Trading with AlphaVL: The Newsletter for Growth and Momentum Investing

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 My strategy call is that we are entering a period of Market Neutrality, if not remaining in a Bearish trend. While the S & P 500 closed up 1.45% for the past week, the gain actually materialized in Friday’s session and was driven by what the market interpreted as positive economic news on both wages and job creation.  Given time to more thoroughly digest this data over the weekend,  investors may very well wake up Monday realizing that truly not much has changed, so be careful with where you trade and how long you hold your positions.

The chart below is a trend chart with four simple moving averages and one Anchored VWAP displayed. The SMA’s cover periods of 20, 50, 100 and 200 days.  The Anchored VWAP begins 1/10/2022. What the chart tells us is that the Close on Friday was below all the simple moving averages and significantly below the VWAP.  It’s not a confirmed reversal, but a decent trading day albeit still away from a definitive turn upwards. 

Historically, the S & P 500 trades within a daily 1% trading range, either up or down.  Inversely stated that is interpreted as 74% of the trading days the S & P 500 will trade within a 1% trading range up or down, with roughly 26% of the trading days it is either over or under a 1% trading range.  Friday’s action, while over the 1% range, was at best just the start of a reversal and a long way from a trend.

This week we saw Breadth at the end of the trading day come in with a Positive bias three days and a Negative bias on Thursday.  Friday’s Breadth was positive with advancing issues beating declining issues by 7:1 on the NYSE and by over 2:1 on the NASDAQ. Advancing volume was 84% on the NYSE and 67% on the NASDAQ. VIX dropped by 1.33 points (-5.92%) and closed at 21.13. Crude oil prices were flat after gaining 0.05 points (+0.07%) and the February contract closed at $73.72 a barrel. Gold prices tacked on 30.30 points (+1.65%) and finished at $1870.90 an ounce.

As I stated in last week’s newsletter, I was apathetic going into the holiday shortened week and did not post trading ideas.  As Tuesday began to unfold, my Bearish stance returned and I put on five Bear Put Spreads with January 20^th expirations in ADM, ANET, AXP, RCL and UNH.  In total, I spent approximately $2,400.00 in premium. All positions were closed Friday with a gain of about $1,200.00.

The coming week will be a repeat of last week. Again, I am not posting ideas today since the coming week is likely to be very volatile with an increase in the number of Corporate earnings releases, which will drive the markets through late February.  Monday will see me with an eye to my watch list looking for names with defined trends in place with ample time to put a trade on prior to the underlying earnings release date and confirming price action in place.

 

To access the current copy of the data behind our trading please follow this link: Tradingwith AlphaVL

Good luck and Good Investing!