Hello traders,
I hope you’ve all had a good week.
There has been some welcome respite from the manic day trading of ‘meme stocks’ touted by users on Reddit’s WallStreetBets which undoubtedly threatened some hedge funds during the short squeeze. There has still been a lot of money to be made in equities since then, albeit at a more leisurely pace, off the back of earnings reports rewarding those with a more patient, fundamental approach to investing.
You will have no doubt seen the big beats by Amazon and Google, with the former company announcing that Jeff Bezos would be stepping back from his role as CEO to be replaced by Andrew Jassy later this year. The growth in Amazon’s cloud computing division, AWS, continues to amaze and follows the strength reported by Microsoft just last week. Alibaba also reached a milestone in its cloud computing business, with the division turning a profit for the first time, and also made a surprise announcement of their own in news that they had reached an agreement with China’s government and regulator to not break up the company, and potentially put the Ant Financial IPO back on the table.
I summarised all of this in my video on YouTube earlier in the week, and discussed other key news including Uber’s $1.1B acquisition of alcohol delivery company Drizly, as well of some of my personal stock positions in the likes of Charter and Visa. These videos are free for everyone to watch, so I encourage you to check them out and subscribe for new updates when I publish them on Tuesdays and Thursdays.
Turning away from earnings to focus on our familiar format, there have been more great setups featured in our Trading Club having identified them with our Checklist process. The general mood in the market has been bullish, with risk markets strongly outperforming safe havens. Here’s our Market Risk Checklist that I shared with you last week, which validates the positive bias in sentiment.
We’ve seen the Industrials / Consumer Staples ratio pick up as we anticipated last week, with opposing safe haven plays in gold and treasury bonds selling-off.
There are numerous ways to play this, including of course a long position in stocks. The S&P 500 looks set to close at a record high today, with President Joe Biden likely to get his $1.9T stimulus bill passed. The generally positive earnings results from many of the largest weightings in the index, including those that I touched on earlier, have also undoubtedly contributed to the rally. Here’s how the chart looks as I write this Friday morning:
Having successfully tested support around 3700, the market has overcome resistance near 3800 and looks set to continue higher. With the RSI less than overbought and no clear impediment until at least 4000, the stock market looks set to continue towards the next major target of 4150 – 4200. Of course, that depends the fundamentals continuing to support the technical picture, with a positive score as our Checklist shows currently.
To learn more about our methods, and join me for more analysis in real-time, check out our MDT course and Trading Club pages where you can preview everything that we cover.
In the meantime, why not head over to our YouTube Channel for our latest FREE videos which I will be bringing to you each week in 2021! As there’s no charge for this content, it would be great if you could support the channel by leaving a comment and subscribing.
Watch this week’s video here: https://www.youtube.com/watch?v=hYuf7Kyv9zM
Have a great weekend,
James
Disclaimer: For educational purposes only. Even though we do our best to provide reliable data, you should not trade based on this information.
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