM each triggered an optimal entry yesterday.

#CVX rests in a similar fashion to the recent breakout and rally in #XOM.

And #PBF sits inside of an inside daily candle/pause after a bullish gap and breakout.

Consumer defensive makes the list but I don’t see many trades for us to discuss today. Although the bullish reversal in #ADM is interesting.

// Industry Groups

Retail apparel stocks perked up the last week or so. #URBN #TJX and #LULU.

Specialty retail supports the consumer cyclical sector. A few stocks worth watching include: #BBWI #BBY. #WSM, Williams Sonoma a fantastic chart to print out. Great price action after earnings and a nice breakout from a pause yesterday.

OIL & Gas E&P remains in play. Make sure you have an optimal entry, a few are extended but worth watching: #CIVI #COP #OXY #SM #MTDR.

Matador Resources ove $67 is worth a look today. An energy candlestick coming out of a bull flag and a breakout of resistance from October 2023. Some minor resistance to note above so this would be an initial position with lower capital allocation until it clears $74.

// Swing Alerts

No new swings ahead of the FOMC today. Managing open positions.

== > Closing the #ABNB swing ahead of today’s news. Not enough of a headstart and resistance looms above. Will be a small gain.

// The Market

Today’s Key Market Themes:

At this point it feels like copy and paste for the opening sentence.

“New all-time highs…”

Just incredible.

During yesterday’s pre-market game plan meeting we outlined possible scenarios for the market reaction after the Fed announcement.

LIttle chance of going down. Sideways or strong rally.

When you have those odds you need to take a swing. Did you? Or did you meekly dip your toes in and hesitate because of the enormity of the news?

Consistently profitable traders have two key traits. Either through pain of losing or through an experienced trader they learn the immense significance of managing risk. That’s job #1. Nothing else matters if you can;t manage the downside.

But that’s protecting capital. And yes it’s critical. But avoiding loss, ruin is not making money. Generating a consistent P&L growth because you understand when the odds are tilted in your favor.

Some of them can and will lose, but you need to take the swing. When the odds are in your favor it’s time to belly up to the bar.

The roadblock many traders experience is a lack of depth. They mistakenly believe that every trade should be treated the same. Same risk. Same targets. Same conviction.

Yeah right. And every time you get on the highways you drive the same, regardless of the traffic or road conditions.

Two days ago the market gave us a lesson in buying a lower open. Today an emphatic tutorial on knowing your odds.

And now it’s on you. Did you take home those lessons or did you pay for them and leave them at the register?

Summary Of Three-Majors Performance:

Much deserved hoopla for the week around #NVDA and #SMCI but it’s the #DIA, Dow Jones Industrial average leading the pack.

Financial stocks, energy stocks and industrials powered higher again lifting the key blue chip index. While tech remains the headline hog, the underlying metrics tell a slightly different story with a messy two weeks of a bearish bias.

The stacked order flow remains bullish, the short term is indecisive. Probably more due to the rapid runs higher need to calibrate.

Remember that Nvidia traded sideways for six months consolidating the massive move higher before the big $500 breakout.

The #SPY holds the top spot for the month of February as market breadth improves. The S&P 500 and #DIA hit fresh all-time highs, but #QQQ did not.

Headline News:

The Federal Reserve’s recent meeting concluded with the decision to keep the key interest rate unchanged, marking the fifth such instance. This decision comes as the central bank continues to evaluate more data to determine the appropriate timing for a rate cut.

Over the past two years, the Fed has aggressively raised rates to combat the highest inflation rates in decades. Despite the ongoing challenges of high interest rates and inflation that Americans face, Fed officials are cautious about lowering borrowing costs too soon.

Wall Street is betting on a rate cut to happen in the summer, but the exact timing is crucial. Cutting rates too early could reverse the progress made in controlling inflation, while delaying cuts could harm the economy.

The Fed’s updated economic projections reflect a change in expectations, with fewer rate cuts anticipated in the next few years compared to December’s estimates. Officials now foresee slightly higher long-term interest rates and have raised the economic growth forecast for the current year.

Additionally, ‘core’ inflation, which excludes volatile food and energy prices, is projected to be higher than previously thought.

The Fed’s policy statement mostly remained the same, but it omitted a previous phrase regarding moderated payroll growth, instead noting strong job gains and a low unemployment rate. The labor market’s performance in the coming months could influence the path of monetary policy, especially if there is an unexpected weakening.

Interesting Points

• The Fed has held the key interest rate steady for the fifth consecutive meeting.
• Wall Street predicts the first rate cut to occur in the summer.
• Economic growth projections for the current year have been raised.
• Core inflation is expected to be higher than previously estimated.
• The Fed faces a critical timing decision for the first rate cut to avoid economic deterioration or undoing progress against inflation.

Earnings Highlights:

Another game plan conversation around the likely reactions to the Micron earnings agate the market closed. Odds heavily favored an “AI” mention and a rally. Especially after last month’s news about Nvidia using their chip parts.

