This market has turned into the little engine that could and with that, the euphoric, bullish traders continue to chant, “I think I can, I think I can.” However, it is not just these euphoric, bullish feelings that are pushing the markets higher. Many of our charts and indicators continue to show a long term bullish pattern. This weeks lows moved down to a support level before bouncing higher off of them going into Friday’s close. If you want to be cautious of this little engine that continues to move higher, look at taking quick profits. Do not trade against the trend, but once you see a nice profit, lock it in. There’s no harm locking in profits and bringing the capital back into your account. As the Tanzanian Proverb reminds us:
“Little by little, a little becomes a lot.”
Little profits can add up quickly and grow an account. Look for the small pullbacks into support and trade with the trend harvesting small profits along the way. Continue to trade along with the little engine that could up the trend until it reaches its final stop and the trend ends.
John — Twas the Friday before expiration, and all through the charts, not a symbol was falling, not even the tarts.” As I’m sitting here at the Miami airport awaiting my connecting flight to Cayman, it is clear from the quotes on my iPhone that money is still chasing this rally. Part of this is due to dollar weakness, which is pushing up our positions in FXE and GLD. And part of this is fund managers caught flat footed at the beginning of the year, and they’ve been panicking to get caught up. The question is, what to do with cash right here, right now? That is very simple and can be encapsulated in the words, “Wait for the next setup.” There will be plenty of moves this year and time spent finding and preparing for the next move, whether that is in the broader averages, an asset class like the Euro, a setup like SGMS, is time much better spent than tossing away capital to quell pent up emotions related to the fear of missing out. Next week will provide plenty of shorter term expiration related setups, and then we’ll see what these markets are made of as we head into February. Trail stops and have a great 3 day weekend.
Henry — I was reviewing some of Carolyn’s work this week and she had mentioned one of her client’s that lovingly referred to himself as a “trend following idiot” and I think I may have to steal that title. I feel like these are lessons I went through 5 years ago, and they’re just as relevant now. Just trade the trend until it stops working. I’ll be the first one to tell you I don’t know “why” we’re getting the rally we are. Wasn’t the tax vote the big focus? That went through, so if that was a story, why can’t we pin it on that? It just feels like traders are so quick to jump on whatever story is next so they can “have a reason”. I’m just a trend following idiot, following the trend. Now with all that being said, I’m all about taking profits on strength, We’ve had a stellar run this week and even though some of these charts I have higher prices in store (PYPL) I can’t let myself give back what we’ve made so far. BA is easily my best trade of the year – I’d love to see that keep moving, but I do think I need to stick to the plan and flatten that one out today. I still have several stock holdings that I’m trying to be patient with, but also want to make sure I turn several of these positions into cash as we head into the long weekend. That’s what I’ve got for now and we’ll see how we open up on Tuesday!
Raghee — I am long euro,pound, bonds, and Dow…it’s a great day for long euro and pound players as the soft Brexit scenario is getting clearer and clearer. EWU and EWG will continue to rally on this news. XLF pullbacks eluded me but I am waiting for the pullback.
Danielle — At this point in the markets, it’s really impossible for me to say what next week will bring. On a technical basis, we are extended across the board – particularly in the S&P, Nasdaq and Dow futures. I don’t have any additional buy signals in the indexes, but I don’t have any sell signals, either. Its weeks like this that remind me that the only way to be along for the ride is to be positioned before it happens. My long plays in XLF have come through in a big way, and the push higher in financials headed into earnings season came through as I wanted. Pre-earnings runs in MS and JPM with an additional setup in XLF have paid well. I have spent most of the day taking profits on tickers I was already positioned in – HON, MS, and MSFT. I threw on a day trade in YY for good measure. I am holding a few key names over the weekend, but I have lightened up as I can’t bring myself to go into a three day weekend sitting on so many names that are close to targets. I’m still playing the long side in MNST, WGO, XLF, PHM, MMM and MCD. Next week will be a short week, and I will most likely focus on getting positioned for additional earnings runs on tickers releasing reports at the end of the month, and following along with the long setups I’m already positioned in.
Bruce — As we know, the market has been on fire this year, or technically last week and this week. I am amazed and perplexed at the same time. There is just NO fear whatsoever in this market. Every level of resistance had been broken to the upside and we still seem to keep going. My biggest question is what is driving it? I don’t know if it is FOMO, tax reform, or anticipation of earnings or all of these. What I do know is that this is not normal and we are traveling at an unsustainable rate. I am not saying we crash, but we are literally moving weekly standard deviations each day and that is not sustainable. Next week is a short week and we start to get into earnings season, next Wednesday, on January 17th. In addition, we have option expiration next Friday so expect some volatility. We all know the trend is higher and that is the way we need to play this, but I am raising cash and trying to be a little more nimble than normal.
Jared — In the crypto world, the news out of Korea dominated the narrative this week. To kick things off, the authority site CoinMarketCap.com abruptly decided to no longer factor in Korean exchanges into the average price of coins and or tokens. This immediately painted the picture of a massive sell-off triggering just that…a massive sell-off. Later in the week, mixed information came out implying that the Korean government planned to completely ban crypto trading. This news was coupled with the raid of some of the largest Korean exchanges like Bithumb. They have since clarified, that they would still allow crypto trading, but under stricter guidelines, at least for now. Today, we’re seeing a nice bounce after a few days of decent selling across the board. As the dust settles over the long weekend, I’ll be looking to establish new positions as the fear based selling seems to have subsided.
Carolyn — I’m so sick of saying the same thing each week!! As far as the S&P is concerned I have to remain a cautious bull and continue to buy pullbacks until it does not work anymore. I do have some weekly timing resistance to the current rally, but I’m not seeing the sell triggers!!! Some of you may prefer to just remain in cash until we can GET a pullback. This market remains on CRACK!!
David — The S&P 500 remains in an uptrend and so long as that persists, corrective pullbacks are buying opportunities. Corrections might be small and they might be large, but it would take back below the 2650 area (and nearby important Voodoo Lines) to think that a larger down move was unfolding. Nearby, Voodoos near 2760 provide important support and I’m only thinking bullish above that level. Doesn’t mean we won’t turn down. Maybe from right here, but I know where my risk is.
Trade of the Week Update
Carolyn Boroden says: If you bought that pullback Monday it’s going ok. In the bigger picture on my weekly chart, I still have that bigger picture upside target at 138.69. My short term buy targets have been met….AND I have a hurdle of resistance you should be aware of it you are still long. It comes in on the daily chart at the 116.01-117.15 area and then 120.44.
See the original setup HERE
Expert: Carolyn Boroden
Setup: Setup on ADSK
Update from Carolyn: Carolyn Boroden says: If you bought that pullback Monday it’s going ok. In the bigger picture on my weekly chart, I still have that bigger picture upside target at 138.69. My short term buy targets have been met….AND I have a hurdle of resistance you should be aware of it you are still long. It comes in on the daily chart at the 116.01-117.15 area and then 120.44.
(Click on the image below to enlarge)
(Click on the image below to enlarge)
We look forward to seeing you back in the Live Trading Room on Monday! We’ll be kicking things off per usual with the room open at 8:20 Central and of course our Trade of the Week along with the End of Day Stock Picking Session. And, if you’re not yet a member, you can still take advantage of our $7 trial for a few more weeks.