Momentum Monday – Coal Baby Coal… And In Defense Of Crypto

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Good morning.

The markets are closed today so we caught a break.

I’ve been sharing charts all week, so I will keep Momentum Monday short and get right to our weekly show. Ivanhoff and I tour the markets and talk what we are seeing and some strategies as we dive deeper into bear territory.

You can watch or listen to the show right here and I have embedded it below on the blog:

Here are Ivanhoff’s thoughts:

In a bear market, eventually, every sector gets under pressure. Up until last week, oil and gas stocks were enjoying one of their best years. And then, they were hit hard. The Fed raised the base interest rate by 75bps and declared that its goal is to bring down inflation to under 2%. All of a sudden, the market’s main worry was not stagflation (high inflation and very low growth) but a recession (negative growth). The oil & gas sector ETF is now down 24% from its 52-week highs. Despite the drop last week, most oil & gas stocks are still in a long-term uptrend and many might have a short-term bounce near their year-to-date volume-weighted average price.

There are not many stocks left that are still above their 50 and 200-day moving averages. Lately, we have seen select Chinese ADRs and biotechs push against the mainstream weakness but overall there are just a few decent-looking long setups and none of them are really very exciting. The silver lining is that even the scariest and longest bear markets experience powerful counter-trend rallies from time to time. Market breadth has become so weak that we might be close to one. SPY is about 5-7% from major potential support near 350–340. If that level doesn’t hold, we might see a major panic selling and acceleration lower. The faster, the better. It’s always preferable to rip the bandaid quickly than to be tortured for many months by choppy down-trending price action. I am not in a rush to be aggressive on the long side but if I see signs of a bounce, I will try some long exposure. Typically, bear market bounces characterize by very high correlations, so I might just as well participate with an ETF like SPY, UPRO, QQQ, or TQQQ.

Howard here again.

The one sector that is working…..COAL.

Right now, the crypto market is taking criticism and selling from all angles. The bears are saying I told you so as they always do.

There are so many Raccoons (I love the term financial raccoon coined by Ben Hunt) in the crypto space, specifically non competent raccoons, but thats what you get in an unregulated global bulletin board stock market.

Getting past the bad actors, where are we? This part of the conversation is still over, maybe under my pay grade. It does feel like we have too little to show for all the monies and time invested.

Chris is a really thoughtful investor I met at FTX Bahamas and he makes the following point about Bitcoin and Ethereum:

You have to stay in the game to take part in the eventual reveals that the market will offer.

Have a great week.

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here.