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Tales of a Technician: 8 Takeaways from Monday’s Pop

March 28, 2022

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Tales of a Technician: 8 Takeaways from Monday's Pop

I surveyed the stock market today and here’s what I found.

Takeaway #1: The resilient nature of the market rebound

Is anyone else impressed by the resilient nature of the market rebound? I find the Nasdaq’s V-shaped rise to be the best example of this. We haven’t seen two consecutive down days in two weeks. And two out of the three single losing sessions were dojis. Bulls couldn’t even wait a day before running back in. Those waiting for a dip on the S&P 500 and Nasdaq have been left behind.


Takeaway #2: V-shaped recoveries are tricky

V-shaped recoveries are always tricky. By the time it’s apparent the daily trend has reversed from down to up, it feels extended and irresponsible to chase. Yet, chase you must if you want exposure.

Takeaway #3: Favor of lower-risk entries

Of course, an alternative is to avoid playing the overstretched indexes in favor of lower-risk entries in individual names. I don’t mind this idea at all.

Takeaway #4: Risk appetite is alive and well

Look who littered the leaderboard on Monday: RIOT, GBTC, TSLA, SQ, FSLR, ADBE, PINS, ROKU, PLTR. Notice the recurring theme? These are aggressive/highly volatile stocks. Some are in the underbelly. What does it mean that they led? It means that risk appetite is alive and well. You don’t see these names as leaders unless traders are feeling optimistic.

Watchlist of aggressive/highly volatile stocks.

Takeaway #5: Risk appetite is alive and well even on ETFs

We could extend the previous point to ETFs. BITO, ARKK, and QQQ were all leaders on Monday. That doesn’t exactly scream risk-off now, does it? Want more evidence? How about semiconductors like NVDA and AMD returning to uptrending status?

Takeaway #6: Crude oil got whacked

Is anyone disappointed crude oil got whacked? Sure, it took the wind out of the sails of energy stocks and commodity names, but they need a breather anyway. I love how we saw rotation out of these sectors and into the tech crowd. This is healthy price action.


Takeaway #7: VIX is a teenager again

How about that VIX? Smooshed another -5% to tumble below the 200-day moving average for the first time since we kicked off 2022. It’s a teenager again! I’ve said it before and I’ll say it again. Fear has left the building.

Takeaway #8: The tradeoff

This ongoing recovery reminds me of the inherent tradeoff to confirmation. Want to wait until the coast is clear? Want to wait until every index and sector is in an uptrend and at new highs to signal the bear has been vanquished? Feel free. But realize that in exchange for all that confirmation, you miss buying at a discount. The only possible way you will ever buy during a fire sale is if you’re willing to put some money to work while the market still looks ugly.

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