EarningsBeats.com Digest for February 21, 2022
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Trading Places Live!
Since the market is closed, there will NOT be a Trading Places Live episode today. Join us on Wednesday, February 23rd at 9am ET for our next show. See you then!
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About this Event: Join Tom Bowley as he unveils his Top 10 Stock Picks in each of his five portfolios - Model, Aggressive, Income, Strong Accumulation/ Distribution (AD), and Earnings Reaction - that are leading stocks in leading industry groups. That's 50 stocks in total!
Our flagship Model Portfolio has outperformed the S&P 500 by a factor of 2.4x since inception in November 2018.
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The Mother of All Head & Shoulder Topping Patterns
Large cap growth ($DJUSGL) literally single-handedly held the S&P 500 up in 2021. Most growth stocks succumbed to surging inflation, but large cap growth - likely due to their pricing power - managed to stay afloat and several of these large cap growth names comprise a very large percentage of both the S&P 500 and NASDAQ 100 ($NDX).
They're weighted more heavily on the NDX, so their effects will be felt most there. At the end of last week, large cap growth struggled and the index nearly suffered a major blow as key neckline support was tested:
This pattern is particularly bearish as far as I'm concerned because both the shoulders and neckline are sloping downwards, and the $NDX:$SPX ratio is on the verge of a key breakdown as well. A heavy volume breakdown confirms a move much lower in this index.
Obviously, if this index takes a tumble, our key indices like the S&P 500 and NASDAQ 100 will have no choice but to do the same. The S&P 500's neckline resides at 4300, so losing that in addition to losing neckline support on the DJUSGS would likely send the Volatility Index ($VIX) soaring back into the 30s. When the VIX is in the stratosphere, market makers have a tendency to "go on vacation" and provide little liquidity and backstop to falling prices. It could
get very ugly very quickly. Clearly, the short-term answer is to hold these neckline support levels, but will those levels hold?
We're going to find out starting Tuesday morning.
Later today, we're having our Top 10 Stocks Portfolio Draft, where we'll announce the 10 equal-weighted stocks in each of our portfolios. It'll be a very interesting draft for sure as we have to consider surging inflation, higher interest rates, the Russia-Ukraine
conflict, increasing fear, and technically-challenging conditions (as reflected above). What's the best way to approach this challenging time? We'll discuss all of that later today. I hope you can join me!
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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