The Shakedown 5-4-25

We continued to rip higher this week as the QQQ tapped the 200sma Friday with the SPY still having a few dollars to go before contact. We are stretched to the upside so I anticipate the beginning of this week to be very tricky. We could absolutely continue to run but understand we are overbought at these levels.

The most important information we learned this week was the 20ema in both SPY and QQQ was a launching point. We came into the week coming off 4 straight 1% green days, so big test coming into the week. We got that stress test where we sold into the 20ema on Wednesday with the QQQ being down over 2% at one point, only to close the day green once we came in contact with that 20ema. That is big information. As long as we are reacting positively off the 20ema, I will look to be long. I am saving up most of my firepower for a retest of the 20ema. We have consistently seen chasers get punished in this market.

The last two times we've had similar market action -- where a big drop below the 200sma was followed by a swift recovery back to the 200 -- 2018 and 2022. I go over the two comparisons below.

Huge week of earnings on tap which I also go over below.

Along with all that -- it's Fed week! The Fed is currently pricing in a 98% chance of NO rate cut this week, so don't expect one this Wednesday. Will be key to hear whether Powell is Hawkish or Dovish at this point.

Overall we're at a tricky spot. The most important aspect of the market to me is that we continue to hold the 20ema in the SPY and QQQ. We will continue to trend higher as long as we do that. I am heading into the week cautious with how stretched to the upside we are, along with a heavy news week of earnings and a Fed rate decision meeting.

Let's get into the report.

Fed probability tracker is anticipating a 98% chance of no rate cut this week.

2018 & 2022 Comparisons

The two most recent scenario's we've had this sort of setup -- big selloff below the 200sma and fast recovery back to the 200sma -- were 2018 and 2022. You will notice they had vastly different outcomes. Look at the day by day action to assimilate yourself with a few different scenarios of how this could play out.

2018 we recovered quickly back to the 200sma. We chopped around the area for about 3 weeks but ultimately resolved higher, creating new all time highs soon after.

In 2022, we saw this type of snap back and then everyone get bulled up to the gills only for it to continue a punishing bear market for the next year. I personally don't think we have a 2022 scenario play out because it's just too obvious and seems with how recently that action took place.

Will have both scenarios in the back of my mind watching the action though.

Ideal Action

This is the ideal setup to me. We maybe run through the 200sma this week but ultimately fail. Though we fail up here, we continue to hold the 20ema as support. We have a few weeks of back and forth chop that ultimately sets us up for a rip through the 200sma resistance. That would set up so many charts and leaders are already beginning to show their face so I would imagine there would be setups-galore.

Economic Data This Week

Upcoming Earnings

HUGE week of earnings on tap. I'm holding some HIMS into the report Monday when we'll also hear from PLTR.

CELH DDOG CEG before the open Tuesday.

AMD, RIVN, TEM, ANET, ALAB, UPST after the close Tuesday.

UBER, DIS, U, VST, OSCR before the open Wednesday.

APP, CVNA, ARM, DASH, BROS after the close.

PTON, SHOP, COP, CROX before the open Thursday.

TTD, COIN, MARA, MELI, NET, SOUN, DKNG, AFRM, WOLF, INOD after the close.

HOOD Long

HOOD with a great earnings report as the stock has been on a tear since the market bottom. Giving us a post earnings setup now with an inside day Friday below the earnings highs at 51.30. Love the way it continues to react off 10ema support. Watching up through 51.30 for an entry.

Trigger: $51.30

Stop: $46.49

Target: $66+

The Shakedown 5-4-25

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