They also used two magic words that investors love to hear, “exceeded expectations.”

Earnings are all about expectations.

After reading the conference call transcript, here’s the details on the earnings report:

Micron Technology, Inc. (NASDAQ: MU) Narrows Losses and Exceeds Expectations in Q2 2024 Earnings Report

Micron Technology, Inc., a leading player in the semiconductor industry, announced its fiscal second quarter 2024 earnings on March 20, 2024, revealing a significant improvement in its financial performance.

The company reported a quarterly loss of 26 cents per share, a notable improvement from the year-ago loss of $1.91 per share. This performance surpassed analysts’ expectations of a 24 cents per share loss.

Micron’s revenue for the quarter stood at $5.34 billion, aligning with analysts’ forecasts and marking a substantial increase from the previous year’s $3.69 billion. The company’s growth in dynamic random access memory (DRAM) revenue played a crucial role in narrowing its losses.

Wedbush analysts projected Micron’s DRAM revenue for the quarter to be $3.9 billion, up from $3.43 billion in the previous quarter and $2.72 billion in the same quarter of 2023. This increase was attributed to the company’s production of chips for Nvidia’s artificial intelligence (AI) graphics.

Looking ahead, Micron provided an optimistic revenue forecast for the fiscal third quarter, ranging from $6.4 billion to $6.8 billion, far exceeding analysts’ expectations of $5.99 billion.

The company also projected earnings of about 45 cents a share for the next quarter, surpassing analysts’ estimates of 24 cents. This positive outlook is primarily driven by the burgeoning demand for artificial intelligence hardware, positioning Micron as one of the primary beneficiaries of the AI boom.

As the semiconductor industry continues to evolve and the demand for AI-related components grows, Micron Technology, Inc. appears well-positioned to capitalize on these trends.

The company’s strong performance in the fiscal second quarter of 2024 and its optimistic projections for the upcoming quarter underscore its potential for future growth and profitability.

// Sector Rotation

Energy and communication services flip-flopped the top spot for the week. Both remain strong.

Despite the market rocketing higher yesterday, communication services boasts a bunch of stocks sitting near an optimal entry. If you aren’t doing this type of daily research it would be easy to feel like you missed the boat.

But this is why I consider the game plan process my nightly treasure hunt.

Here’s the stocks for your watchlist: #CDLX #GOOGL #DASH #DIS #NFLX #META #SPOT #LYV.

Cardlytics is a good example of an EGOP trade. (earnings gap open price)

Energy is hot, so many are beyond an optimal entry but I’ve got a few to consider for today. #PXD #SM #PSX #EOG #CHK #MTDR #SLB.

// Industry Groups

We briefly mentioned financial stocks before so there’s some opportunity there.

The asset management industry group shows five stocks with stacked order flow: #NTRS #APO #BX #KKR #TROW.

Capital markets joined the party as #MS, Morgan Stanley and #GS, Goldman Sachs finally offered up some tradable momentum. #IBKR too. Goldman sits firmly in a trading range dating back to December 2023.

But with a strong close yesterday the stock looks poised to finally make a run at the 426 all-time high.

He software application group boasts five stocks to consider as well: #APP #FROG #TTD #ADSK #CRM. A solid breakout in

#PCOR yesterday too. A grinder but the order flow is obvious. Best to manage this stock with moving averages. The daily candles are t00 choppy.

// Swing Alerts

== > #GOOGL is an alternative setup to consider today as well. I’m going with #AMD because of the separation from the previous high.

///

#DELL hit our buy stop so we opened a new swing. After spectacular earnings and a steep profit taking decline this one is interesting. Will we see a new superstar stock emerge? Or is the AI shine already priced in?

We didn’t cancel the inside day setup because the stock held the daily 20 SMA. Which is a pretty solid indicator to use for fast moving momentum stocks to need to catch up to. A late day FOMC fueled surge hit the buy stop.

#AMD, Advanced Micro Devices declined over $50 after the previous breakout. Taking a peak at #NVDA, the daily 20 SMA (simple moving average) also caught up to the stock price so there’s a good chance we’ll see a pop here too.

A couple of nagging bearish gaps in that decline but the semiconductors are in play until we hear otherwise. Meaning Nvidia breaks down.

If this move follows through it should be strong, but because of that decline, I’m going with a lowered initial position size to start the trade.

If this trade stops out, it will be a small dollar loss despite the large candle yesterday (which is less than the ATR) because of the lowered size.

[$184.56 buy stop / $172.12 stop loss / $201.44 add shares / $221.85 IPT / $9.38 ATR]

// The Market

Today’s Key Market Themes:

Will too much candy give the kids a belly-ache?

The sweet sweet rally keeps on chugging without a black cloud in the sky. All without the Fed actually lowering interest rates yet. Only one question at this point. How will investors react when a market without a decline, actually declines?

