The flowers are starting to bloom, the sun is peeking out behind the clouds, and it finally seems like the market has found a support level to spring out of these winter lows. There is still room to test the all time highs but the trend, both short term and long term, seems to be moving on up. The move lower earlier this year is a great reminder that the markets need to cycle much like the seasons throughout the calendar year. Just like summer cannot be the only season, even if some of us prefer an excuse for ice cream all year, a healthy market cannot continue in a single trend. A healthy market will cycle between higher, lower, and sideways year round. Just like we need all four seasons to have a healthy planet, the market needs to fluctuate.
So next time there is a sell off in the market, do not let your emotions run wild. Take a deep breath, check the longer term charts for support and resistance, and take a step back to see the bigger picture. We know more than likely the move lower is a healthy move. One the market needs to make so it can continue in its longer term trend. If that is the picture being painted on the next move lower, look to buy near support levels when the tick holds and starts to bounce. By doing this you don’t have to take the short term sunburn to your account. Instead apply some much needed sunscreen, so you and your account are ready to jump back in the sun when support holds.
John — I thought we might get a quiet week, but after today’s NFP numbers, that is proving not to be the case. The S&P 500 is breaking out of a huge wedge and the Nasdaq is on fire. Where do we go from here? Simple. Stay on the path of least resistance, which is higher.
David — Last week we observed that the S&P 500 had found a floor at the Voodoo fireline and that based on the importance of that line, we wanted to favor the upside so long as that support held. Subsequently the S&P 500 has continued upward and the price patterns in the advance reinforce that view and suggest that the advance isn’t yet over. Eventually the market should make new all-time highs, but we will need to be cautious once the index finds itself above the February 27th high as there is a possibility we could falter and revisit recent lows before the eventual destination is found.
Danielle — The markets have been incredibly volatile the past couple weeks. I’ve tried to ignore the news and pay attention to my levels, focusing on market leaders with wide stops. The indexes were stuck in ‘no man’s land,’ but today, the S&P futures finally broke above the 50 day SMA – and I can officially consider them long again. The Nasdaq has been the leader when compared to the ES, YM and RTY futures. It made new highs today, and I’ve been playing MSFT and NVDA alongside it. IBD50 stocks have been good to me the past two weeks, with ‘honey badger’ plays in AMTD, WING and FIVE. We always have to manage our risk, as a crazy Trump tweet can come at any time, but I like the Dow and RTY on the daily charts. These both have daily squeezes. The Dow squeeze looks like it will fire long, and the Russell has already taken off. I will look to focus on strong stocks within those indexes next week. I wouldn’t say volatility is over, but I like this market strength and I’m looking for it to continue into next week.
Bruce — The VIX has moved back down to support levels we have not seen in a while and the market has had a nice move up this week, but I am still overall cautious. I will trade with the trend and have a more bullish stance, however, as we climb higher I will continue to hedge myself incase we see a move back down. In SPX 2800 will be the next important level. If we are able to break above that, then the trend continuing higher seems likely. If 2800 acts instead as resistance, then a move back down to test these recent lows would not be out of the picture. I don’t think volatility is out of the picture yet, so I will continue to be cautious and keep my Risk in check.
Carolyn — The path of least resistance in the SPX is for a continued rally towards the next immediate target at the 2827 handle…and then if the bigger picture pattern remains intact, the 2965 area. Price is clearly above the 200 simple moving average and now back above the 50 simple moving average. The 5 ema is also above the 13 ema which has us in a buy mode. I’ll be setting up pullbacks on the buy side until the symmetry of the chart is violated!
Henry — With today’s close behind us I’m reminded of so many things that have been immensely helpful to me, but have not always been popular. The primary one stems from a comment that came in the room that was something to the effect of “where are your bearish positions”. I respond to say that I don’t really have any. I see us as being in a bull market, and I’m working to pick out the best bullish stocks. I remember a craps game where someone had the 4,5,6, and 8 bet and the comment was made “what about the 9 and 10?”. Well, I’m not trying to touch “all” the water and it’s exactly the same in trading. If the markets would’ve fallen today, I would’ve lost money. Since they were up, and I was playing trending stocks, I was able to have a solid day. As long as your losses aren’t too large, you don’t have to worry about also betting the 9 and 10.
Trade of the Week Update
Henry Gambell says:
See the original setup HERE
Expert: Henry Gambell
Setup: Setup on ORCL
Update from Henry: Everything is easier when you get direction right. They moved the report on us which did move the highest IV, but as long as you were buying calls on Monday in ORCL, you made money. If you did both series then you’ve made money and have a little more on that you can leave to ride into the report, but not through it.
Next Week Danielle is hosting an exciting class going over her strategies for growing smaller accounts in an “aggressively conservative” way. If you love following along with her in the room, and want to gain more insight into her trading style, then you do not want to miss out on this class…