The Shakedown 4/12/20

To Fight the Fed.... or Not?

LAST WEEK, S&P 500 (+12.09%):

Monday: +6.72%

Tuesday: +0.10%

Wednesday: +3.36%

Thursday: +1.52%

Friday: Good

We saw the Fed fire an absolute bazooka at the market this week, causing the biggest weekly gain in the S&P since 1974, all while setting unemployment records as the US Economy remains shutdown for non-essential businesses. We are seeing irrationality in markets as Wall St and Main St have never been so disconnected.

This week the Fed vowed to "provide as much relief stability as we can." And provide they did, as they way outpaced any sort of stimulus we saw in the 2008 Financial Crisis. The most recent update was another $2.3 Trillion injection in the economy to aid businesses & Governments. While many may point out the stimulus itself won't be enough to fully restart the economy in the post-corona world, they will miss the fact that the economy doesn't necessarily equal the stock market. We have seen a direct correlation in Fed asset purchases with stock market gains since the Fed was introduced in 1913 -- hence the adage, "Don't Fight the Fed."

However, after a 50% bear market retracement, I don't believe we'll see a V-shaped recovery in stocks back to highs like this all never happened. There is still a ton of damage under the hood and we will begin to see how that is taken as earnings season gets going this week. 

From a trading standpoint, I'll continue the short-term intraday trades. Knowing and understanding market levels is always a huge help in this environment. Knowing where to look for support and resistance in the indices, will help your individual stock executions 

In this type of trading environment, I go into everyday asking myself 3 questions.

"If the market gaps up, I ...?"

"If the market gaps down, I....?"

"Market's flat, I.....?"

Earnings Season Kicks Off

We finally have earnings season come under way this week and it will be the most interesting one we've seen together with the prospects of how the Corona related economic shutdown is effecting company's numbers.

Will the shutdown be priced in?

Will they sell the horrific but expected numbers?

We'll get a better clue of that notion this week as we have some heavy hitters like JPM, JMJ, BAC, WFC, UNH, C, ABT, GS, BLK, PGR, ISRG and many more reporting.

What's going on with OIL?

We should open the week with a big time gap up in Oil and Energy stocks as a whole after OPEC agreed to a historic 10 million barrel per day production cut, after Russia and the Saudi's price war led us to the lowest oil prices we've seen in decades. 

Long Setups

Short Setups

SDGR Long

This SDGR is so relatively tight, I love how it's setting up for an entry this week. Coming off an inside week where the stock traded in a very small range for itself, there looks to be a ton of opportunity in this one above the 42 resistance area. 

Trigger: $42

Stop: $38.49

Target: $48-50+

Hope to see you in the chat Monday!

Watchlist coming in the following email.