Will they run for the hills and create a giant sea of red panic?

Should we be concerned about whether the market is getting ahead of itself and pricing in unrealistic growth expectations? Should we care and just follow price action?

The rapid appreciation in NVIDIA’s stock price and the increasing concentration of the market in a handful of AI-related names were potential red flags. But market breadth has improved.

Past tech bubbles, such as the dot-com boom and bust, and caution that narratives can shift quickly.

Investor Psychology and the AI-Driven Tech Rally: A Double-Edged Sword

In the midst of the current AI-driven technological rally, the spotlight turns to the often-overlooked aspect of the stock market: investor psychology.

The conversation has recently veered into how investor behavior shapes, and is shaped by, market cycles, especially in the context of the burgeoning interest in companies like NVIDIA, which stand at the forefront of AI innovation.

The Fear of Missing Out (FOMO) that grips investors as they witness the meteoric rise of certain stocks or sectors. The allure of AI and its promises has not only captivated the imagination of the public but has also led to a frenzied race to capitalize on what is perceived as the next big thing.

During bull markets, pressure mounts on investors to not just partake in, but aggressively pursue, the segments of the market dominating the headlines. This often results in allocations to outperforming stocks or sectors beyond what might be prudent, potentially leading investors to buy at peak valuations—a risky maneuver that causes more stress than joy.

The discussion doesn’t shy away from the inherent dangers of this performance-chasing behavior. By the time a trend reaches peak hype, much of its potential for returns may have already been factored into prices.

This leaves latecomers to the trend exposed to heightened risk, particularly from shifts in market sentiment or price corrections.

A reminder from a veteran trader of the importance of maintaining a disciplined approach, resisting the urge to get swept up in the fervor of the moment. After all, in the rapidly evolving landscape of AI and technology, today’s groundbreaking innovation could quickly become tomorrow’s cautionary tale.

Summary Of Three-Majors Performance:

Fancy indicators not required for this market. Both The #SPY and the #QQQ traded into all-time highs, but both closed near the lows.

The #DIA joined the ATH party lifted higher by a strong mix from multiple sectors.

All this despite the woes piling up for #APPL. Apple Inc sank 4 percent for the day. An unusual set of events with all three major indices in rarified air.

Headline News:

Sour Apple: the U.S. Department of Justice sued Apple, alleging antitrust violations through its iPhone and App Store policies.

This legal action highlights the government’s concerns over Apple’s dominance in the smartphone market and its impact on competition, innovation, and consumer choice.

The DOJ, supported by 16 state and district attorneys general, filed the lawsuit in the U.S. District Court for the District of New Jersey, marking a concerted effort to address what it sees as monopolistic practices by Apple.

The core of the DOJ’s allegations centers on Apple’s restrictive policies, which are said to make it difficult for consumers to switch to other smartphones, hinder app innovation, and impose undue costs on developers and consumers.

#RDDT: The Reddit IPO launched and offers up a nice lesson on visualizing what VWAP (Volume Weighted Average Price) can show us.

For most of the day the stock traded below VWAP. 48 million shares traded, but most of them below the average transactions of the day. Profit taking on day one.

Reddit’s entrance into the public market represents a significant milestone for the 19-year-old company known for its vast array of online forums. The IPO was highly anticipated, and the company managed to sell shares at the top of its expected range, reflecting strong investor interest.

The stock closed at $50.44, which valued the company at approximately $9.5 billion.

Adding to the complexity of Reddit’s market debut is the FTC’s ongoing inquiry into the company’s data practices, specifically regarding the use of user-generated content to train AI models.

Earnings Highlights:

FedEx Corporation #FDX reported its fiscal third-quarter earnings on March 21, 2024, revealing mixed results that highlighted both achievements and challenges.

The company announced a third-quarter profit of $879 million, with a reported revenue of $21.7 billion, which fell short of the Street forecasts that anticipated $22.02 billion2.

Despite this, FedEx exceeded earnings expectations by posting quarterly earnings of $3.86 per share, surpassing the Zacks Consensus Estimate of $3.49 per share. The stock gained 12 percent in after hours trading.

Despite the rally FedEx’s earnings report and its narrowed full-year earnings view highlight ongoing uncertainty about the economy. The company cited “volatile macroeconomic conditions” as a factor negatively affecting customer demand for its service.

Nike Inc. #NKE reported its fiscal third-quarter earnings, surpassing both earnings and revenue estimates. The company announced quarterly earnings of $0.98 per share, beating the estimate of $0.69 per share and showing an improvement from the $0.79 per share reported a year ago.

This quarter’s earnings represent a 42.03% surprise over the expected figures. Previously, Nike had expected to post earnings of $0.84 per share but had outperformed with earnings of $1.03, marking a surprise of 22.62%.

Over the last four quarters, Nike has exceeded consensus EPS estimates three times.

