How TLT Impacts Stocks | A List of Strong Stocks to Trade

Relative strength has been the name of the game lately.

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Please see our note on relative strength stock under the Go-To Watchlist. They have been robust!

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Technical Edge — 

• NYSE Breadth: 70% Downside Volume

• NASDAQ Breadth: 75% Downside Volume

As a trader, you have to be careful (or at least cognizant) of how event-driven and headline-driven algos work. Look at yesterday’s Fed announcement reaction. 

The horizontal lines dictate the session high and low coming into 2:00. Notice how in less than 15 minutes the market popped through the highs, reversed, ran through the lows and reversed again. 

In other words, the market/algos ran the buy stops on the upside and the sell stops on the downside before settling down a bit. 

I don’t have a problem with the action; I’m not blaming anyone. In reality, it is what it is. I just want to point it out for those trying to navigate sessions like this, because it can be tricky on Fed days!

Game Plan

I want to see if we are looking at a simple “ABC” correction in the S&P, as laid out below. I’ll also be watching bonds for a tell on the market. For tech especially, the rally will have trouble holding if TLT and bonds continue to move lower. That will be a problem. 

Recently, Cathie Wood said it would be a mistake for the Fed to raise rates too quickly. At the same time, JPMorgan’s Jamie Dimon — considered by many to be Wall Street’s best banker — said the Fed may need to be more aggressive than investors and the market realize. Some of his thoughts:

“I believe that this could be significantly higher than the markets expect…If the Fed gets it just right, we can have years of growth, and inflation will eventually start to recede.”

“In any event, this process will cause lots of consternation and very volatile markets…The Fed should not worry about volatile markets unless they affect the actual economy. A strong economy trumps market volatility."

S&P 500 — ES

Yesterday we were keeping a close eye on the 4447 to 4450 area. The ES bottomed just shy of that at 4444.50. As you can see above, that gave us an ABC dip down to the 21-day. 

Maybe we can get