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Scrooge on Stocks

Morning in the Markets

Briton Ryle by Briton Ryle
December 20, 2022
in Stock Market News
0
Scrooge on Stocks

Bah Humbug spelled with toy blocksSanta hat.

Well, here we are, just a handful of days before Christmas. I’m getting about the best gift I can imagine: my daughter got home from her two-month trip to Europe this past Friday, and she is going to make the 9-hour drive from New Orleans to St. Marys, Georgia, to spend Christmas with me. I haven’t seen her since graduation last May, and I’m very excited. 

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It looks like we’ll be having gumbo for Christmas dinner…

The hyper-commercialization of Christmas saps my holiday spirit a little more every year. If it were not for the chance to spend good time with family and friends, I’m sure I would’ve devolved into a grumpy combo of Scrooge and the Grinch, muttering “bah-humbugs” as I punted those insufferable, cheerful little “Whos” across the town square…

So, a big thank you to my daughter!

Of course, that’s all a setup to talk about what this week will bring for stock prices. Last week’s action was surely the work of Scrooge and the Grinch. Maybe this week will give investors a little surprise under the tree? 

Let’s dig in…

Friday morning, I wrote: 

Today, the 50-day moving average for the S&P 500 sits at 3,861. As I write, S&P 500 futures are trading at 3,859. There is no doubt that the 50-day MA is accounted for in the trading algorithms. The algorithms were targeting the 50-day MA in the pre-market. The question is, what will the algorithms do now? 

I will watch for a show of strength at the 50-day moving average. And that’s simply because I expect that the downside story is mostly played out after the selling we've seen. Opportunity should be to the upside. We’ll see…

And at approximately 10:05 Friday morning, the S&P 500 broke below the 50-day Moving Average (MA) at 3,861 without so much as a wink or nod on its way to the day’s lows at 3,827. 

Now, if there’s going to be an intraday reversal, 10:30 AM and 2:30 PM ET are the times to watch. 

The hour between 9:30 and 10:30 is often called “amateur hour” because that’s when FOMO (fear of missing out) usually comes into play. Maybe it’s some news or an economic report, but when the market puts in a decent move right out of the gate, there will always be a fair amount of investors and traders that can’t wait and jump on the prevailing market direction. 

FOMO tends to wear off after an hour or so.

On the other hand, institutional buy and sell orders tend to hit late in the day. And so around 2:30, the market will sometimes tip its hand about what the end of the day's trading will be like. 

Market rules are never written in stone. Sure, that would be helpful, but if anything, the market’s job is to make things more difficult. So that’s why we get head fakes, whipsaws, failed breakouts, and breakdowns. As I like to say, history doesn’t repeat, but it does rhyme. And that's when patterns do emerge.

Friday, the selling paused, and there was a little recovery at 10:30 AM. It didn’t hold. But the rally that started right around 2:30 was mostly held. By 3:40, the S&P 500 had rallied a couple of points above its 50-day moving average. With a close at 3,852, the index didn’t finish above the 50-day MA. 

But here’s what the chart looks like this morning…

S&P 500 chart

That last red glyph on the right is Friday, and the purple line is the 50-day MA. That gap in the shaded circle was mostly filled by Friday’s action. 

Maybe I don’t have as much inner Scrooge and Grinch as I let on, but that looks like a show of strength at the 50-day MA. And it’s got me feeling optimistic. We got red for the holidays last week. How about a little green to round things out this week? 

And, for the record, instead of Meta (NASDAQ: META), I bought some Amazon (NASDAQ: AMZN) calls for a trade. The stock could take a shot at $95-$96 this week. I picked up a handful of the 95 strike calls that expire this Friday. Hopefully, it makes for a nice Christmas gift.

That’s your “Morning in the Markets” for today, take care, and I’ll talk to you tomorrow.

brits-sig

Briton Ryle
The Profit Sector

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Tags: Amazon (Nasdaq: AMZN)META (NASDAQ: META)S&P 500
Briton Ryle

Briton Ryle

I’ve been trading, investing, and sharing my insights with individual investors since 1998.  Back then, the internet was not a very useful research tool. Armed with a library card and a huge budget for the printer, I’d scroll the microfiche for Wall Street Journal and Financial Times articles. I bought technical books on wireless technology and fiber optic networks. I traveled to Chicago to learn the secrets of stock options trading directly from the experts on the floor of the CBOE.  I’ve attended and spoken at more investor conferences than I can remember…. All because I’ve always taken my responsibility to my readers and subscribers very seriously. I refuse to parrot popular opinion, offer up half-baked ideas or publish incomplete or half-hearted research.  There is no shortcut to deep research... becoming as close to an expert on topics, trends, and technology as possible. And the rewards are life-changing. The very first stock I ever recommended was South Korea’s SK Telecom. My readers enjoyed a 150% profit in a matter of months.  And after 25 years, I’ve helped tens of thousands of readers change their financial fortunes.  A few months ago, I donated all my suits to Goodwill, pulled my name off the list of speakers for the big investor conferences, and left the big city for Southern Georgia. The plan was to retire to the banks of a tidal creek that splits off from the St. Mary’s river as it enters the Atlantic between Cumberland and Amelia islands... and trade stocks when I felt like it. But, I guess retirement wasn’t for me after all. I’m back, and this is gonna be something special. 

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© 2022 The Profit Sector, LLC. All rights reserved. Our website provides stock market research, commentary, and analysis. Information is provided “as is” and solely for information purposes, not for trading purposes or advice.

Nothing on this website should be considered personalized financial advice. Any investments recommended herein should be made only after consulting with your personal investment advisor and only after performing your own research and due diligence, including reviewing the prospectus or financial statements of the issuer of any security. The Profit Sector, its managers, its employees, affiliates and assigns (collectively "The Company") do not make any guarantee or warranty about the advice provided on this website or what is otherwise advertised above. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. The Company is not affiliated with, nor does it receive compensation from, any specific security. To the maximum extent permitted by law, the Company disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations provided herein prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.

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