February 16, 2022

The chart below shows the Nasdaq having a hard time staying above the 20 ema for more than a day. The key swing points are the matching highs (purple line) and Monday's low (circled in green). Overall, this is a negative picture since there is a neutral (sideways) pair of highs to go with a lower low.

Thus, the trend has a lower bias which would turn definitively down upon a break of Monday's low.

The driver of stocks at the moment is the Ukraine situation. A full-fledged war would take some Russian oil & gas off the global market, sending prices for those commodities higher. This would likely push inflation higher. At the moment, it appears Russia is contemplating less than a full-fledged war, but an invasion nonetheless. Of course, this is a fluid situation changing almost daily.

Despite questions surrounding Ukraine, it is possible that the market may have already discounted it. This is what occurred with the first and second Gulf Wars. Then, the market exploded once the bombers were en route to the Gulf ('91) and the troops were marching to Baghdad ('03).

The positive that the market has going for it is the fact that it is trading well higher than the lows of late January -- despite the inflation, Fed, bond yields, and Ukraine fronts all worse than then.

A second positive is the broader market. The riskier small-cap sector has outperformed in nine of the past 10 sessions.

A negative is that we have yet to see the concerted base-building occur after a growth-stock selloff is over. This is key. Only a few names are forming bases of note, one being Datadog (DDOG), which is an open triggered trade. It and Bill.com Holdings (BILL) are believed to be the best growth-stock actors.

There were a few pattern setups earlier this week, such as Mosaic (MOS) and Booking Holdings (BKNG), but upcoming earnings reports got in the way of putting them on the Focus List.

Three Focus List pullback ideas, two of them of the System R variety, triggered today and gained ground even as the market traded lower for most of the day. There were another five System R setups in the software segment that also looked good for today. However, this is a market with its two big averages trading below their 20 ema. Thus, from a reward/risk standpoint, it did not make sense to have eight ideas going into today.

There are no pattern setups for Thursday.

In summation, let's maintain an open mind as to whether the market has already discounted war in Ukraine. All the while, the 10s yield creeps higher, last at 2.04%. The bias is to the downside. Cash is king.

Kevin Marder

Trading Lessons
Introduction to the service (38:00)
Money management and risk management (20:27)
Bread and butter pullback (11:10)
Bread and butter pullback: Pt II (15:09)
Bread and butter pullback: Pt III (31:48)
Bread and butter pullback: Pt IV (30:16)
System R
Short-selling video (25:53)
Wyckoff spring setup (2:30) 
5-minute breakup test (8:01)