More Bounce To The Ounce
The market experienced significant volatility last week, with Bitcoin dropping sharply before a strong recovery on Friday. The Dow Industrials surpassed 50,000 for the first time, while the Nasdaq Composite and Nasdaq 100 rebounded to key Fibonacci levels. The S&P 500 also recovered losses from earlier in the week. The semiconductor index remains in an upward trend, and transportation stocks have performed well. The author is currently lightly invested, holding 70% of capital across 25 positions, and anticipates potential bear market activity in the coming week.
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That was a seriously crazy week. It seemed like the bears were going to absolutely take over the market, with an amazing crescendo seen late on Thursday as Bitcoin plunged to less than half its peak price. Friday saw the revenge of the bulls, however, and the NQ and ES went up hundreds of points, the YM went up quadruple digits, and the Dow Industrials crossed above 50,000 for the first time in human history.
My opinion (and, certainly, my hope) is that this was nothing more than a bear market rally, or a dead cat bounce, or a relief rally, or whatever other moniker you want to assign it. The Nasdaq Composite, for instance, has pushed its way back to the 50% Fib (between the lifetime high and the November low), returning to prices not seen since two days prior.
Word for word, the same applies for the Nasdaq 100.
The S&P 500 is shaped differently, though. Its own lifetime high is closer, and the rally on Friday undid the losses from Thursday, Wednesday, and even a little bit from Tuesday. That broken wedge is important, though, and I think the bulls are going to have to come in on Monday with a huge catalyst if they want to push things even higher.
The semiconductor index remains within its unbroken ascending channel. It got tantalizing close this week, but – nope, no dice.
The Dow Utility Index is about 90% done with what might ultimately be a fantastic head-and-shoulders top. There’s certainly some more work to do here.
Finally, the Dow Transports did precisely what its brother the Industrials did: blasted to lifetime highs. For whatever reason (and it’s certainly not cheap oil), transportation stocks have been doing wildly well for months.
I am coming into the week quite light – about 70% committed across 25 positions, with not a single large position among them. Hopefully the bears can reload with vigor early in the week.
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