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I spent some time comparing notes last week with Money Morning's Quantitative Specialist, Chris Johnson. He trades around the 20-50-200 day moving averages.
The 50-day has been a critical line for me on the aggregate for market momentum - as I am also looking heavily at volume through the Money Flow Index and the MACD.
About 80% of stocks were under their 50-day moving average three weeks ago.
Today, that figure is 49%. As you can see in the chart below, these moves coincided with another positive momentum switch. It is the fourth positive switch of the year... and how we profited so well on the SPY and IWM last week.
What Do We Trade?
Chris and I started to compile a list of stocks that he and I will go long on when momentum is positive and short when momentum is negative. It's a no-brainer.
They include (Tuesday to Thursday stock gains)
- Standard Lithium (NYSEAmerican: SLI) - Up 39.5% in three days.
- Charge Point (NYSE: CHPT) - Up 17.6% in three days.
- Nikola (NASDAQ: NKLA) - Up 11.2% in three days
- Palantir (NYSE: PLTR) - Up 14.4% in three days.
- ARK Innovation (NYSEArca: ARKK) - Up 12.7% in three days.
- Direxion Daily Small Cap Bull 3X ETF (NYSEArca: TNA) - Up 12.6% in three days.
- Workhorse (NASDAQ: WKHS) - up 26.3% in a day.
Just look at this chart - it tells you all you need to know about momentum and how silly our market is.
Charge Point surges whenever we have a positive switch in momentum down to the day... and it tanks right after a negative switch... down to the day...
Monday's Momentum Reading
Chart of the Day: AT&T LOL
For years, AT&T (NYSE: T) was a cornerstone stock of mine... I bought and held it for the dividend... reinvested the cash flow... and let the money roll... But I abandoned it - live on air - thanks to the company's epically bad Time Warner deal last year.
So, I snickered, thankfully - when the company reported a disastrous quarter the other day. The company's cash flow position is horrible. Strong cash flow used to be the hallmark of AT&T. Things have changed in 2022.
But here's the story. The problem isn't a bad deal in DirecTV or Warner media. No, no.
Customers just aren't paying their bills. But, in a weird recap from the Wall Street Journal, customers are paying their bills two days later than they did last year...
And that alone has impacted its cash flow by roughly $1 billion for the most recent quarter. That's insane.
- Who in the heck is Judge Alan Albright, and why does he hate free time so much? Tomorrow, there will be a trial between Koss Corp. and Apple over royalties and patents related to the latter's earbuds and Beats headphones. Each side... gets... 10 hours each... 10 HOURS EACH... to present their side. Congratulations to the lawyers on their payday.
- Earnings reports come from NXP Semiconductors (NASDAQ: NXPI), Range Resources (NYSE: RRC), and Newmont Corp. (NYSE: NEM).
To catch an episode of Midday Momentum you may have missed click here to watch a REPLAY.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.