$QQQ's big moment
I am never going to hide facts I come across in my trading from readers of this substack. I will not find a way to spin facts to fit my own narrative. Intellectually, I do not think tech stocks, particularly mega cap, semiconductors and SaaS stocks deserve to be where they are given the state of the macro economic environment. Period. Why? 1) They aren’t cheap by any means either relative or by historical comparison (25x for $AAPL, where is it going?), 2) Technology and IT spending by banks represent as much as 15% of overall capital spending in the industry and is likely to hit pause in the coming months, 3) the eye of any storm does the most damage after it passes. The Fed and other central banks pausing sounds like a bullish possibility for risk assets but it is also a sign of fragility 4) consumer spending appears to be topping out with delinquency rates showing increases across most February releases, and lastly 5) the Fed is not likely to become supportive of risk assets, but rather pause at best wanting the economy to bend but not break.
Having said all of that, the charts do not lie! The Nasdaq 100 is the only index still above its 200 day moving average. Fine. The flight to cash rich, cash generative technology companies with no balance sheet holes represents a level of safety for investors as we have been discussing ad nauseam. The tricky part is this could be a head fake and they shoot the generals next! But let’s review the MACD and the TD MA2 we discussed about a week ago. Believe it or not, with another leg up in the QQQ, both the MA2 and MACD will turn positive! Now, it does have to sustain beyond a gap up tomorrow if something resolves in Europe.
We will keep you posted, as always, and sitting here right now I do not believe we run away to the upside, but it’s possible the easy trades ahead become buying the cleanest, best cash rich companies on dips ahead. We have been doing well using AMD, META and MSFT during this period of volatility. Let’s see the flop tomorrow and discuss in our WhatsApp group as the cards come out of the deck. The possibilities tomorrow are likely to be a gap up to sell or a gap down to try long the generals if they weaken substantially. Welcome to investing while trading what you see!
See the A in the chart below for the MA2? It crosses above and the trend will have changed to a new uptrend. See the arrow in the 2nd chart MACD about to cross as well? Again, it could entirely be a head fake and the whole neighborhood is about to go up in flames. But, respect this signal, see if trading it from buy the dip works after we get some resolution tomorrow on the European new crisis. And ask in the WhatsApp chat if you have any questions! And please consider supporting our substack and becoming part of our Educated Guesses group. I would like to think we are adding a ton of value for peanuts and popcorn.
Rob’s Educated Guesses
Chart 1 QQQ MA2
Chart 2 QQQ MACD