Markets whipsawed after a higher than expected CPI reading Thursday morning led to a bear trap and short-covering rally that reversed back to the downside on Friday. Thursday was a tease for FOMO buyers, but I noted after the close on Twitter that just this year we’ve seen many next-day reversals after big volume up-days below the declining 21EMA. It pays to remain disciplined.

Not much has changed from last week in terms of execution strategy. It’s best to wait for a clearer picture and a low to form. I’d far rather sit on the sidelines than chop up my account and mental capital trying to make a few hard pennies. When there are solid setups, we will be on top of them, and they will be worth the wait!

The most productive thing to do now is to watch for potential new market leaders exhibiting constructive volume and price action. There is very, very little of that at the moment as far as I can tell, so there are no new long setups to review tonight. I’ll cover what I’m seeing in the major market indexes, a few stock updates, and a stock study on NFLX at the bottom. Let’s get into it!

Index Update

The indexes briefly traded above the short-term moving averages after the big bounce on Thursday, but sliced back down on Friday. All of the indicators below being red is a signal of strong caution on long positions.

The Nasdaq traded back up through the YTD low for a potential undercut and rally, but that failed on Friday as it came back down. It’s interesting to note that Friday’s sell-off came on much lower volume. A follow-through day could still be in play as soon as tomorrow as Thursday’s low was not breached.

The S&P-500 paints a similar picture, but it traded up to it’s 21EMA in blue before getting rejected. Below all of the declining key moving averages, the trend is firmly down. Stay objective.

Stock Updates

International Seaways (INSW) is super strong, breaking out on Thursday and closing higher on Friday even with the market down big. Volume was weak on the breakout, but it’s up nearly 5% from the buy point.

Regeneron Pharmaceuticals (REGN) traded just over the buy point at the end of the day on Thursday, but it came on a large outside bar that didn’t allow for a good technical stop-loss. I avoided it due to the adjusted risk-reward not being attractive and my apprehension of the indexes.

Best Setups

There are no long setups tonight as most charts are too busted up to provide any sort of good risk/reward. If this changes between now and Wednesday, I will update through Twitter!

Study of the Week

Tonight’s study features Netflix (NFLX) leading out of the 2018 correction. It more than doubled from the first buy point over the course of 6 months.

That’s all for tonight! See you back here on Wednesday night where there will hopefully be more stock setups to review.

Cheers,

Dan Dormody