The Bond Market Wakes Up, Are These Stocks Ready To Wake Up? Is The Alarm Clock About To Ring?
The Bond Market Wakes Up, Are These Stocks Ready To Wake Up? Is The Alarm Clock About To Ring?
Charts Included...
Happy New Years Powerhouse Traders and Investors—What a Start to the New Year in the Financial Markets Right? There is actually a lot of things going on in the markets globally from Supply Chain issues, Central Banks, Covid-19, Travel, Oil, China-Russia-U.S.A and more.
Even with all of the headlines and events happening, as Powerhouse Traders we want to find High Conviction potential trades and I hope this newsletter can help your research and informative process.
As we do not directly feature a Powerhouse Report on 1 specific stock in this report, we wanted to put something out for readers to hear our thoughts on the coming week.
*All things said is for information only and not buy/sell advice. What you do with the information is up to you.
The Schedule For This Week Traders Should Be Aware Of
Wednesday 1/12/22 the WASDE Report comes out for Grains.
Tuesday 1/11/22 Jerome Powell will be testifying for a Nomination Hearing
Thursday 1/13/22 FED Governor, Lael Brainard will be testifying for a Nomination Hearing
(TSM) Taiwan Semiconductor Manufacturing Company Reports Earnings
TSM reports earnings this Thursday before market open. This is worth sharing because the stock broke out of a large base these past few days before closing around the breakout level (prior resistance). It will be worth watching if prior resistance acts as new support.
Take Away From The FED’s Minutes Release
Inflation readings remained high, and various indicators suggested that inflationary pressures had broadened in recent months.
As many already know the FED are turning Hawkish and the FOMC minutes confirms this. To make things simple, short and sweet, the FED does not see inflation as “Transitory” anymore because the virus and restrictions that come with the virus are here to stay for a short while.
Pandemic-related fears as well as concerns about inflation and tighter monetary policy apparently weighed on risky asset prices despite continued robust economic data
10 Year Treasury Note Futures
The Bond Market is the Smart Market!
Last week we saw the 10-Year Treasury Note Futures fall sharply before bouncing into close Friday after it fell to around prior support from December of 2019.
As you can see in the chart illustrated above, it was a complete breakdown with 6 red days in a row.
So… Why Is This Worth Mentioning?
Opinion: As buying T-Notes in a rising rate environment is ill-advised in my opinion, this technical area could be of potential interest for shorter term stock traders.
If yields can cool off for a bit, it could allow Stocks and the Stock Market indices to fluctuate to the upside, especially higher growth names that got beaten down…There is ALOT of them.
Does that mean that we are going to see a bounce? No! But, it is something to watch.
Lets dive a little deeper with Charts…
Thesis
What we know:
NASDAQ (QQQ) is at prior support
SPY is Trading near the upper range of Oct 26th-Dec27th Channel
10 Year Yields at Prior Resistance
Many Stocks are ‘technically oversold’ but with good reasoning
QQQ
10 Year Yield
With the information we know, we can expect volatility going into the week but, it is NOT the information that we know that will allows us to put together a good trade plan.
It is HOW WE DEAL with the information we DO NOT KNOW ,is what will help us put together a good trade plan.
We DO NOT KNOW what direction the market will go (up/down/sideways) but, we can stack probabilities in our favor and manage risk according.
What I would like to see happen in the markets this week is:
1.) A bounce off technical support levels.
A) A Bounce will allow us to risk around the support area on various stocks while being able to capture a short momentum squeeze potentially if the thesis plays out.
2.) A Complete break down on stocks and breakout on yields
B) We have to be prepared for both sides of the move. The virus is leading to a massive spread and this could potentially hurt supply chain in the short term. There is so much uncertainty and the market does not like uncertainty so we have to be open to both outcomes.
Bias Is Still To The Upside + Cash Is Trash
In my opinion, the bias is still bullish and money is rotating frequently. Money Managers have to put money somewhere and money has been going out of Bitcoin, out of High Growth and frankly it is going out of high valuated names from what we have seen the past few months.