Despite these strong earnings, Nike shares have seen a 7.6% decline since the start of the year, underperforming against the S&P 500’s gain of 9.5%.

The after hours decline was attributed to the company’s lowered revenue guidance for the first half of fiscal 2025, reflecting an indecisive macroeconomic outlook.

// Sector Rotation

Take your pick with the green on the screen. Basic materials, consumer defensive and energy each on a hot streak.

#BG popped out of a pause and produced its fifth straight green daily candle.

#ELF broke above a three week downtrend with a bullish gap. And #PEP rested for a couple of days after a strong bullish reversal.

Energy shows a large number of stocks with stacked order flow, but only a few near an optimal entry.

Stocks worth a look today include: #PBF #PSX and #CNQ.

// Industry Groups

Banks exploded to the top of the industry group conversation. #JPM led the way with five explosive momentum days after getting fined $350 million for inadequate trade monitoring.

The company boosted the quarterly dividend after the record profits.

Continuing with financial sector industry groups, asset management stocks resumed the bullish order flow. #STT #BX #CG #KKR #TROW.

#KKR similar to #GS broke above a long trading range.

Shifting gears (pun intended) Specialty industrial machinery shows six stocks with stacked order flow in a strong sector. #CMI #GE #PNR #ETN #IR #ROK.

General Electric with the spin-offs and persistent bullish trend boasts an incredible picture for the last eighteen months.

// The Market

Overview Of Today’s Key Themes:

Stocks took a breather to end last week and that’s a good thing.

Going up virtually every day sounds great, but it’s like eating too much of your favorite food. You start to get uncomfortable.

Not because of profits, but because the likely reward for the risk starts to get out of sync. As stocks rally without a pause the risk/reward begins to move closer to break-even. Risking a dollar to make a dollar.

We want closer to three to one. So a temporary pause is healthy, and better for accepting risk.

First let’s break down the recent rally and why many stocks hit new all-time highs:

Federal Reserve’s Policy: The Federal Reserve (the central bank of the U.S.) has made some comments that have made investors feel confident.

They’ve indicated they’ll continue to lower interest rates. Lower interest rates can make it cheaper to borrow money, which tends to encourage spending and investment, boosting the market.

Tech Stocks: There’s been a lot of excitement about technology companies, especially those working with artificial intelligence (AI). This excitement has led to an “AI-powered rally,” meaning a significant increase in stock prices within the tech sector, driven by optimism about AI’s potential.

Could anything derail the positive vibes? Yes. Data about the economy and inflation. And we get two important ones this week.

On Thursday the release of GDP (Gross Domestic Product) is scheduled for release before the market opens. It’s important because it’s basically a scoreboard of a country’s economic health.

GDP measures the total value of all goods and services produced over a specific time period within a country. It’s like taking the economic pulse of a country. If GDP is growing, the economy is in good shape, and the nation is moving forward. If it’s contracting, the economy could be in trouble.

If GDP growth is slow or negative, a government might implement stimulus measures to boost economic activity. Alternatively, if the economy is growing too quickly, which could lead to inflation, policy makers might raise interest rates or take other actions to cool things down.

The Fed keeps a close eye on this to determine a path for interest rates.

And on Friday, PCE (Personal Consumption Expenditures) is scheduled for release. First thing to note is this report gets released on a day the stock market is closed (Good Friday).

Many say this is the “preferred” measure of inflation for the Fed. PCE measures the total amount of money consumers spend on goods and services. Since consumer spending accounts for a large portion of overall economic activity in many countries, especially the U.S., this report gives a clear picture of the health of the consumer sector.

Because it’s a primary inflation indicator the Federal Reserve uses to gauge price stability. Inflation affects consumer purchasing power, interest rates, and, ultimately, stock prices. If inflation is too high, it could lead to higher interest rates, which typically dampen stock market performance.

A growing economy generally supports higher corporate earnings and, consequently, stock market gains. Conversely, declining PCE can signal economic troubles ahead, potentially leading to market downturns.

The Fed came into 2024 with the expectation of six interest rate cuts. And as of today it’s looking more like three. These key reports on inflation, economic growth and also employment are key news stories to know.

Summary Of The Three-Majors Indices Performance:

One of the key things to notice when analyzing your stocks is the relationship between price and volume. We want to find clues about buying and selling pressure that tells us one of two things. Do we expect a continuation or a reversal?

In advanced trading circles this is a form of “tape reading.”

Volume during a pause gives those clues. A light volume pause implied continuation. A heavy volume pause implies a change of the current trend.

Longer periods of time can also give us clues. Typically over a 20-30 day period we can spot clues if institutions are buying on the way down (building a position) or selling on the way up (exiting a position).

Experienced traders call this accumulation or distribution. Smart money doesn’t buy or sell at once. Positions are worked over time. In our community we call this order flow stacking.

