Stock Market & Bitcoin Analysis 1/9/26

Key Concepts

• Swing Trading: A short-term trading strategy aiming to profit from price swings.
• Moving Averages (5-day, 20-day, 50-day, 200-day): Indicators used to smooth price data and identify trends.
• Year-to-Date (YTD) Anchor: A reference point based on the year's opening price, used to assess performance.
• Measured Move: A technical analysis technique to project potential price targets based on prior price movements.
• Market Structure: The patterns and formations observed in price charts, used to identify potential trading opportunities.
• Higher Highs & Higher Lows: A bullish pattern indicating an uptrend.
• Cup and Handle/Ascending Triangle: Chart patterns suggesting potential breakouts.
• Stage 4 Decline: A late-stage bearish pattern characterized by significant price drops.
• VWAP (Volume Weighted Average Price): A trading benchmark that provides the average price a security has traded at throughout the day, based on both volume and price.

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Market Overview – January 9th, 2024

Brian Shannon’s market analysis on January 9th, 2024, highlights a generally bullish start to the year, with significant strength in semiconductors and the Russell 2000. The S&P 500 reached new all-time highs, while Bitcoin showed a more neutral trend. The core principle emphasized throughout the analysis is to “buy strength after the dip” rather than attempting to “buy the dip” itself, focusing on risk management and capitalizing on confirmed trends.

Equity Market Performance

S&P 500: The S&P 500 is currently at a new all-time high, trading above a rising 5-day moving average. Pullbacks to the 5-day moving average and the year-to-date anchor are viewed as buying opportunities after a confirmed bounce, not as immediate entry points. The strategy involves waiting for buyers to regain control and establishing positions with stops placed under recent lows.

NASDAQ: While not at a new all-time high like the S&P 500 and semiconductors, the NASDAQ has broken out of a triangle pattern. A push above a horizontal resistance level is expected to continue the upward momentum. The presenter notes the potential for this to form either a cup and handle or an ascending triangle, but emphasizes that the specific pattern is less important than the demonstrated bullish behavior – increasing buying pressure with more frequent tests of resistance. The buyers are becoming more aggressive in both time (frequency of tests) and price (size of moves).

Russell 2000: The Russell 2000 is also at a new all-time high, exhibiting a pattern of higher highs and higher lows above a rising 5-day moving average. Stop-loss orders are recommended to be placed under recent lows, adjusted upwards as the trend progresses.

Semiconductors: Semiconductors are leading the market, mirroring their performance from the previous year. They are nearing their measured move objective, calculated by projecting the height of a previous price move (A to B) from the bottom of the subsequent move (point B). While reaching this objective doesn’t necessarily signal a reversal, it suggests a reasonable area to consider tightening stops and managing risk. The measured move was calculated by duplicating a line representing the A to B move and adding it to point B.

Cryptocurrency – Bitcoin

Bitcoin’s performance is described as “neutralized,” trading within a defined range. The year-to-date anchor is proving to be a challenging support level. While a push towards the $100,000 level is possible, Bitcoin remains below the declining 200-day moving average, making a long-term bullish outlook less certain. The 20 and 50-day moving averages are being tested for buyers.

Individual Stock Analysis – MAG 7 & Beyond

The analysis delves into the performance of several large-cap stocks, categorizing them based on their current trends:

• Positive Momentum: Amazon and Google are exhibiting positive momentum with patterns of higher highs and higher lows.
• Neutral/Cautionary: Meta, Microsoft, Nvidia, and Palantir are described as “dead money” or exhibiting neutral behavior. These stocks are either below key moving averages or showing limited price action, warranting a “stand aside” approach. The presenter specifically warns against buying Netflix, which is in a Stage 4 decline (a late-stage bearish pattern on the weekly timeframe).
• Weakness: Apple is continuing to decline and is below both the 5-day and year-to-date anchors. The presenter advises against individual investors attempting to catch the bottom.
• AMD: Rejected at the declining 50-day moving average last week.

Sector Performance – Biotech & Financials

Biotech: Biotech stocks had a good week, bouncing from the rising 50-day moving average. Entry points were identified as breakouts above the flat-to-rising 5-day moving average.

Financials: Financials created an inside day, potentially forming another flag pattern after a previous breakout. The recommendation is to wait for evidence of renewed buying pressure before entering a position.

Other Market Observations

• Bonds: Bonds remain “stuck in no man’s land,” with a head and shoulders pattern forming. The presenter cautions against relying on textbook price targets based on this pattern.
• Interest Rates: Lowering interest rates are expected to benefit homebuilders.
• News-Driven Trades: The presenter warns against chasing news-driven rallies, using the example of energy stocks reacting to news regarding Venezuela. He emphasizes that the market often prices in news before it’s publicly released, leading to “buy the rumor, sell the news” scenarios.

Trading Methodology & Risk Management

The core trading methodology advocated is based on:

1. Multiple Timeframe Analysis: Combining analysis across different timeframes to confirm trends and identify optimal entry/exit points.
2. Buying Strength After the Dip: Avoiding the attempt to predict market bottoms and instead waiting for a confirmed bounce before entering a position.
3. Strategic Stop-Loss Orders: Utilizing stop-loss orders to protect capital and manage risk, adjusting them based on the timeframe and market volatility.
4. Market Structure Focus: Identifying and capitalizing on patterns of higher highs and higher lows, triangles, and other formations.
5. Avoiding Predictions: Focusing on observable market behavior rather than attempting to predict future price movements.

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Conclusion

The market outlook presented is cautiously optimistic, driven by strength in the S&P 500, semiconductors, and the Russell 2000. The key takeaway is the importance of a disciplined trading approach focused on buying strength after a dip, managing risk with strategic stop-loss orders, and adapting to evolving market conditions. The presenter emphasizes that while the market has been favorable thus far in 2024, this is unlikely to continue indefinitely, making a well-defined trading strategy even more crucial. He promotes his subscription service, Alpha Trends, as a resource for daily analysis and specific entry/exit signals.