As stocks drift lower, the S&P 500 is near the all-time highs.
$1 in 2019 could not buy you the same as $1 today. CASH IS TRASH.
Why in the world would managers want to hold cash during an inflation environment? To be frank, I do not think they do want to be cash especially when the S&P 500 is near the highs.
When bias is re-confirmed the move usually accelerates fast and this is exactly what we are watching on the S&P 500 (SPY). If the SPY can get back around $475 and near new highs then a acceleration move could bring us near $500 rather quickly in my opinion.
This might sound good if you are a money manager but to be a powerhouse trader and have potential for triple digit % gains annually we need to have constant turnover and be in and out of movers.
SO WHERE IS THE MONEY MOVING…
First, lets highlight some stocks that are a little more stable in my opinion but, may not give you the ‘crazy short term reward’. These stocks are could be potential for a multi-week time frame.
With rising rates we want to really look at banks as profit margins could increase with certain monetary conditions.
With this being said, we have to feature Morgan Stanley (MS) in this report.
Morgan Stanley (MS)
*Many stocks from the industry report earnings in coming days+ Jan 19th MS reports earnings
This stock has been trading in a tight range from around $96 to around $105 since August. During the later half of the year MS has tested around 96 multiple times confirming it as support again and again.
As this stock technically has been more stable then many high flyers, Morgan Stanley could be a stock that could potentially see money start to flow into as the FED turn more hawkish.
To those whole follow Nicholas Darvas or Jesse Livermore then around the $106 area could be of interest to start scaling in long potentially.
The chart has momentum backed with a solid multi-month consolidation period as well as a breakout above prior historic chart visual from the year early 2000’s.
Hilton Worldwide Holdings (HLT)
HLT was actually featured on our report in early 2021 around $116. Now it is trading back around $152.
We are once again featuring this stock because our original thesis holds from early 2021.
Why are we featuring Hilton?
The Economic Shock of 2020 and Global lockdowns caused this industry to take a hit. During this time, companies with bad balance sheets took a beating but, companies like Hilton, a leading company in this space actually benefit in my opinion.
Hilton was able to really clean up their balance sheet during the pandemic and get rid of ‘excessive weight’.
Hilton, being a leading provider for hotels, is able to seek appropriate investments to maintain a safe and healthy environment for guests. Not every hotel company has the ability to do so.
With Hiltons ability to ADAPT and SURVIVE, in my opinion this ONLY furthers investors confidence in the company and could possibly attract more money flow into the name as managers look to rotate money into more stable names that could help them get stable returns potentially during a rising rate environment.
At the end of 2020 we said in our annual report that we will not be featuring biotech and pharmaceutical stocks based on our past performance and lack of edge. Things have changed. One stock I want to mention could be of interest technically but, has potential for big upside as well as big downside.
The company is Vertex Pharmaceuticals (VRTX).
Vertex Pharmaceuticals (VRTX)
As we do not have a clear edge from a fundamental perspective on this industry, I will keep it brief and short and you can do what you like with this chart.
The stock recently broke out of a downtrend aggressively as speculation came out of the company having a ‘cure for diabetes’.
A new treatment using stem cells that produce insulin has surprised experts and given them hope for the 1.5 million Americans living with the disease.
The stock has been consolidating and most importantly it has HELD ITS GAINS from the recent rally. Around $222-$225 is a area technical and momentum traders are watching for potential for more demand to come into play.
Rapid Fire Charts
TRV
UPS
BJ
DG
Final Take
The reality is, protecting our money is part of the business and if there is nothing that is high conviction then we should not be trading it in my opinion. Sitting on our hands and trading our edge is what keeps up consistently profitable.
Right now, there is not much out there from what I see unless you are a bottom fisher looking to catch a falling knife.
This week keep an eye on the 10 year yield. If it does breakout lets see how the market does react especially the NASDAQ which is near a potential breaking point.
We are wishing everyone a safe week in the markets.
If you have any questions you can email us at info@Lussosnews.com
Best,
SC
Thank you for this awesome report ! Having an eye for XLI, XLB, XLF, XLE.