Market Outlook 07/05/2022 via /r/wallstreetbets #stocks #wallstreetbets #investing

Recap On Fridays Market Action:

• SPY closed up 1.06%
• QQQ closed up 0.66%
• Dow Jones Industrial closed up 1.05%
• VIX closed down 6.93%

Futures currently show:

• SPY up 0.57%
• QQQ up 0.90%

On Friday we saw a moderate selloff during the first few hours of market open, then sideways action during the middle of the day, and finally a strong rally into the close. This price action was constructive towards the overall market rally and somewhat helped confirmed the high low setup. Although this was a nice close, we are still far from a bull market and need to adjust our stock exposure according.

SPY Daily Timeframe

SPY was able to fight back on Friday to regain some of the ground that was lost early in the week. With today being a holiday it was not surprising for Friday to see lower trading volume that usual. SPY did manage to break Thursdays highs although it did so on lower volume. Let’s step back and see what we can see on the weekly chart.

SPY Weekly Timeframe

This is an ugly chart and not one that you would see in a book or video saying to go big on. Although the overall trend is still down, this week actually proved to be more “constructive” than others. During the low of last week SPY was down approximately 4.50%. This week had an increase in volume compared to last week. You could look at that as more people selling, or you could see that people sold but also that there was enough people buying to prevent breaking previous lows and close in the upper half of the range.

QQQ Daily Timeframe

QQQ has a somewhat similar story as SPY, except QQQ never broke above Thursdays highs. This shouldn’t come as a surprise since QQQ has performed worse for than SPY for the entire year. Since QQQ did not break Thursdays highs, the buy for the higher low setup did not trigger. Thats not to say that the setup is now invalid, there is just some work still to do.

Recap on recent positions:

SPY moving past the buy trigger lead me to open a position in SSO. SSO is a 2X leveraged ETF of the S&P 500. Why did I buy SSO instead of QLD (Nasdaq version of SSO)? Because SPY triggered at the buy price AND SPY has been the stronger index throughout this entire bear market. Depending on where we open tomorrow, I will be looking to buy more SSO if we push through Wednesdays highs. I only bought 20% of what my total position size would be since this market has been extremely choppy. If we start to drop tomorrow I will be quick to sell.

JK Daily Timeframe

JKS has two tops on the daily timeframe that are part of a larger base that can be seen on the weekly timeframe. Decent buying volume has come into this stock as it runs up into the base. The buy area would be $69.70 which corresponds to taking out Thursdays highs.

NOC Daily Timeframe

NOC is approaching a 5 month base and could potentially break out tomorrow.

With both of these setups it is important to note that a good market is needed before buying. If the overall indices are dropping then do not buy.

Bringing everything together:

Some strength was shown going into this three day weekend and futures are currently up. It is important to note that overnight price actions does not always carry over into the next day. It is still important to invest cautiously and you should not over exposure yourself. These markets are still choppy and can quickly turn around and set newer lows.