Sectors Relative to QQQ

Sector Funds vs S&P 500

Game Over

Repo is inverse with XLF, not on XLE.

Financial MIRV

Gambler strikes: RY $80, XLF $30. Lots of targets in this sector. Avoid ones hitting support such as SIVB. Zion is an example of the mondo topping patterns in small and regional banks that haven't busted yet.

XLF on a Line

Bank earnings took XLF back up to a resistance line.

Bearish Looking Charts With Liquid Options

Assorted charts follow.

Earnings Hell For Single Stock Traders

Did you catch financial earnings today? Several of the top-10 gainers in the S&P 500 were bank stocks.

I expect hell for earnings season. Netflix exemplifies the wild ride that could be coming this earnings season for single stocks and it's why I held off on buying NFLX calls this morning despite being bullish on XLC. 

I think Netflix could get to within striking distance of $250 per share quickly on a positive earnings report. Positive means however the market interprets earnings and guidance. If Netflix announces a total disaster and the stock jumps 10 percent, that tells me "the market" was pricing in the apocalypse and didn't get it, hence positive.

For the bears, Netflix is also perched about $30 above long-term support. I lean on the bullish partially because I think that support will hold, but the stock could easily hit that level after bad earnings on Tuesday after the bell. Between you me and the wall dear readers, if NFLX tumbles to around $158 per share post-earnings and the overall market is well into rally mode, I plan to be buying. That said, if it loses $158 the next support is the next open gap down around $100 per share. I don't think that would come as quickly, but a really bad earnings report that takes out $158 has a target between $150 and $100. 

Side note: I noticed heavy put buying in XLF today and I almost jumped in to buy calls because everyone thinks this bounce is overdone and falling rates will harm financials. The latter is definitely correct over the coming months, but the direction of rates affects relative performance of financials, not absolute performance. Many of these stocks bounced off or near lows today. If the market rallies, they could run even if long-term yields continue falling.

Sector Check-Up

Healthcare (XLV) is the only clearly bullish pattern. Maybe XLU too. Tech sectors (XLY, XLC, XLK) are ugly, but hold potential. Value sectors (XLF, XLRE, XLP, XLI) look like they're rolling over. Materials and energy (XLB, XLE) both rolling over, but they are not required for a bullish move in the broader market. At this point, a rally requires their weakness.

Easter Charts

Financials XLF

Rising interest rates benefit XLF, but now I think they've bottomed, or at least a big bounce off long-term support will follow. This will be murder for financials in the context of a wider sell-off in stocks.

Financial Island

How about a gap down tomorrow?

Energy Up, Tech Down

I'll do a longer round-up in a bit, but wanted to note XLE is hitting resistance areas again in pre-market. There is a conjunction of long-term resistance lines there.

I've talked about the 10-year yield being crucial, and energy is a component of that. There's a monster inverted head-and-shoulders pattern there. If that pattern completes, the target is $100 on XLE. A 67-percent increase from the current price. If that completes, if energy breaks out, all hell is going to break loose in the financial markets. I have weekly puts on XLE that will get stomped if XLE doesn't back off quickly, but I have a lot more in Apple weekly puts I picked up around the same time that are getting greener. As I've been doing for the past year or more, I'm persistently more bearish on technology because I see a no-win scenario. Either the pattern since 2008 holds, with commodities and markets reversing sharply right when it seems like inflation is taking off, or inflation and interest rates actually take off. The latter scenario is worse for technology and related financial assets. If energy breaks out like that chart implies, financials may also collapse like a house of cards because rates will rise too quickly, devaluing their assets faster than they can grow them with new lending. That's more speculative though. What I'm most confidence about is that tech is doomed, which is why most of my money is betting against it.

Premarket: Tesla Fills the Gap

Tesla has filled the gap as far as I'm concerned in premarket, at $911 per share. It needs to trade there in regular trading hours to count, but I suspect it will. The question next is does it bounce, or has it broken support. There was strong support at $930 as I pointed out a couple times yesterday. Today could be wild in either direction and Tesla may be at the center of it. I cannot stress this enough: almost every time we have come to a point like this in the past, outside of March 2020 and maybe autumn 2020, the bearish setup failed. From my perspective, with VIX still crushed as of yesterday, the profit opportunity on a break is vastly larger than the opportunity from a bounce because a downside break has at least 5 percent downside and probably closer to 10 percent. A bounce could be brutal in the short-term of days and maybe weeks, but remember the S&P 500 Index futures made an overnight all-time high ahead of the Thursday open. There isn't much upside for stock indexes outside of a melt-up scenario. Beaten down stocks suck as ARKK could rally 20 percent or more if the market stabilizes. When it comes to caution, I'm watching the ARKKs of the market and not the Apples.

For a bearish continuation, the Russell 2000 needs to make a new low. The futures low for this correction is 2127.

ARKK is not at a new low in premarket trading. It's lowest point was $89.03.

I will press the accelerator on short positions if there is a breakdown in the market, but otherwise I'm going to be sitting on a healthy cash position waiting to see how the market opens. I'm also interested to see if more sectors join in the selling, sectors such as consumer staples and financials.

Imagine Buying Tech with Central Bankers Cheering on Double-Digit Inflation

Then compare to the relative price of financials, energy and materials.

The only question is when, not if, the tech bugs find their windshield.

XLF Testing Resistance

Wayfair Plunges Tomorrow

I think Tesla could get to $900 too, if Biden has hinted at a higher-than-expected CPI number.

Reuters: Biden says inflation data due Friday will not reflect recent drop in some prices

President Joe Biden sought to reassure Americans on Thursday that rises in consumer prices were easing somewhat, saying that inflation data for November due out on Friday would not reflect a recent drop in some prices including energy costs.

Maker forecast is 0.7 percent. I don't know if it is worse or not. That would raise the 12-month, but it'll take 0.9 percent to get a 7-handle.

Wayfair and Tesla are at support. The Russell 2000 futures crosses below the 1-year moving average again. IWM hasn't yet. If CPI comes in high tomorrow, I'm expecting a big down day for tech and related growth/momentum.

BTC looking ugly too.

This could be a bear trap. Maybe it's a dip and stocsk rip higher tomorrow or next week. I just want that caveat there to anyone taking on risk. I take on risks I can live with. I can reverse position at any time and do. But right now, I am betting the correction resumes tomorrow. XLY, TWLO, AAPL, UUP (calls) are my 4 largest positions. I have weekly options expiring tomorrow on ROKU, W, and XLE because I do think tomorrow could have some fireworks.