Sectors Relative to QQQ

Sector Funds vs S&P 500

Epic Bear Market Unfolding and Adding to McDonald's Short

I've filled out my put position on McDonald's today. Full caveat: it has room to go up another 10 percent. If it gets up there, then I'm going to make far more than I will lose if I'm wrong at this spot.

The stock market is entering month 11 of a bear market and yet. Look at this pattern on XLY. I was bearish on XLY and I was early, but that pattern eventually broke.

Look at McDonald's and auto parts in this context. If this is a bear market, do you think these stocks already at relative all-time highs, or near those highs, versus the S&P 500 Index are going to explode higher from all-time highs?

There are scenarios where stocks such as McDonald's and Autozone, trading at or near all-time highs and at or near relative all-time highs versus the S&P 500 Index somehow lead a new bull market. I don't know what they are outside of something like a hyperinflation scenario, but they're out there. The bear market scenario looks more compelling though. Here are patterns that look like technology a year ago. This isn't like 2000 though, when there was a 2-year stealth bear market in value stocks as the tech sector kept soaring higher. There are some examples such as FedEx and Boeing, sitting at lifetime support, where you could make a case for them not going lower. If the market rallies, they could bounce a lot. The stocks above have ignored the bear market and they benefited from 2020 to 2022. If this is a bear market, these are the types of stocks that might outperform technology as short candidates for 2023.

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.

XLY Next Stop $120

What If the Rally Aborts

If this rally fades quickly, it's almost time to be shorting again. That Tesla is up almost 8 percent at the moment tells me this market still doesn't get it.

XLY Too

Go Time on Tesla and XLY

Back Into XLY

The Tesla-Amazon vehicle.

It's Technical: Nasdaq and Crude Bounce

The only surprising thing is crude is still running, but then bonds haven't started selling off again yet.

Bonds will be the tiebreaker.

Bounce or Final Washout

I find my bearishness alleviating with the decline in price, but this is now a far more volatile situation than it was in the prior weeks. The window for a "crash" is open, for capitulation selling as everyone who hoped stocks like ARKK would turn around throw in the towel. Or the first wave of people who have been holding stocks like Apple and Tesla and Amazon, and refusing to believe the party is over, realize they had better get out. Apple lost support at my line of $167.46 and it hasn't retaken it in pre-market, but could easily take it in regular trading hours. I will be watching this closely because it was the position I did not close yesterday because my littlest one decided to take a glass dish out and smash it at the close. Work from home means I have a P/L chart of diaper changes. 

Stocks like ARKK should be about done for now and a bounce is forming. I don't know if I have the stones to buy ARKK if it fills the gap at $72.83. Some charts like CHTR and ALGN that had been my targets, didn't plunge with the market yesterday.

Energy looks like a better short and if energy slide, that is good news for technology because it means some inflation fears will reside. The market doesn't always trade it based on that relationship, but sometimes. This AM, XLE is down and Nasdaq is up so...

That said, if the Nasdaq isn't done yet it could again become a compelling short if it bounces to a resistance area. It is currently probing a high-traffic zone. The next one is between 15240 and 15350, above that is 15492.

AAPL, SMH and XLY are my top picks for Nasdaq/tech here because I don't want to be in these smaller single names when the market reverses and things could be so volatile that liquidity is at a premium. Click on the tags below to see those charts.

The S&P 500 Index and Russell 2000 aren't sending any bullish signals the way the NQ has, looks more like a weak bounce thus far. Who is the leader?

Will Bitcoin be a survivor or the next shoe? It still sports a very bearish topping pattern, but it hasn't completed. This is relative strength if a rally is incoming.