While stocks continue a slow grinding march higher, we’ve spotted distribution-type action where the heaviest, above average volume days have traded in the days the market declined.

This doesn’t mean to dump everything but it does mean something is going on “under the hood.” When I managed my trading firm in NYC I would instruct my traders to move your profit taking levels higher.

Print out this chart and study it. The horizontal line on the bottom is an average of the volume. The red spikes show above average volume on days when selling dominated the market.

– Headline News:

Top news for the week is the economic data. Fed chair Jerome Powell is scheduled to speak on Friday as well.

We are seeing a bit of a flight to safety as well as many tech stocks are approaching “perfectly priced levels.” Gold and oil continue to climb amid ongoing attacks in Russia.

Combine that with Consumer Defensive stocks rallying and the clues point towards a sideways market this week. A cash flow type of trading scenario. Faster profits.

NOTE: A “flight to safety,” it means they are moving their investments from what they perceive as higher-risk assets to lower-risk ones.

This shift is typically a reaction to uncertainty, volatility, or outright negative developments in the economy, geopolitical tensions, or financial markets. The aim is to protect their capital from potential losses that might occur if riskier investments were to decline in value.

// Sector Rotation

The strongest overall week for major sectors in over a month. While important economic reports and potential “distribution” unfold in the S&P 500, there’s a bright spot we can focus on. Market breadth is improving.

The amount of stocks and sectors showing bullish stacked order flow increased outside of the popular tech stock sector.

Communication services offers a few market leading stocks sitting at an optimal entry to start the week. #GOOGL, Alphabet Inc remains strong after some positive AI news last week.

The stock needs to clear $152 for the next wave of buying to kick in.

#SPOT, #NFLX #META and #DIS also looks solid for the new week. Disney stock continues to make higher highs and higher lows showing a persistent buying pressure and stacked order flow.

Energy stocks pushed higher again last week, but many are too far from an optimal entry today. However we do have one stock that looks solid for a new swing today. #PSX.

A clean push and a pause setup in a strong sector.

// Industry Groups

Specialty industrial machinery shows ten stocks that meet the stacked order flow criteria. Once we separate the scans from trade setups we see: #CMI #IR #ETN #PNR#EMR and of course #GE.

Semiconductor stocks got a boost last week as #NVDA popped above the resistance level we’ve stalked for a couple of weeks. Combine that with impressive earnings from #MU, Micron and the sector remains in play.

Someother news about Micron and China to be aware of.

#AMD is an interesting one. A deep decline. Is the stock broken or offering an amazing opportunity? We’ll watch it this week and provide updates. Traders in NYC would call this “buying in the hole.”

// The Market

Overview Of Today’s Key Themes:

On a day where very little happened tells us everything.

One of the secrets to profitable trading is that you likely don’t need to know more. You need to use your knowledge better.

Yesterday’s melted candle on light volume showed the end of the two day decline. A down day, opening and closing near the same level. A day that nothing happened. But what actually happened is that the sellers stopped taking profits.

Chart patterns, price action and volume clues happen every day. Traders often interpret them in a vacuum. Without context.

The candle itself doesn’t matter. WHERE it happens matters. Yesterday’s day of “nothing” actually gave us a big signal that the pause was over.

Does that mean stocks will rip higher again? No. It means the short term move didn’t follow through. We’re likely to see sideways action more than bullish momentum.

How did I draw this conclusion? Because I went in yesterday looking for something. Volume to the downside. And we did not get it.

To be clear, I didn’t want a heavy volume down day. I was simply putting the pieces together. If we saw a bearish energy candle (red/heavy volume) coming off all-time highs. That would tell me buyers are selling on the way up.

But for now. That didn’t happen. Hence the move higher this morning.

Yesterday we examined the distribution over the last three weeks. Let’s continue to monitor the relationship between price and volume. If we’re lucky the clues will be obvious.

As mentioned yesterday, the previous two candles into the new highs unfolded on light volume. Until that changes, our expectations for new highs are lowered, and so is my position size. (That is a VERY important point)

One final note. Yesterday saw quite a few failed breakouts. That’s something to notice and should influence your position size. These little things are what unprofitable traders just don’t see.

When you notice and adjust, losses are very small. So ask yourself. Am I adjusting risk based on these little things? It makes all the difference in the world.

Summary Of The Three-Majors Indices Performance.

The #SPY remains the leader for the month of February. With the #QQQ coming in slightly negative. The fact that the #SPY leads the pack shows that market breadth improved.

Sectors besides technology are gaining traction. Specifically energy and basic materials. In the long run that’s a great thing for the markets. When a hot sector or group of stocks reaches a point where it’s “priced to perfection,” money needs to shift to other places to see gains.

Year to date the #SPY and #QQ shows 10 percent moves. Impressive for just one quarter. Most investors would take that for the year. A good context to remember when things slow down.

A new catalyst is needed because I’m not sure how much more these AI stocks can keep beating raised expectations.

