One Last Bear Rampage in 2022: Communication Services

We've Only Just Begun

I am strolling through the charts and seeing areas of the market that haven't even completed tops yet. It took 5 minutes of looking at charts to find these, this is the top of my giant pile of charts. And by top, I don't mean the best, though some are great. I mean I made it through only a sliver of all my watchlists and had enough charts for a short video.

Google on the Line

A trip to $85 on a dip

Adobe too, but seems like more bounce potential given the drop is on earnings, guidance and a buyout.

Friday's Bashed

These are stocks that fell on heavy volume on Friday and have good looking bearish setups. I put Google and Amazon in here and then stopped with BigTech like Adobe, Meta and Nvidia because so many of them showed up in my screen. BigTech is a bears' shooting gallery again if this market is going down. Cloud companies such as Docusign, Salesforce, etc. all look headed for new lows.

Bonds and Yen Kill on Friday, But Powell Kills Next Wednesday

Strange day. Bonds rallied strongly and yen trades paid off. Oil was up most of the day before reversing. My portfolio is more overweight TLT and USO positions after today. I am flat on the broader market aside from some calls on EWI and EWG, plus the XLC position. That was destroyed by poor earnings from SNAP today. That stock sank about 40 percent and nuked the social media space. The jump into the yen was profitable, but the raining is still ahead given my use of OTM calls.

The markets were constructive for a rally today. The dollar pulled back, oil fell and bonds rallied. Whether that sparks follow through remains to be seen.

The S&P 500 Index filled its gap and that was also the underside of the trendline I had drawn.

If I could call the plays for next week, and using BTC as a proxy, a pullback to the blue horizontal followed by a breakout to new highs would be my call. Then the rally can complete in early August and timewise, the market will be on the 2008 analog.

If I had to pick a bearish chart for the market, Google move to the bottom of its post-June channel. The XLC trade will go up in smoke if Google breaks down.

The island in TLT survived the day. Normally, I wouldn't put much emphases on an island in TLT, but today was an important macro day with the flash services PMI below 50, signaling economic contraction. The Federal Reserve has already seen next week's GDP report and we'll see it on Thursday. The consensus is at 0.4 percent and the Atlanta Fed GDP Now model is at negative 1.6 percent with one more estimate on Wednesday. A negative number will trigger a technical recession, which in turn will unleash a political backlash on the beleaguered Baizuo admin. 

A recession would ratchet up political pressure on the Federal Reserve. How independent are they? Will Powell invert the curve like an animal? Or will he pivot? I'm not sure it matters here for TLT longs, except that the near-term expected move in TLT will be higher the harder the Fed attacks inflation and assuming that is successful, with oil cratering below $90. If a Fed pivot instead sparks inflationary action in markets, it could weigh on long bonds even if investors expect a less hawkish Fed.

Updated: Loaded up on XLC for August

I still have cash to deploy, but this trade is set.

I put details on Twetch.

XLC calls remind me of XLY puts at the start of the year. I was targeting XLY because AMZN and especially TSLA puts were far more expensive. To give a ballpark idea for why I like XLC despite it being illiquid, as XLY was back in December and January: for a given rise in XLC and META, the cost of XLC calls is one-tenth the cost of META options. The latter should rally more than XLC, thus it isn't aaples to oranges. Even at the same OTM delta though, XLC is half price. Conversely, if by some luck META actually rips higher and went into the money on this way OTM same-delata call, it would by itself get me halfway to ITM on the XLC calls, despite only being about 18 percent of XLC.

The main holding in XLC is Alphabet at nearly 25 percent of assets. It has about 5 percent to my lower horizontal, about 9 percent up to a resistance area, and 15 percent up to a gap. If this turns into a big rally, then I think it gets to around 15 percent. That would mean a highly profitable XLC trade. As for options, Google is also considerably more expensive for similar strikes. Add in Netflix, and that's almost half the portfolio in

Air Balls

The setups are incredible again. The next move will be big in either direction, but a move down will be far larger and far more important. It is a new wave of selling if these stocks break lower. A short-term rally may require positive earnings. Google and Microsoft report today.

No Island, But Google Top is Complete

Bombs away. Google reports earnings on Tuesday. If they disappoint, bears win. Major indexes will be at new lows.

There's 20 percent downside to the top of the wedge. I suspect it'll break the support of the wedge in a major bear market. Getting to long-term support would come with a loss of about 30 percent, so not much farter because that wedge is getting very tight.

What the h?

The h-pattern is hell for bears in bull markets and hello new lows in bear markets. Some h-patterns are at their moment of decision right now. Others are at various stages, some bounced where a bull would want them too, some broke, some are still early in formation. The most important and imminent two are ARKK and FB. Both are near their 52-week lows.