There's plenty to complain about in this market.
The SPDR S&P 500 ETF (SPY) , Invesco QQQ Trust (QQQ) and iShares Russell 2000 ETF (IWM) all are beneath their 50-day, 100-day, and 200-day simple moving averages (SMAs). If we look back a few weeks to mid-December, IWM is up 1% while SPY and QQQ are both lower. And with Fed Chair Jay Powell speaking on Tuesday, the December Consumer Price Index (CPI) due out on Thursday and a handful of the largest banks reporting earnings on Friday, I doubt many traders will want to load up their sheets with a bunch of risk.
OK, that's enough of the bad. Let's talk about what's working.
While the richly valued (price to sales) stocks such as Rivian Automotive (RIVN) , Tesla (TSLA) , Atlassian (TEAM) , Zscaler (ZS) and Datadog (DDOG) continue to get killed, we see impressive levels of strength and some decent buy setups in small and mid-cap semiconductor names such as Rambus (RMBS) , Vishay Intertechnology (VSH) , Amkor Technology (AMKR) and inTest Corp. (INTT) .
If you don't mind a heaping helping of political risk and are willing to be very late to the rally, a bunch of Chinese stocks are soaring. Stocks such as Baidu (BIDU) , Tencent Holdings (TCEHY) , Alibaba Group Holding (BABA) , Pinduoduo (PDD) and iQIYI (IQ) are all on fire. For the record, I've been burned enough by the whims of President Xi Jinping that I won't position trade Chinese stocks anymore. But hey, if juggling pinless hand grenades are your thing, take a look at the space.
If we ignore things such as the Fed, economic data and coming earnings reports, there are reasons to be optimistic. Unfortunately, the odds of the stock market breaking out to a new bull trend are low while the Fed is still hiking rates and earnings, margins and forward guidance are likely to disappoint. While SPY and IWM may be establishing a higher low on a higher timeframe (weekly), I expect any rally above the early December swing high will chop around and ultimately fail.
From an index standpoint, we need to focus short term. That means fading weakness toward the low to mid-$380s on SPY until we close under $379. And if Friday's rally continues into this week, a bullish bias seems warranted until we test prices in the low $400s.