– Headline News:

Navigating the Waves: Key Economic Indicators and Federal Reserve Stance Shape Market Sentiment

As we enter a week rich with pivotal economic data releases, the stock market braces for potential volatility and opportunities. Investors and traders alike are poised at the edge of their seats, keenly aware of how these indicators could sway market sentiment and shape trading strategies in the days to come. Here’s a closer look at what’s on the horizon and why it matters:

Source: investing.com

Inflation Data and the Federal Reserve’s Perspective

The spotlight intensifies on the Federal Reserve, following its recent communications signaling a readiness to cut rates—a move warmly welcomed by the market. The central bank’s stance on inflation and interest rates, particularly its commitment to rate reductions amidst robust growth and low unemployment, is under the microscope.

This week, the release of the Core Personal Consumption Expenditures (PCE) inflation data for February is highly anticipated. Analysts are predicting a 0.3% increase month-over-month and a 2.8% surge year-over-year.

Given the Fed’s 2% inflation target, this data becomes a crucial barometer for assessing whether inflation is aligning with the central bank’s objectives.

Market participants will scrutinize this release for indications that inflationary pressures are moderating, potentially reinforcing the Fed’s rate cut trajectory.

Economic Growth and Employment: A Dual Focus

The health of the U.S. economy, as gauged by growth rates and unemployment figures, continues to draw attention. Recent adjustments to GDP growth figures and future economic projections paint a picture of cautious optimism.

The expectation is for sustained growth that doesn’t fan the flames of inflation or trigger spikes in unemployment.

Moreover, the enduring strength of the labor market, highlighted by an unemployment rate persistently below 4%, alongside robust job creation, remains a focal point. These metrics not only offer insights into the labor market’s vitality but also hint at the broader implications for consumer spending and overall economic dynamics.

The Pulse of the Consumer and the State of Housing

March’s consumer confidence data, especially following a dip last month, is eagerly awaited. This measure is a key indicator of consumer sentiment, with direct repercussions on spending behavior.

Additionally, housing data, particularly pending home sales, is slated for release. The housing market’s dynamics are especially relevant for investors, given its sensitivity to interest rate fluctuations and its broader economic impact.

A Global Perspective: International Economic Indicators

While U.S. economic data takes center stage, indicators from other key economies are also in the limelight. Inflation figures from France and Spain, along with GDP data from the UK, are on this week’s agenda. These statistics not only affect global market sentiment but also carry significant implications for multinational corporations and the commodity markets.

// Sector Rotation

Outperformance of defensive sectors like utilities and consumer staples is the conversation. Mentioned last week that money shifted to less risky assets.

While there has been a general rotation out of technology stocks and into cyclical sectors, the pace and timing of these rotations have varied. Some cyclical sectors, such as consumer discretionary, start to lose momentum, investors are beginning to seek out more defensive plays.

This shift towards defensive sectors is seen as a potential indicator of investor caution, as they look to protect their portfolios against potential downside risks.

When utilities and consumer staples are gaining ground at the same time and the Russell 2000, a small-cap stock index, is struggling to confirm new highs in major indices like the S&P 500 and Nasdaq, suggests that investors may be becoming more selective in their risk-taking.

That the Russell 2000’s inability to convincingly break above key resistance levels, such as the 2,100 mark, is not necessarily a sign of an impending market breakdown but rather a reflection of investors’ reluctance to take on as much risk as they did in November.

More insights into “the right risk” at this stage of the rally.

Industrial stocks picked up steam recently with the amount of stocks with bullish stacked order flow surging.

#FDX beat earnings expectations last week and rocketed higher. Yesterday traded into a bullish u-turn offering a second entry after the gap. Above 284 seems to be the breakout level but I’m waiting for the EGOP level (earnings gap open price).

Four other stocks in the sector offer a bullish pause setting up new optimal entries. #BLDR #VRT #NVT #TXT.

Consumer defensive stocks also offer a few optimal entries. Gotta love when we get a real pause that sets up the next push. Was getting hard to continue buying new highs without resetting the risk/reward.

#TGT broke out of a three day consolidation. And is firmly back above the earnings gap.

#BG and #STZ shows an optimal entry with room to go.

After a failed breakdown, #PEP came storming back and rested on a potential breakout level. Minimal stacked order flow but worth having in a watchlist this week. Short sellers are hoping that resistance holds., If it doesn’t they need to cover to exit, and fresh buyers will create a fast wave higher.

A good tape reading scenario to watch.

// Industry Groups

With money rotating out of tech (relatively speaking) the market is searching for new pockets of opportunity. Oil & Gas, E&P looks to have the biggest list of stocks with stacked order flow. #SM #COP #CNQ #EOG #OV

#CNQ blasted through resistance yesterday. Looking for #OVV to do the same today.

// The Market

Overview Of Today’s Key Themes:

Market leading stock #NVDA broke out yesterday, and failed.

