Daily Market News - 18th August 2022
The Tech Dilemma
2 Months ago, in anticipation of a face ripping rally, I said the words,
“if we’re not looking at great stocks that are 80% off their highs, then what the f~~k are we even doing.”
Hindsight tells us it was a great call at the exact bottom of the market, but the question I think most of us are asking, how long can it possibly last?
In this weeks letter, I’ll lay out a few more charts that I’m watching closely, because we’re now approaching logical “pause levels” in the major averages.
Zooming out puts things in perspective.
In my view, the dollar’s driving everything and it’s still in the same uptrend that’s been a headwind for stocks for the last 8-9 months. I’ve been pointing this out for months.
Ideally, I’d like to see that inverse relationship de-couple.
August has seen stocks move higher along with the dollar, so I’m paying close attention to that information.
But lets take a gander at my dilemma in Tech.
I enjoy a face ripping rally as much as the next person, but Tech (much like the S&P500 and Small Caps) is pushing up against a “zone” where I think we can probably expect a bit of chop.
Basic Technical Analysis tools like the 200 Day Simple Moving Average are a hot debate among professional analysts, I personally like to use them when I can definitively show they’ve had merit in the past. Which I think is reasonable. The chart shows the 200 Day SMA has been a problem recently.
Lets look at a sector which includes NFLX, DIS and META.
I have a dilemma with Tech, because as the Communications Sector chart shows, there could potentially be something brewing in terms of a bullish failed break down setup.
For me, it really comes down to assessing each chart on its individual merits. If we’re above those Covid crash levels, I’m leaning bullish.
Trailing stops and having a set process to prevent 2nd guessing every 2% market move is a godsend in this environment.
Here’s a list of names to do some due diligence on. I’ve put these premium charts to our clients/members over the last month and some of the charts are still looking great.
In Summary
I don’t see the point in trying to label something a bull or bear market, it’s not particularly relevant in the current tape. There’s too much going on.
The message I’ve been communicating to hundreds of our clients and members over the last few weeks is to not overthink the broader market.
There are plenty stocks breaking out to new All Time Highs, so try telling those stocks it’s a bear market. For me it doesn’t really matter.
Find the best stocks, in the best sectors, and manage risk. That’s the game plan at Honeystocks HQ. It’s been working well.
Who cares if it’s a bull or a bear market.
I also laid out a bunch of charts at the weekend, feel free to check that out below.
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