Bullish market – Hoping for accomodative Fed

Here are the market observations for today

1. The market swings between Surprise and Confusion. Price Action helps you navigate this landmine.
2. Why the market has rallied over the last few weeks: Corporate earnings results have exceeded expectations by a wide margin. The market runs on surprise.
3. Source of worry and confusion:  “There’re a lot of things out there that could potentially derail the market, especially as you’re making this transition from where we are, which is easy comparables versus last year, to more difficult ones going forward.”
4. Source of Optimism and surprise: Fed will taper but all the supply-side worries leading to higher inflation will subside over the next few months PLUS Corporates have enormous pricing power to protect margins.
5. US Federal reserve will announce the Fed policy decision tomorrow. The market is trading flat as of now.
6. The Leadership stocks continue to march higher. Take AMD as an example, now at $126.
7. The US stock market has moved higher but that’s not the case with Emerging market EEM. It’s slowly declining.
8. Hydrogen Economy stocks continue to attract traders’ interest be it Plug, Bloom Energy, or FuelCell FCEL. I closed BE ahead of earnings but continue to own Plug and recommend holding FCEL
9. CLF has been one of the most frustrating trades of 2021. It does take support at moving average but sells off pretty quickly too. Here’s how it played out recently.
10. Sometimes selling from the resistance is fast and furious. Match.com, the owner of Tinder, just witnessed that despite all the good news (entry in S&P500 + Google cutting app store fees). The company is set to declare earnings today.
11. But when stocks break above the resistance, then they automatically become buys. I am adding Silvergate today.
12. Bitcoin ecosystem stocks are on fire be it HUT or Marathon Patent. MQ is another stock that seems well-positioned to rally.
13. Stocks do react to business performance. Chegg CHGG, an online learning site, peaked at $110 in Feb 2021 and since then has been declining. Today it’s down 43% on the poor earnings report.
14. California judge has ruled in favor of drug makers in opioid settlement and it’s driving stocks like Teva, Endo International higher. News-driven moves can reverse on adverse news. Stock price spikes do not sustain. See TEVA
15. If you don’t know who you are, the stock market is an expensive place to find out. – Jesse Livermore

Trade Sheet:

Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers