The past week has been very challenging, as the market can't seem to pick a direction. Though short-term momentum has more overhead pressure, even the bears have had difficulty shorting the choppy price action. In times like this, it can be helpful to take a step back, watch key price levels in the major indices and relate them to trading levels within our personal trades. Sometimes you can even find trades that are going against the short-term trend. With that said, this can also be a great time to start watching areas, like non-cyclical stocks.
In the above chart of the four major indices, only the Russell 2000 (IWM) has broken its support from Monday's trading range. However, it was able to close over the low from the 24th at $191.23. Other indices, including the S&P 500 (SPY), Dow Jones (DIA) and the Nasdaq 100 (QQQ) are well within Monday's range and ended the week over or near last Monday's high.
Though Mish has pointed to stagflation for a while now, it continues to play a role through 2022 and can lead us towards areas to focus on. For instance, non-cyclical companies, which people will continue to buy from no matter the economic situation.
Two of the sectors we've been watching are medical and parts of the retail space. For the medical space, we've been watching Vertex Pharmaceuticals (VRTX); for the retail space, Levi Strauss & Co. (LEVI). While VRTX closed a whopping +6% on Friday, its strong upward trend means it's worth watching for another trade setup. When it comes to LEVI, it will need to hold its 10-day moving average at $21.72. However, even noncyclical stocks are subject to overall market pressure if the indices begin to break down. Therefore, we should keep an eye on the major indices to hold over last Monday's low from January 24th.
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With the market under pressure, stocks that outperform after earnings reports can often give you great trading ideas of where to go. On this week's edition of StockCharts TV's Mish's Market Minute, Mish dives into an assortment of stocks that have already reported or are about to report to show you the "good, the bad, and the ugly" of earnings trades.
- S&P 500 (SPY): 442.42 the 200-DMA to clear.
- Russell 2000 (IWM): 208.76 resistance. 191.23 minor support.
- Dow (DIA): Flirting with the 10-DMA at 346.99.
- Nasdaq (QQQ): Like this to hold over 350.
- KRE (Regional Banks): 68.74 support the 200-DMA.
- SMH (Semiconductors): 257.24 needs to hold.
- IYT (Transportation): 248.85 support to hold.
- IBB (Biotechnology): 122.50 support.
- XRT (Retail): 75.62 low to hold.
Assistant Director of Trading Research and Education