Weekend Stock Market Review

Worried about inflation, recession, or further stock market declines? The Federal Reserve is too. In order for the Fed to combat inflation, it has to first remove liquidity from the market. Since January, they have been increasing interest rates and tightening balance sheets in order to do so. When liquidity is removed from the markets, stocks perform poorly. If that's not bad enough, a recession may be on the horizon. Has the Fed gone to far? Will they reverse interest rates or continue to combat inflation? 

While these are important questions to ask and will definitely weight on the markets, I prefer to consult the chart and play it like I see it. Here's what I see this weekend. 

First, if we look at the Nasdaq (QQQ) from a support and resistance standpoint, the market ended the week up against strong weekly resistance levels set back in Oct. 20' and Mar. 21'. On the daily chart, we can see that we are also up against possible resistance with convergence at the 50 SMA and downward sloping trend line.

Now if we look at buy and sell signal counts, then we see that our count is only +1 and exposure 30% to the upside. 

Also, if we look at the Nasdaq heavy weights, TSLA is at the top of a bear flag formation. AAPL also in somewhat of a bear flag just managed to climb above the 50 SMA but on light volume. NVDA is stuck below weekly resistance and the 21 EMA. GOOG, AMZN and MSFT although above their respective 50 SMA are also in a bear flagish formations while JPM and FB are in no mans land. 

AAPL

NVDA

TSLA

GOOG

MSFT

AMZN

JPM

META (FB) 

If I were a betting person, then I would say the odds are stacked pretty high to the downside. However, realizing that anything can happen in the market, a push above the 50 SMA and resistance on the Nasdaq although unlikely would be substantial for the markets. There is also the possibility of sideways movement. On one hand, a push above the 50 SMA has potential to take us up to a 50% retracement (above 7% up) and near resistance around lows made in Feb or March. On the other hand, a push lower could take us down to potential support at COVID crash highs about 20% lower. 

All I can say is to be flexible and be prepared for anything. Have a game plan and execute your plan. Personally I want to be prepared to take advantage of the market either way.