I'm not sure what triggered Tuesday's explosive price action, but I'll take it. With the SPDR S&P 500 ETF (SPY) , Invesco QQQ Trust (QQQ) and iShares Russell 2000 ETF (IWM) all gaining between 2.7% and 3.5% on the day, I think Rev Shark hit the nail on the head when he credited Tuesday's rally to the fact that investors weren't ready for it.
However, with the Fed about to hike rates by another 75 basis points and a massive number of companies set to report earnings over the next two weeks, I wouldn't get too comfortable with Tuesday's green arrows. While the market may be overdue for a bear-killing bounce, I don't believe we are at the beginning of a new bull market.
Before discussing a few individual stocks, let's look at QQQ, because with Tuesday's rally in the books the bulls have an opening to trigger some fear of missing out and bid prices up toward $330.
While you can't see this on the chart above, QQQ cleared Tuesday's opening swing around 10:30 a.m. ET and after that price never came close to the session's volume-weighted average price (VWAP) for the rest of the day. On a swing basis, with price firmly above its 21-day exponential moving average (EMA) and 50-day simple moving average (SMA) and the Relative Strength Index (RSI) above 50, this isn't a market I'd be in a hurry to fade.
Regarding upside targets, I don't have the year-to-date VWAP marked on the chart above, but it's currently around $330. While a 10% rally sounds fanciful given what's on deck with the Fed and corporate earnings, as long as the QQQ holds above its 21-day EMA and 50-day SMA my two upside targets are the early June swing high near $315 and the year-to-date VWAP around $330.
Away from QQQ, I've got my eye on a few of the broken ARK Innovation ETF (ARKK) names. Stocks such as Teladoc Health (TDOC) , Roblox Corp. (RBLX) and Spotify SPOT are showing signs of life. But if you zoom out past a month or two, they all look pretty rough. The bottom line is if there's more buying behind Tuesday's rally in the QQQ, and provided companies don't report atrocious earnings over the next few weeks, stocks such as TDOC and RBLX may be able to squeeze higher and trigger some FOMO in the well-rested momentum cabal.
