Trading with AlphaVL: The Newsletter for Growth and Momentum Investing
Get the Stock Picks You Need to Succeed in the Markets, Get Ahead of the Curve, Grow Your Portfolio with informed and analytically consistent Stock Picks
This past Friday was a bullish day in the markets, despite light trading volume due to the Christmas Holiday. Volatility was with us from the beginning of the week, mixed economic data that included a +0.2% rise in core-CPE, Durable Goods Orders falling -2.1%, and Consumer Spending increased at +0.1% instead of +0.9%, both fueled as well as dampened hope that a Santa Claus rally might be in the making. The hope was further bolstered by an upward revision in University of Michigan’s Consumer Sentiment Index for November, which moved up to 59.7 from its expected 59.1 reading and solidified investors' sentiments towards the rally’s progress this holiday season. Furthermore, crude oil prices hovered around $80 a barrel thanks to the recently approved $1.7 trillion dollar package and a reduction in Russian exports capped firm rally growth as well.
I remain in the bearish camp after reviewing the four primary domestic indices with only the SPY showing a Buy Signal on the hourly charts. The remaining three indices DIA, IWM and the QQQ are in Sell mode on Hourly charts. Market breadth on Friday was mildly bullish with advancing issues beating declining issues by a ratio of two-to-one on the NYSE and outpaced them by 155 units on NASDAQ. These upbeat results were highly visible in breadth, as both indices experienced a positive trend. Further boost came from crude oil prices, which jumped 2.16 or 2.79% and settled at $79.65 per barrel for the February contract. The VIX index showed an overall decrease as well, dropping 1.10 points or 5.01%, and closing at 20.87 – all making it a great start to the festive period! Simply stated there remains a continuing difference of opinion between indicators which should bring the investor to a state of extreme caution.
Bearish sentiment was fueled with Bloomberg's report on Friday, it is clear that the uptick in Covid-19 cases across China has been significant. The National Health Commission held an internal meeting on Wednesday and reported that approximately 37 million people could have contracted the virus in a single day and that 248 million people were likely infected within the first 20 days of December. This suggests more than half of residents in Sichuan province and Beijing may now have the virus, leading to increased concern among health professionals. Coupled with China's abrupt rejection of its "Covid-zero" policy just a few weeks earlier due to public protest, it is anticipated that medical facilities are feeling deluged as they attempt to treat those affected. This situation presents very serious implications indeed.
Following the ten trades which were suggested in last weekend's edition would have resulted in six winning trades and four losing trades with a gain of approximately $1,725.00 for the week.
A quick review of today’s Market Dashboard would support a Neutral status at best for the current markets. There are no suggested trade idea’s for the coming week in today’s copy of the Trading with AlphaVL spreadsheet.
My primary focus in the coming week will be on rebalancing my three personal portfolios. As you may recall my personal management style calls for the total dollars available to be split as follows: 50% in a Buy and Hold portfolio which holds four Vanguard ETF’s, 30% in an Active Equity portfolio which hold no more than 20 positions of Growth stocks and 20% in an account focused on Short term trading with Options. Each year the week between the Christmas and New Years holidays finds me rebalancing these three accounts and enjoying the slowness of the markets.
To access the current copy of the data behind our trading please follow this link: Trading with AlphaVL