Dear Followers, I'm putting up the full post of my 22 Dec writeup 'Will Santa be Naughty or Nice?' today on 6 Jan 2022. POEMS clients of mine & PATREON subscribers receive it on 22 Dec 2021. To subscribe to PATREON, pls click here.
Enjoy!
'Dear Clients
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Hope you have been well! This is the last post of the year and I'm sure you'll agree with me that 2021 appears to have gone past in a flash!
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As many of my old-time clients know, I'm involved in multiple projects (StockWhsiperer, Pte Equity, etc) so I need to apologize if at times I am not able to respond to your queries at short notice. I've been actively looking to hire a Dealing Assistant, but apparently it is hard to come by. And I thought 2021 was the year of the 'Great Resignation'?
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Anyway, let's get down to business and revisit how Mr Market (S&P500 Index aka SPX) has behaved since my last post on 16 Nov 2021 (ref: www.thom-ng.com/post/i-was-bullish-then-but-perhaps-not-bullish-enough-thomas-ng-16-nov-2021):
1. In the last post, I mentioned the potential of an intermediate term bearish 'Broadening Pattern' manifesting in SPX. Given how the original unrelenting bullish price action has now morphed into a trading range (see attached SPX Chart yellow-colored zone), the potential of the said pattern has been greatly reduced. . 2. On 17/12 (last Friday) a client asked for my short term outlook for the next few weeks given how the Omicron mutant is causing the world's govts to re-impose some form of lockdown. I replied twice and pls now refer to the attached whatsapp screenshots A / B / C to follow my train of thought of how I assess the current SPX price action: . In the 1st reply on Friday itself, I mentioned that I'm actually looking for SPX to break out & up given how the bullish inverse Head & Shoulders pattern is shaping up. However, in the same reply, I also mentioned I need a few more days to confirm the said bullish potential as price action has yet to break out. In the 2nd reply on 20/12 Monday morning, I further mentioned that the 'alternative scenario will be price easing off towards early Dec lows (horizontal black line), thereby creating a big trading range'. . Now, based on 21/12 Tuesday's night close, the alternative scenario appears to be playing out nicely as price action hits near the early Dec lows before staging a strong reversal. In effect if you are a close follower of my write-ups, you would have noted the alternative scenario I mentioned above is actually the same Bollinger Bands Strategy I used extensively for the SPX. . 3. To give a rounded analysis to the big picture, the 3rd possible scenario is that price action breaks below Dec lows authoritatively - if that were to occur, a potential bearish Double Top Pattern executes and lo & behold, the downside target points back to the good ol' blue rectangular support zone that has been shown on my Chart since September! . 4. In view of the potential year end Santa Claus rally, out of the 3 said scenarios, my bias is towards the bullish or trading range resolutions. Bearish double top resolution is least favored. Anyway, no matter the shorter term resolution, I remain bullish for 2022. . 5. The last point I would like to discuss is the US mega cap tech stocks vs the 2nd/3rd tier tech stocks. The mega caps tech stocks (think FAANG) are still holding closer to their all time highs while many of the 2nd & 3rd tier tech stocks have seen extremely heavy drawdowns. As a casual observation, many tech names with market cap less than USD80b would have seen its price gone back to where it started rallying from. The overarching culprit is the sustained inflationary backdrop which has forced the FED's hand to raise interest rates earlier. To recap, growth stocks lose their shine in a rising interest rates environment. The FAANG & other mega cap tech are seen as Value rather than as Growth stocks. . Does it mean that these 2nd/3rd tier tech stocks are doomed forever? Perhaps not, I reckon once inflation numbers mean-revert sometime in 2022, there still stands a good chance for the 2nd/3rd tier stocks to recover well from the said lows. However, this likely only applies to those names that are able to consistently do a 'BBR'. 'BBR' stands for: B - Beat topline B - Beat bottomline R - Raise guidance
Anything less than a 'BBR' in 2022 will likely see the stock under-performing its peers. . Conclusion in layman's terms: 1. Bearish Broadening Pattern has likely invalidated. 2. On a shorter to intermediate term outlook, my bias is towards bullish to trading range resolution in SPX. Beyond that, no change to my bullish outlook for SPX in 2022. . Side note: By now, i think you have a better sense of what Charting can do for you - it allows you to potentially see all alternatives (up, down, neutral - c'mon its only a 2D chart); favor the highest probability outlook; but yet plan your action for the worst if the favored outlook DID NOT materialize. You see, Mr Market does not give a hoot about what I say or think, it will do what it wants to do. So since I can't control Mr Market, I can only control my trading or investing actions to manage the risks thru Technical Analysis. All good technical analysts cover all ground, but often out of convenience or time constraints, some may only show the favored bias. . 3. In the 2nd & 3rd tier tech stocks universe, IMHO only those that can do a 'BBR' in 2022 can likely see a stronger recovery in its price action. . That's all folks! Here's wishing all Clients & followers Merry Xmas & Happy Holidays! See you in Jan 2022! . Live Long & Trade Well! . Remember, do subscribe to my PATREON Channel for my unparalleled insights to the World's most important index, the S&P500 Index! . Thank you & regards . Thomas Ng, CMT Principal Trading Representative 首席股票经纪 www.thom-ng.com . #plsreaddisclaimer #chartforillustrationonly #spx22dec21 #santaclausrally #befluid #wytant #livelongandtradewell Chart source: tradingview'
