Hi, Five Star Traders!
It’s me again!
I’ve been on maternity leave for the past three months, and it’s crazy because, on the one hand, it seems like everything has changed, but on the other hand…nothing has changed.
While I’m finally feeling like myself again and ready to get back in the game, at the same time, I’m coming into 2023 differently in so many ways. Of course, life changes so much with your first child. Everyone expects that. I knew it would change with my second. But, to the extent, I couldn’t have imagined!
Looking back on it now, life and trading have changed so much. Somehow I ended up homeschooling a 3rd grader who’s a great little assistant caring for his newborn brother. In all reality, he isn’t that little anymore!
Throughout all the craziness, I remind myself why I started trading in the first place. I started it to take care of my newborn ten years ago. I wanted to be a trader to get through that newborn timeframe while I refused to send him to daycare. The irony of that train of thought is there was so much more I could never have anticipated that has happened over the last ten years. And now, I’m still using the trading lifestyle to be the best mom I can be, to both him and his brother. The memories and reasons I started have been striking over the past three months!
As I get back into trading (of course, I never ignored the markets while I was gone…I couldn’t stay entirely away), the reason why I do it is always front and center to me.
It’s Earnings Season, Again!
I gave birth to my son in the middle of earnings season, which means I’m also returning in the middle of the core of earnings season!
Upon the beginning of my leave in October, the stock market was in the midst of an earnings-induced rally. Again, the stock market is in the midst of an earnings-induced rally.
However, despite these rallies, the S&P is only trading about 100 points higher than it was on October 28th! The Nasdaq is not much different, as it is up about 300 points since then. It’s almost as if the time went by unnoticed.
Unless you’re Tesla, Nvidia, Caterpillar, or more, who have seen major moves over the last three months, despite a real lack of progress in the indexes.
The Federal Reserve + Market Reaction
We were (and still are) focused on the Fed. But, something that has changed substantially during that timeframe is that the Fed has gone from raising rates .75 basis points to (a projected) .25 hike during the January 31st – February 1st meeting. Multiple inflation metrics have demonstrated that inflation is slowing (but have you seen the price of eggs?!).
As such, I’m not betting on the Fed being as big of a market mover as it was last fall. At this juncture, most of the Fed news is likely priced in.
So, what is new this time? What is the difference between this rally and the rally that lasted throughout October and November, only to die in December?
The last time, the rally got cold feet at key technical resistance zones. This time, the data is easing up (along with the Fed), and investors are aware and expecting. We are seeing signs that the rally is breaking above resistance this time. Check out the chart below:
S&P Futures Daily Chart 1.30.23
While I’m hopeful this *could* be a bear market rally that reverses the trend *if* it can maintain steam, it all depends on the market reaction to the Fed this week, plus key earnings reports after market close, including Apple (AAPL), Amazon (AMZN), and Alphabet (GOOGL).
It’s amazing how different a chart can look if you look at it in a different time frame. Do you see that same chart above? It looks promising on the daily chart. But, if you switch to a weekly, it’s even more apparent how glaring the bearish head and shoulders pattern is.
S&P Futures Daily Chart 1.30.23
Looking at the weekly chart, you can see that this rally has only formed the right shoulder of this bearish pattern. Without a major break above the 4200-4300 area, the path of least resistance remains lower. On a week likely to be explosive, we will see which one prevails — the daily chart showing signs of breaking above resistance, or the weekly chart that is a glaring sell.
Making Money with Charles Payne
I joined Making Money on Charles Payne on Monday to discuss more of what I’m watching this week. Check it out below!
Of course, I couldn’t close this up without a family picture! Here’s me with all of my boys! Everything may be different coming into this year, and I can’t wait to see what it brings!
Starting today, I’ll be back in the Simpler Options Gold Room! If you’re a member, I’ll see you there on Tuesdays & Wednesdays from 1-2 pm. If not, you’ll be hearing from me again on Thursday. I’ll see you in the next episode!