From the Trading Desk

NASDAQ Leads as Small Caps Take a Step Back; Cryptomania Continues

Volume across both exchanges ended lower on the session despite closing all-time highs. Intraday all-time highs are within reach, but all eyes will begin to shift towards the Federal Reserve statement tomorrow at 2pm EST. The sore spot on the session was certainly small caps not joining the party. The group still remains above its 50-day moving average. Bitcoin futures began trading Sunday evening and its first full day of trading on Monday. Cryptocurrencies have undergone quite the run and now bubble talk has hit mainstream media. Maybe we need to see talk about Bitcoin on the “Today Show” or “Good Morning America” to really see a top in place. We are only concerned with price action and at the moment stocks and cryptocurrencies are in solid uptrend price swings.

Very encouraging action from AAPL yesterday as it reclaimed its 10 day moving average on above average volume. The stock has been forming a solid handle and this big boy stock wants to get going. It is by far the best out of the FANG stocks and poised to breaking higher. FB, AMZN, NFLX, and GOOGL are all sloppy in price action. AAPL, although big has set up great for a bigger run. MSFT often left out of the top stocks has quietly held up its gap post earnings and ready to jump to all-time highs once again. Keep an eye on the big boys for moves higher.

Banks have enjoyed some solid gains as of late. However, they are quite sloppy in nature. It is no secret higher rates are a HUGE benefit to them. Keep deposit rates low and lend at higher rates is a recipe for success. An inverted yield curve may derail their plan, but for now the yield curve is as such banks should continue to do well even when the Fed raises rates on Wednesday. We still have to get through Tuesday’s market action first. All signs point to the stock market continuing this trend.

Bucking the trend a bit is XLU and XLRE. Both groups should be negatively impacted by higher rates. With that said, both are poised for runs to the upside. Positive price action for both certainly gives the impression they are going to withstand higher rates. The bond market is pricing in another rate hike in March or May. This is something to keep an eye on when the Fed’s statement is released Wednesday at 2pm EST.

This market has treated those who have stayed with the trend. Bucking the trend is never the right way to go. Most want to top tick the market and make a killing on the turn only to be burned badly. Stick with Big Wave Trading as we navigate this market. Best of luck to your trading!

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