This is my swing trading strategy for the Nasdaq

It never fails, does it? Just when traders started taking the scales away from their eyes and went full-on hawkish interest rates as urged by the Fed, stocks started to recover. The latest hawkish comments from a Feb member onWednesday finally convinced them the Fed were actually serious about keeping the foot on the gas on rate hikes. And in a truly perverse manner, stocks rallied hard Thursday and Friday.

You could understand reasons for the Damascene conversion with crude oil surging over 10% in a week off the recent lows. This put visions of 50 bps or even 75 bps hikes next time for the Fed.

I had actually anticipated this on Wednesday and advised members to take some/all profits on stock index shorts (and our short T-Bond positions) as both the T-Bond decline and the stock index declines had become compressed – and hence poised for a rebound which duly appeared right on cue.

But this action is entirely in keeping with my current thesis of high volatility. This is highlighted by the series of recent rapid 600-pip swings in the Dow that I have covered in recent posts.

But the action late in the week was truly astonishing – and confirmed my view that the market was heavily short as traders viewed the sharp rise in interest rates and T-Bond yields as confirming their bearish stance.

Here is the the interest rate-sensitive Nasdaq

Note that in just two days the RSI had zoomed up to the ‘overbought’ line and very close to my upper trendline (and close to the Fib 50% retrace). This second Elliott wave retracement has a very similar appearance to the first major second wave last month – a very sharp relief rally. That one ended in a sharp decline to the Wednesday low.

When the current second Elliott wave terminates – with a likely move slightly higher next week – it should roll over and enter the most destructive bear phase yet.

This very volatile action is entirely appropriate for my swing trading approach.

One note of caution – the current second Elliott wave is only two days old – extremely short compared with the previous Elliott wave 1 down. To maintain the ‘right look’, this wave will probably extend for a few more days and possibly into the following week. But if not and the market turns down this week, this would be very bearish action and likely herald a very sharp retreat.

I am long Meta (again)

We are having fun with this share for Pro Shares members. We bought first down near the lows in December at the 124 area and took profits early last month at the 195 region.

I watched for a few weeks while it digested the sharp rally and on Friday morning I pounced and bought again as it surged by $12 on the day.

So what was the earth-shattering news that ’caused’ it? The only item I saw was a huge price reduction on one of its fancy headsets. Normally a big price cut is a desperation move to try to stimulate sluggish sales and bearish for company earnings.

But as regular readers know, company earnings are not the driver of share prices. Period.

What did drive prices higher yesterday was the short term oversold position and huge momentum divergences into Thursday’s low. That prompted short covering when traders saw that the ‘bearish’ news had no follow-through. So what can’t go down must go up.

Recall a similar situation with Tesla. When it announced a price reduction for its flagship EV, the share price tanked. Go figure.

This is the very interesting chart

It is now testing the upper tramline and a break above would set up a move above my first $200 target. Since we are in a large second wave up, the pattern should be a three up or some variation. I would thus like to see a new high above $200 for this move and then a move down in a ‘b’ wave and then a move to new highs in the final ‘c’ wave. let’s see.

Sugar is looking so sweet

I have been trading this very large – and hugely overlooked by traders- market for some time and have always traded with the trend – up since the record 9.30 low set in April 2020

And you can see why – it has been in a solid uptrend for almost three years. It is one of the many commodities taking part in the great commodity boom I have been covering in my blogs.

It reached a high at 20.50 in September 2021 and has been in a lengthy consolidation zone since – until last week. That 18-month consolidation has the three down Elliott wave look which confirms the uptrend. And on Friday, it pushed up into a new high at 21.

There is little fundamental news from this market as it is produced globally – cane in the tropics and beet in the north. Bad weather in one region is usually compensated for in another.

Remember, this commodity is contained in almost every food sold in supermarkets and indicates the level of food price inflation New highs for sugar would likely keep general price inflation higher for longer.

But trading it is very worthwhile as food prices rise!

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Watch out for rising petrol/diesel prices – again

Most of us are keenly aware of petrol/diesel prices as a rough measure of inflation. When driving, we constantly pass filling stations displaying their prices very prominently – and even more so when paying to fill up. It’s the same in the US.

They have been falling recently and has contributed to the partial lifting of the gloomy mood among consumers. But that is about to change.

Last week I covered the hugely oversold position in NatGas pointing to a likely surge (coming true with last week’s surge).

I track the US gasoline (petrol) wholesale prices and the chart is telling me we are going higher – much higher.

Incidentally, today’s price is only slightly above the long term average (pre-Ukraine) and so any disruption to supplies/increase in demand would put upward pressure on gas.

There is talk in the MSM about the Russian economy being on its knees and ready to implode because of the vast cost of its Ukraine war. These costs appear unsustainable, let alone the vast cost of lives (said to be over one million and counting).

So what would be the consequences for oil of a regime change in the Kremlin? Would the kleptocratic oligarchs take over as they did in the 1990s? I doubt it. The US sanctions would ensure that.

I can see a period of disruption of supplies leading to global price surges in energies. That would likely take effect later in the year. And my first major target at $200 in crude would then become feasible.