For much of 2024 both Nvidia and Super Micro Computer, #SMCI pulled the markets higher without needing help. Just two stocks carrying the load as the shine on the magnificent seven stocks declined. ( Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla)

Here’s where things get challenging.

The price action of these two amazing stocks got sloppy. Gone are the weeks of strong, persistent rallies replaced by a wide choppy trading range. This type of chart pattern is a stark contrast to the “breakout and rally” from January.

What does that mean for us? For risk?

I have an easy way to determine risk. Or better said, the amount of capital I’m willing to put into new trades. No calculator needed.

It starts with perfect. Once I know what perfect looks like, anything that’s not perfect dictates lower risk.

With significant economic data due Thursday and Friday morning we have reason to be cautious. Hold the winners but having a trailing stop loss in place is just smart for the current price action.

Summary Of The Three-Majors Indices Performance.

The nasty selling that unfolded in the latter half of Tuesday suggests a lower opening today. But the bull market persists and stock futures are significantly higher.

It’s impossible not to marvel at the continuous rally seen in indices like the S&P 500 and Nasdaq, which continue to hover near new records. This bullish trend is a beacon for optimism, yet it comes with its share of cautionary undertones regarding its sustainability and the looming possibility of a pullback.

There’s a growing sentiment of weariness over the rapid succession of these market highs, suggesting a mix of awe and skepticism among observers.

This sense of caution is not unfounded; it reflects a deeper contemplation on whether the current market trajectory is on solid footing or if we’re on the cusp of a correction.

A closer look reveals a disconnect that goes beyond the surface-level enthusiasm. The disparity between the general market and the actual economy, as well as the internal divergences within the market itself, is becoming more pronounced.

Speculative assets and recent tech IPOs have seen a resurgence of interest, mirroring the speculative fervor of 2021.

This trend, often driven by speculative optimism, signals a potential misalignment between market valuations and the underlying economic fundamentals.

However, the challenge of timing the market for a correction is formidable. There’s a consensus that while it’s important to be cautious, completely stepping away from the market in anticipation of a downturn could mean missing out on valuable opportunities.

– Headline News:

Apple Inc. appears ready to launch an AI. They need some positive news. The stock is having a rough year.

Apple has announced its annual Worldwide Developers Conference (WWDC) for 2024, scheduled to take place from June 10 through June 14. The event will be livestreamed on Apple’s website, with a select group of software developers invited to attend in person on the first day at Apple’s campus to celebrate.

This year’s WWDC is anticipated to reveal Apple’s long-awaited artificial intelligence (AI) strategy and consumer features. Apple CEO Tim Cook has previously hinted at significant AI investments and teased an AI-related announcement for later in the year.

Tesla #TSLA gets a downgrade, the fourth this year. And of course in this wacky market the stock rallied.We’ve repeated over and over this year that lower margins and lack of interest is not good. I don’t care how popular your CEO is. Eventually the numbers catch up.

Mizuho analyst Vijay Rakesh downgraded shares of Tesla. Here’s the quote and reasoning.

“While we remain constructive on the broader EV landscape with the long-term trend to electrification, near-term EV demand, and tightening liquidity are creating challenges into 2025,” wrote Rakesh, adding high inventory levels are pressuring wholesale volumes from auto makers. Demand is ”decelerating faster than expected.”

Looks like the 180 level is significant for the moment. With a couple of recent bullish gaps, the stock appears to have a short-term bottom.

If it holds that level we could see a run to 205. Not necessarily a long (buying opportunity) but more of a game plan if you are betting the stock declines further.

/ / Sector Rotation

Financial stocks continue to quietly impress while tech hogs all of the attention.Despite the anchor on #BA, Boeing right now, industrials are hanging tough too.

We often talk about making better distinctions to make better decisions. In other words, simply noticing more helps you make smarter decisions.

Check out the declining numbers in energy. Still green but losing day-by-day momentum. Time to think twice about a new breakout trade there and wait for the pullback to better reset the risk/reward.

For the financials none are stronger than #JPM, JP Morgan. A textbook pause looking for a new entry today.

Asset management company #KKR rests above previous breakout level. I love these setups. There’s no guessing about the result. It’s typically a quick failed breakout or a new move higher and an easy trade to manage.

Most traders I know prefer a fast loss. Not that we WANT a loss, we just want to have our capital moving in favor. So a quick exit means we can put it back to work.

The ATM (average true move) for this stock is roughly ten dollars. The 112 level would be the IPT (initial profit target). #APO would be a sister stock to watch with #KKR. #TROW too.

How about #PYPL coming off the mat? The breakout failed yesterday but most of the market closed near the low. A gap fill up to that 72 level would be my first target. Then 76 comes in a strong resistance above that.

Let’s not look past the nice #C, Citigroup and #SCHW pause. Schwab has better reward potential at the moment.

