What a week in the market, I want to explain this pullback a bit more. This blog is jam packed with valuable insight, but first I'd like to ask for your support.
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Let's get to what I am good at doing, that's talking about the stock market.
Tech Selloff: How Big is Big Tech?
Big Tech took a tumble for the second week in a row, with more aggressive selling this week. On a percentage basis, QQQ had its worst day since October 7, 2022.
The word 'big' in 'big tech' is quite literal. Did you know about 31% of SPY’s total weighting is tech?
Look at the top 10 holdings of SPY:
Other than Warren Buffet and Eli Lilly (hello GLP1), SPY is heavily influenced by technology. Big Tech is BIG, and the law of large numbers is something to study!
When tech is being sold off, expect SPY to feel the pressure.
We are right in the middle of earnings season which will likely be the key driving force for the week ahead.
Magnificent 7 Earnings
GOOGL and TSLA reported last week, and both stocks are down on the week.
Google had a great quarter, but the stock is down 13% off recent all time highs. YouTube revenue did not meet expectations.
Tesla is down 20% but keep in mind the stock climbed almost 60% IN A MONTH.
The company is having a tough time selling cars. Elon now says the company is no longer a car company, he’s talking about robots, AI, and robotaxi’s.
The market is trying to digest this. So am I because I bought a car from them a year ago this week.
Magnificent 7 earnings for next week:
4 of the Mag 7 report this week:
Tuesday: MSFT
Wednesday: META
Thursday: AMZN and AAPL
The good news is that MSFT is currently 10% off its highs, META is down 15%, AMZN is down 10%, and AAPL is down 8%.
If earnings aren’t too bad, we could see a rebound. However, the environment still leans towards the sell side, with potential sector rotation into more dividend stocks. I prefer when a stock slows down into earnings versus running straight up making expectations even higher. Always think about this for any stock!
Are you taking enough risk:
Too many of you are stuck in your heads and scared. I’ve been there too. I walk up a steep hill three days a week because I’m fairly certain steep hills and body fat don’t get along (that’s a different blog).
I always see this truck with wheel chocks behind both tires in the driveway and I think about risk management. Is putting the truck in park not enough, what about the emergency brake?
“You can never be too careful” he says. I think to myself oh yeah you can. Question for you: Does your trading account’s risk management look like this? STOP being scared of taking any risk, this is why we have stops!
This truck is part of the reason I wrote about speculation this week read the full article here.
Make some trades, don't let fear take over. You may be afraid of a pull back, I get it, but push through the fear, let me explain more.
When I heard QQQ hadn’t been down this much since 2022, I had flashbacks. The 2022 bear market lasted 10 months. It was pretty rough for this full time trader my friends, SPY dropped about 25% from its highs. Bear markets are part of trading, and you shouldn't avoid taking risks because of them. Let me show you why.
You see the decline of 25% (the red box on the left)? Notice the market does NOT go straight down. Look closely you’ll see some nice ‘bullish’ runs as well. You aren't going to time this right unless you are hindsight trader. Hindsight trading makes you ZERO money.
People who focus on losses during an account drawdown get nervous. Some can’t take the pain and they sell during the drawdown. Other’s think, as soon as I get back to even I’m getting out! That’s the green box I drew above.
The market retest’s the moving averages and they think they were so smart to get out. Then the market takes off 25% ABOVE the previous high from 2022.
Drawdowns are normal. The key is surviving without blowing up your account. If you didn’t panic and sold everything when the market retested, you missed out on the 25% breakout.
You probably don’t need to put wedges behind the wheels of your truck to keep it from rolling away. You also need to be putting on some small trades regardless of how extended the markets are. Time in the market is better than timing the market.
Mr Money Maxwell (M$M) Preview on Hedging
Checkout my gumroad product on hedging click here to download an in-depth discussion on why I hedged this week along with an explanation of what I posted in discord! I've made this free for everyone!
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Upcoming Dividends:
I'm not looking to grab any of these this week, but that doesn't mean you shouldn't. We had a nice trade on LOW last week. I'm focused on earnings this week.
Dividend Aristocrats next week:
Dividend Kings next week:
Upcoming dividends this week:
Earnings for the week:
There are so many earnings this week! I can't even list all that I'm watching in this blog, check discord and I'll break it down each morning.
Weekly Charts:
SPY - Second down week on SPY (keep in mind what I wrote above about tech being 1/3 of this index).
I see some support around 520, we have a daily 100 moving average and the weekly 20ema in this area. If we see weakness, that would be our next bearish target. Notice how the volume came in a bit the past 3 weeks? RSI still pretty high. We could see some buying coming in. I'm still feeling a little bearish personally but I have bullish delta and some bearish trades.
QQQ- Tech bounced where it should. but it still looks pretty weak. We do have a lot of earnings this week. Notice the evening star reversal? I wouldn't be surprised if QQQ came down to around 445ish, but earnings are a wild card that can nullify technical analysis.
IWM- I see compression this week on IWM. I think rate cuts help smaller cap stocks who depend on debt. I've said this for a month now. I'm still bullish IWM as you can see I'm profitable on this breakout we setup 4 weeks ago.
TLT- I'm also bullish TLT with upcoming rate cuts. I know I've been saying this for almost all of 2024, but you are seeing why now. Look at this compression! We're holding the trendline of higher lows, perhaps we break out soon.
VIX- Look at the weekly doji (meaning indecision) we finally got a spike in fear this week, but the pullback on the indexes weren't quite enough for me to put on any sizable risk. As you can tell from the doji we went from no fear to fear back to right where we started.
GLD- continuing to pull back into the range. We have a doji... break above or break below?
Week Ahead
Busy week ahead. Federal reserve rate decision, expectation is no cut until September. Let's hope they are waiting too long for the first rate cut.
Jolts, ADP and Jobless claims. I hope you see how this repeats over and over again. You should start getting a feel for this by now.
I'll see you next week. Much sooner in discord. Hope to see you in the Mr Money Maxwell's Inner Circle
Happy Trading Good Kids!
-$Maxwell
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