As I sit here in the Caymans, watching the waves ease onto the shore, a warmth of euphoric peace surrounds me. As I have these feelings wash over me, the market appears to have the same state of mind. The last few posts have mentioned how 2017 was a strong overall year in the market, and it has not let off any steam going into this year. Even with whispers of a possible government shutdown, the noise cannot seem to infiltrate the market’s headphones as it blasts higher. We know that this sentiment will not last forever. Just as I have to leave the sandy shores to return to my landlocked reality, the market will eventually have a need for a correction. Remember, the market does trade in a straight up and down direction. Much like the waves in the ocean, there will be cycles of higher and lower movement. Keep in mind that a correction or reversal does not mean a crash. It only takes a move down to a support level and then the market could continue on its merry way higher with the trend. The key is to not let emotions of euphoric happiness or inevitable dread of a reversal take over the account. Keep an even temperament and continue to watch the charts and trade the setups that present themselves. Do not force a trade off emotion. This is how a successful trader will continue to stay afloat no matter what the direction the market takes.
John — The markets continue to chug along. The main issue at this point is that there are many stocks that are far away from their “average price” which increases the likelihood of a violent snapback to the mean. In addition, the put call ratio is at a 3 year low, which also increases, exponentially, an “out of the blue” pullback. I’m fine getting long stocks like SGMS that have been consolidating or UNG which is breaking out of its shell, but I’m shying away from the high flyers for now. There is plenty of money to be made “not chasing.” I’m not one to short a parabolic advance, either – so that leaves me trading small and holding onto cash waiting patiently for the next elephant to come walking along.
Henry — Monthly expiration went mostly as planned. Generally we’re looking for a little bit more sideways action but the strength of this market continues to shine through with the bid that we continue to see. We all know that at some point a correction will come, and I’m a little cautious heading into the weekend after expiration, but I’m not going to fight the trend and the indexes look good for higher prices. PYPL and FLIR were both solid, basic swing trade setup and a great example of what we’re trying to do with the Squeeze. WGO and THO have been slow, but I think they’re worth keeping an eye on in a similar way.
Raghee — Despite the potential of a government shut down, the indices have held up well. There are competing narratives this week and earnings are winning out. A bit of profit taking into the weekend would have probably kicked in regardless. I am still long gold and silver, euro, pound, Dow, and crude oil. Heck, I am long BTC/USD as well. Some bad news for the bullish BTC story – but not enough to derail the bigger blockchain story – is that the ETFs that looked like a “done deal” isn’t quite looking like they are going to gain favor with the SEC. Apple staged a nice PR coup with their investment of 350bn in the U.S. over the next five years. It’s a funny little math. But beyond the headlines, the market didn’t care; we hit 180.00 and a new all-time high. IBM’s fourth-quarter results sure did not hurt my overall long bias and positions in the Dow (via YM). It’s the first time in over five-years that Big Blue has shown a profit.
Danielle — The S&Ps continue their uptrend, and I for one don’t see any sort of sell signals. We are headed into the meat of earnings season. The financials kicked it off last week, and largely reported positive earnings, which to me bodes well for continued strength in the markets. I go into this weekend relatively long the market, playing a few key names that aren’t extended – yet. New long have been hard to find, but focusing on runs into earnings and sectors that are moving have been my bread and butter. Next week, I will focus even more on earnings.
Jared — As we wrap up the third week of 2018, the big question in the crypto world is, “Is the selling over?” In my mind, the answer is “YES!” After what was basically a ‘crash’, it will take some time for new patterns to develop, but at these current levels a LOT of the crypto market is still on Sale. In a matter of days, we saw hundreds of billions pour out of the market. Largely, I think this is the “dumb money” that got involved in the last few months of the year who couldn’t hold on through the selling. Remember it was just a month or so back that banks were issuing home equity loans to buy Bitcoin between $18k – $20k. Across the markets I’m seeing most of the patterns mimicking that of Bitcoin and with a Squeeze forming on a four hour chart, I would be looking it to take BTC to around $14448 – $15000. This will be the next decision point for Bitcoin and the market as a whole. Rally resume or bears take the wheel.
Carolyn — With the market this extended, you still want to have relatively tight stops in this market. The trend is still clearly up, but we’re still in a position to see a healthy pullback within this larger uptrend. Remember not to trade opinions, but to trade setups. Even though the indices are not pulling back much, I’ve still found plenty of other stock/etf setups in this environment. Bottom line, I’m buying pullbacks on most setups and many of these are updated each evening on my end of day updates or in the chart packets! Wynn is a great example of one of our recent setups that has now met two key upside targets. Here is what THAT chart looks like.
Trade of the Week Update
Raghee Horner says: For lack of a better way of putting it, this was an important week to shake out what I endearingly call the chuckleheads from the market. It’s important for the maturation of this market that higher highs not be the hallmark of crypto. And as this market “grows up” it will increasingly become blockchain focused.
See the original setup HERE
Expert: Raghee Horner
Setup: Setup on BTC
Update from Raghee: In the meanwhile, from SEC letdowns of a potential bitcoin ETF to the futures contract for bitcoin rolling over, to any number of negative stories that hit this market since Monday, BTC/USD has been resilient and traders that saw this sell-off in ETH, LTC, and BTC will be rewarded. The 60-minute set up could be a great one to watch into next week if we get bullish momentum trading higher through 12000-12100.
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.