Nice Rally. Now What?

The elastic band finally got stretched to the max and the snapback rally is upon us.

It started with a strong close on January 31 and then followed through for three consecutive days last week until Meta Platforms (Facebook) plummeted 25% on missed earnings dragging down the market. 

These oversold rallies can sometimes suck investors into thinking the worst is over and that we'll be back to all-time highs in no time. But what if this isn't the case? What if stocks continue to make lower highs and lows?

Let's take a look at where we are now and the levels you should be watching.

NASDAQ 100 Index

After suffering a 17% decline price finally rallied more than 10% from the lows on the back of strong earnings from AAPL and GOOG and clawed its way above the 200-day moving average. However, this was short-lived as FB earnings disappointed and the price quickly reversed right at the 50% retracement level and trendline resistance.

Are we now headed back for a visit of the lows? It's difficult to say but until we get a couple closes above the 200-day moving average the bears are in control of this tape.

For now, last week's high near 15,200 is just another lower high until proven otherwise.

S&P 500

The S&P 500 corrected 12% from the most recent high and is trading just above the 200-day moving average. It also surpassed the 4,500 price resistance level and the 50% fib retracement but Meta earnings put an end to that. 

The S&P 500 ended the week above the 200-day moving average which is a win for the bulls.

I'll be watching closely this week to see if we can continue to trade above but for now, the 4,600 area is another lower high.

At the end of the day, the mega-cap tech heavyweights (AAPL, AMZN, GOOG, FB, NVDA, TSLA, MSFT) are driving the bus when it comes to the S&P 500 and the NASDAQ which doesn't give us a complete picture of the stock market.

Behind the scenes, It remains a "market of stocks" with small caps/Russell 2000 (IWM) and micro-cap stocks (IWC) trading well below the 200-day moving average and down around 20% from the November highs.

On the flipside, there are some great trends in Agriculture, fertilizer, energy, and material stocks with some making multi-year highs. This is where we've been focusing our efforts over the last few months.

Energy, Agriculture, and Fertilizer Stocks vs. The Market...

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Nothing in this blog post should be considered investment advice and is provided for educational and entertainment purposes only. The commentary and information represent the opinion of the author and are not recommendations to buy or sell any security or investment product. The author may or may not hold positions in the securities and investments mentioned. Full disclaimer here.