In this post, I’ll focus on setups that I’m monitoring for both long and short positions. With a chart and short write-up, this is a quick way to scan and plan potential trades.
These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.
Stock Market Update
Stocks are attempting to bounce back from an extremely oversold condition, but one key hurdle remains in the way. Across the major exchanges, the percent of stocks trading above their 20-day moving average (MA) dropped to just 18% at one point last week. Along with other indicators like the McClellan Oscillator, various breadth metrics pointed to oversold levels while investor sentiment turned increasingly bearish across both survey and positioning indicators. Those are ideal conditions to support a rally, with the S&P 500 rebounding off last week’s lows at the 6500 level. But so far, the index is struggling to recapture the 200-day MA (green line in the chart below) which has served as resistance on several occasions this week.
While breadth, sentiment, and positive seasonality over the coming month are all tailwinds for equities, investors are being forced to contend with a rapidly changing dynamic when it comes to monetary policy. As forces driving inflation show no signs of easing, the outlook for rate cuts is growing uncertain as various market-based indicators are now pointing to the prospect of rate hikes in the year ahead. The 2-year Treasury yield now sits above the upper bound of the fed funds target, and fed fund futures now favors a hike in 2026. At the same time, longer-dated yields are approaching key levels. The chart below shows the 30-year Treasury yield, which is forming an ascending triangle pattern. A breakout would put the 30-year at the highest level in nearly 20 years.
The interest rate backdrop is quickly shifting to a headwind on both the short- and long-end of the yield curve. While that could pressure equity prices, I believe the near-term setup favors bullish action in the indexes. With that in mind, it’s important to keep a close watch on our trade setups that are showing relative strength and nearing key breakouts. Keep reading to see:
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