Good morning and Happy Friday, everyone. It’s been quite a week!
Yesterday marked the 7th day in a row for tech stocks to blast higher, undoing almost all the damage from the Iran War (or whatever they’re going to wind up calling it). The Dow Industrials, for its part, has added literally over three thousand points to itself in a matter of days.
The NASDAQ Composite, shown here with the standard trio of exponential moving averages (just like all the charts in this post) underwent a key change between Tuesday and Wednesday: prices leaped deep into the topping pattern and simultaneously jumped above all three moving averages.
The move compelled by what was effectively the surrender of the U.S. to the situation may well have broken the back of what was shaping up to be a beautiful longer-term bear move.
You can see this just as plainly on the NASDAQ 100. The price action on Wednesday and Thursday was simply from a different world altogether.
This backbreaker was particularly obvious with the Russell 2000, which had (past tense!) hammered out a sensational topping pattern that was horribly violated by the green bars Wednesday and Thursday. It’s going to take something pretty serious, like a total breakdown in peace talks, to set things right (so to speak).
Although I was able to emerge from Wednesday’s monster rally with most of my body parts intact, the semiconductor sector was the most brutal. Here we have the $SOX at lifetime highs, two words I thought I wouldn’t have to bother using side by side for at least a few months, but here we are.
As for the Dow Transports, those have been in la-la-land for months at this point. It’s stunning to me how a nearly doubling of energy costs would be greeted by the transportation sector with utter insouciance, since this index is performing the same act as semis are: lifetime highs every day.
As for the all-important S&P 500, as of Tuesday it was nestled beautifully at its lowest EMA, but here at, it put on its best track shoes and ripped above all three EMAs and well into its topping (?) pattern.
If there’s any sliver of good news for the one or two bears still breathing, it’s that fear has utterly and totally left the building, with the VIX oriented toward its three EMAs just as it was before the war even started: that is to say, mashed against the lowest EMA and completely collapsed from all the fun we were having in March.
The VIX peaked at 35.90 on March 9th, and here we are, a month later, back into the teens. Sad!
Today might actually be incredibly boring, and I continue to be positioned cautiously. Two of my portfolios are pure cash, one is 75% cash, and the other two are in a hodgepodge of small shorts without any use of margin.
It remains to be seen whether or not this capitulation is simply another version of what we had precisely a year ago (that is to say, a few weeks of bear fun and then resuming months and months of lifetime highs), particularly since these ridiculous two week “extensions” can be granted in perpetuity. Hang in there!