// Industry Groups

Insurance stocks are on a heck of a run. #ALL, Allstate is the slow trend that keeps on giving. We had a really nice swing trade using the profit maximizer about four months ago. (see the arrows on the chart) The stock broke out again this week. We’ll be looking for a new entry to start in April.

Other insurance stocks in the industry group to have in your watchlist include: #TRV #WRB #HIG.

Computer hardware stocks caught some upgrades this week and continue the solid start to 2024. #WDC #STX #DELL. We can add #SMCI and #ANE to the list.

“Capital markets” stocks #GS and #MS both exploded with momentum last week and paused for a couple of days. Worthy of consideration for a two day swing to end the week.

// The Market

Overview Of Today’s Key Themes:

The five month rally continues.

The big nagging black cloud heading into 2024 focused on the Magnificent 7. Market breadth showed a concentration of stocks carrying the market higher. (“market breadth” is the amount of stocks performing in sync. In this case we did not have a positive breadth. Only a few stocks were outperforming.)

History tells us that’s not sustainable. Once that story plays out, look out below! We need to trust history because we crave what’s likely to happen next. It gives us comfort to accept risk.

The same for an inverted yield curve. History tells us that an inverted yield curve leads to a recession. (When the interest rate on long-term bonds is lower than the interest rate on short-term bonds.)

Again look out below!

Neither scenario drove the stock market lower. Mostly because the AI tsunami created a frenzy of the future not seen in 25 years.

AI basically carried the market until now. Technology stocks are no longer flying higher as valuations are most likely catching up the lofty levels.

But fear not. Market breadth has improved. Yup. Order flow shifted into other sectors as industrials, financials, energy and basic materials have all refueled to support the bullish bias.

Money found other places to achieve alpha. All without the Fed actually cutting interest rates yet! iIll that shoot us into orbit or be a “sell the news event?”

We’ll get new clues this morning and tomorrow as economic data (GDP) and inflation (PCE report) provide some clues.

What an amazing ride.

From a strategic perspective the persistent trend validates our core philosophy to avoid picking a top. Especially for profitable trades. Our profit maximizer allowed us to hold winners longer simply because price keeps churning higher.

“The trend is your friend until the end when it bends…”

Summary Of The Three-Majors Indices Performance.

March slowed the gravity defying AI boom. The #QQQ looks ready to close the month with a whopping zero percent gain.

The #SPY shows nearly triple the gain for the month of the tech heavy index thanks to the slow spread of order flow into other sectors.

Year to date and of course Q1 statistics show them neck and neck over ten percent. The #DIA lagged but played catch up the last month thanks mostly to the surge in energy stocks.

A perfect bull flag/pause and rally to end the first quarter of the year. Let’s see if the economic data this morning adds a shot of adrenalin.

– Headline News:

GDP gets the attention this morning.

Economic Indicators: Key economic data releases include the U.K. Final GDP and U.S. Final GDP, both expected to remain unchanged from previous figures.

U.S. Unemployment Claims are anticipated to be slightly higher than the previous week, and U.S. Pending Home Sales are expected to show an increase after a previous decline. The U.S. Revised UoM Consumer Sentiment is projected to stay the same.

Monetary Policy Outlook: There is an expectation that the Federal Reserve may begin cutting interest rates in June, as inflation has cooled from its peak.

This anticipation is based on the broader expectation among traders and the recent actions of other central banks, such as Switzerland’s, which have already begun cutting rates.

– Earnings Highlights:

GameStop’s stock tanked after reporting a profit but a drop in revenue. Nvidia also faced a second straight loss despite a strong performance earlier in the year.

// Sector Rotation

Optimal entries galore in the industrial sector. Either a pause looking for a new entry or hop on board a move that began yesterday.

#FDX, Fedex clawed its way back above the earnings gap and closed as an inside day. Setting up a new breakout trade.

#GE. What other amazing words can we use to describe that this stock has done for 2024? Another bull flag, breakout, bullish gap energy candlestick closing near the high on above average volume.

Other stocks in the sector at or near an optimal entry include: #RTX #PNR #CMI #AER #PCAR #CAT #ETN #BLDR #IR.

Not to be left behind, basic materials reset a bunch of new optimal entries as well.

#AA traded into an energy candlestick breakout. While #NEM closed strong, validating a change of trend to bullish.

Others to watch today include: #EMN #AEM #CMC #NUE #LYB.

// Industry Groups

Healthcare has “channeled” for the better part of two months. But yesterday’s big bullish gap shows a test of the resistance is coming.

Diving deeper we see that medical devices stocks helped push the indice higher. Stocks to watch: #TNDM #ZBH #MDT #EW #SYK.

Capital markets offer three stocks showing momentum: #GS #LAZ #SCHW. But it’s the banks that I love to trade working in harmony. #C #JPM #CMA #PNC #WBS.

Good Friday. Markets closed