January 26, 2022

Following a robust morning rally, hawkish language by Fed Chair Powell extinguished nearly all of  Wednesday's gains. The session went out with the Nasdaq and S&P 500 quite extended from their moving averages on the downside.

Right after the Fed's statement was released, the Nasdaq was up 3.4%. But in his news conference, Powell described labor market conditions as "tremendously strong." He said that the inflation outlook was the same or somewhat worse than in December, noting the still-bothersome supply chain problems.

The markets immediately began pricing in five Fed rate hikes this year, up from the four that were previously discounted. And the yield on 10s vaulted 7 bps on top of the 5 bp gain of Tuesday. This puts the benchmark within several bps of a one-year high.

With the Nasdaq and its software components all extended to the downside, fresh-money shorts are off the table. Ditto for longs.

The oil & gas explorers remain the strength on the up side and might be worth watching in the event of any contra-trend rally in the averages.

Our five open shorts which triggered Jan. 13, along with their MFE:

ProShares UltraPro Short QQQ ETF (SQQQ) +49%
Tuttle Capital Short Innovation (SARK) +27%
ZoomInfo Technologies (ZI) +22%
Zoom Video Communications (ZM) +18%
Microsoft (MSFT)

In summation, cash is king.

Kevin Marder


Subscriber: A while back (3 months, six months, 1 year?) I believe you mentioned The Strat.  It came up when I was doing some research today.  Did you look into it very deep? Thanks for your hard work! 

KM: You are welcome. Yes I spent about 15 hours researching it. The price patterns of the strat are the same as the bread and butter. The only thing that it adds is a way of making money off broadening formations, which I would probably never use.  There are only so many ways to cut the cake once one boils short-term price movement down to its essence. In other words, it’s the same as the bread and butter.

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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
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Wyckoff spring setup (2:30) 
5-minute breakup test (8:01)