SHORT MARKET OUTLOOK THIS WEEK.
I was unable to work on my video market outlook this week, so publishing this in the old blog style format. Also, this is a very short market outlook as there is no point delving too deep into technical analysis when we already know that UNH and NFLX will decide what happens to the markets next week.
UNH earnings on Tuesday will decide if Dow Jones is able to breakout to new highs
Tech rules the world and AI is the talk of the town for over a year now. People tend to forget that UNH is a 570 billion mammoth, and happens to be the biggest component of Dow Jones by market cap. DOW made a brief attempt to breakout of its trading range last week, but the breakout will only be confirmed after UNH reports earnings on Tuesday (before market open). If UNH hits it out of the park, we could see a huge TTM Squeeze type breakout to the upside and that would be a good time to go bullish on DIA and other Dow stocks. A miss on the other hand is capable of sending DIA back to the bottom of its Bollinger Band.
So watch out for UNH earnings on Tuesday. I will also be skipping trading on Monday because of this reason.
QQQ – A weak recovery on Friday
We saw a huge red candle in the Qs on Thursday. As is common with such big moves, a retracement of the move (or a dead cat bounce if you will) was expected. And Qs started the day very strong on Friday with a 1.4% move up. But it fizzled out by the end of the day with Qs giving up 80% of the morning gains.Â
This is an interesting development and should not be ignored. Who knows what is behind this move? The big whales taking some risk off of their tech exposure or maybe some earnings news has leaked in advance. Nobody knows, but you can’t hide price action so keep a close eye on Qs next week. A sector rotation from high flying tech to cyclical stocks may very well play out here. Â
RRG charts – Will sector rotation play out?
RRG charts get updated on stockcharts.com on Monday evening, so I will replace this image and also paste it on discord for our group to see. I have been observing that a sector rotation may be playing out as money flows out of the high flying tech sector into more stable/cyclical stocks. So, this chart looks wrong to me as XLK is still in the leading quadrant (Qs spiked up after TSM earnings last week, which caused NVDA, AMD and the rest of the gang to go up too). But the sell off on Thursday isn’t being reflected here.Â
Important Macro Events (UNH and NFLX)
UNH will move Dow, NFLX will move Nasdaq. That is the main thing to watch out for. However, don’t ignore Powell’s speech on Monday as it will be interesting to hear his comments after we saw a good CPI followed by a bad PPI on Friday. He has been hawkish for months now, but markets continue to ignore it. Fed Beige Book on Wednesday should also cause some volatility in the markets. Â
EARNINGS: A ton of earnings, but the NFLX and UNH will rule next week
Earnings season kicks into high gear with a ton of activity. But UNH and NFLX will steal the show as these are two massive market movers. I will skip trading on Monday because UNH reports earnings on Tuesday morning pre-market. So, I will take my trades based on what UNH does starting Tuesday.Â
