Up Is Down And Bad Is Good – Say What?

The indecision continues to bother me. Wall Street isn’t sure what to do. Last Wednesday, the NASDAQ zoomed from the bottom of its technical trading box to the top. Strong volume accompanied the power move, giving the appearance of strength.

Ah, but no.

Bulls tried to take the NASDAQ higher on Thursday, only to end flat. It’s been downhill since, including a drop of close to 2 percent to start the week. Just like last week, the index remains tightly tucked into a boxed in trading range.

Bears and bulls volley between green and red based on an inverse reading of economic headlines. Jerome Powell and his band of Fed Board members made it unquestionably clear that inflation is public enemy number 1. Good is bad and bad is good during the current trading environment.

Wall Street sees good economic data as bad for stocks right now because the better the news, the more room the Federal Reserve has to raise rates.

On the other hand, bad news is good for stock prices. Investors see hope for an end, or at least a “pause”, in rate hikes with softer economic news. It’s an indication that rate hikes are having the desired effect.

At some point, algorithms will pick a side and drive the NASDAQ out of its box. Like Senator William Marcy said, “To the victor go the spoils.” It’s been our experience, the longer the consolidation (range bound trading), the stronger the rally of selloff will be after the index busts through support or resistance.

Index investors need to exercise some patience but be ready to act after the NASDAQ breaks out above or below the box. A close above 11,500 and Invesco QQQ Trust (QQQ) could be poised to move up with a stop if the NASDAQ closes below 11,000. Reverse it and 11k gives way first, then ProShares Short QQQ (PSQ) would rally if the NASDAQ 100 drops, using a close north of 11.5k at the stop loss exit point.

SECTOR WATCH

Not surprisingly, Marijuana had a big week, with ETFMG Alternative Harvest ETF (MJ) climbing 16%. According to multiple news outlets, the industry could see beneficial legislation on two fronts.

1 – Access to banking/financial institutions (1)

2 – Federal decriminalization (2)

Either of both would give the weed biz a significant boost. But, investors need to tread carefully here as Lucy has pulled away the legislation football from Charlie too many times to count. MJ investors will have plenty of time to react if/when either/both bills are sent to the White House for President Joe Biden’s signature.  Sure, you could leave some short-term profit on the table, but if the football gets pulled away yet again, you’ll be on your backside after swinging and missing.

STOCK WATCH

Cronos Group Inc. (CRON) is a weed stock worth watching. It is our highlighted insider buying stock of the week (you can check that out here). Director Marc Jason Alder went on a recent CRON buying spree, investing more than $1.5 million. Adler has a good track record of being on the right side of the trade. (3)

Of course, CRON is only appropriate for investors with the highest risk tolerance, at least a 12-month time horizon and feel comfortable investing in marijuana stocks.

Rich Meyers
Investing Trends

 

1 – https://www.axios.com/2022/12/03/senate-marijuana-legislation-chuck-schumer

2 – https://www.marijuanamoment.net/senator-files-bill-to-get-country-ready-for-federal-marijuana-legalization-amid-heightened-reform-talks/

3 – https://www.secform4.com/insider-trading/1656472.htm