Printing massive amounts of money, or in the Fed’s case refusing to tighten?
As obvious as the tech crash in 2000 or the housing bubble…are bells ringing in your ears why stocks are moving. We are trend followers and we all know that stocks rally due to liquidity…we saw what happened when the FED raised interest rates ever so slightly…
The charts of the major averages are looking better as more retake their line of demaraction…200 day moving average. However the problem is that most of the gains are coming from defensive names and beaten down stocks or even Gold shares. The are more breakouts showing up, but they are not producing worthwhile gains. Most are stalling after they break out. Even early buys are not doing much.
So what do you do?
Simple solution….try to trade ETFs on the indexes….or even leveraged ones…this is your decision as it has to be applicable to your rules and risk…
This is one of the most difficult market to make progress in that I have ever seen as most or all of the rules that have worked for decades are being distorted by political comments or central bank shenanigans…
Yesterdays stock market session was favorable. All eyes were on the FED announcement. When it came out saying there would be no rate hike now and probably not for a while the market rallied. The major averages finished with solid gains of .75% for the QQQ and .56% for the SPY.
Finally the SPY broke convincingly above it’s 200 day moving average. Hopefully it will be able to hold this moving average. The 200 day has been the primary resistance on it’s chart. There were some breakouts today such as MXL, but we are still not seeing strong gains in quality growth stocks. Without this action the durability of this rally is still suspect. The strongest sectors were the semiconductors. Maxlinear is a leading stock now in a leading sector. The fundamentals are extremely strong…actually triple digits…and now we had a break out…In a healthy market this is what one needs to find…
We have had a strong rally.These strong rallies can also be a retracement in a bear market. Hard to tell until time has passed. The fact however is that the indexes have taken out the 200 day moving averages. If they can hold these moving averages this is very constructive and gives proof to this rally.
The issues however are that the rally has been on weak volume. You want to see conviction. You want to see institutions participating. Some exposure is warranted depending on your risk profile and your own judgement….however there are not many High growth quality stocks breaking out…
As we all know most oil stocks have been clobbered….actually so have Biotech stocks and even the index….The oil stocks are seeing some life for the first time in a long time. They seem to be breaking out…however today crude is trading down.
Looking at these on a retracement trade -trend following
Jesse Livermore had a saying about milestone marks in the stock market. TSLA..NFLX are around these milestones and they might be turning over. They ran up on the highest volume and now knocking at the door of the 50 day moving average. This is an example of a retracement trade in Trend following…
No one really knows at this point where we are at in the stock market cycle. Everyone has an opinion….that is why you should not listen to anyone rather than yourself and have rules…
My simple rules are I want to be above a 200 Day Moving Average..We are almost there but not yet. More so I would like to see 72.90 taken out on the QQQ. I try to simply think. We are 7 years into one of the longest lastly bull markets. Risks are increased…however most are bearish which is bullish…More so there was a bullish divergence at the lows….
It is never easy…that is why we trade with rules..
I want to share with my readers Traders Unplugged. Every aspiring and even successful trader needs to work on themselves and learning is constant. In this episode of Traders Unplugged is Tushar Chande. I remember using his indicators almost more than 20 years ago…
Tushar Chande has stated “You have to be an optimist in this business to survive, you have to bring an original point of view, why you want to do it in a certain way and you need to be able to explain to people in a way that makes sense to them why you are doing what you are doing”
Tushar Chande, is the Co-Founder and Head of Research at Rho Asset Management. Tushar is also the author of a number of books on the topic of how to design rule based trading systems as well as having been actively trading these systems for more than 20 years.
As always I have a watch list of stocks that are both fundamentally and technically strong. More so I look at the market. We have taken out the 50 day moving average yet below the 200 day moving averages.
I am only long GDX- gold miners….You determine your own trades and position sizing depending on your own rules based on risk tolerances…
Below is my watch list…this is a list that I am watching…Not a buy list
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING COMMODITY FUTURES, OPTIONS, AND FOREIGN EXCHANGE (“FOREX”) IS SUBSTANTIAL.
The good news is that the stock indices have taken out the 50 day moving averages, yet we are still below the 200 day moving average. The VIX is retreating like a wounded solider, however economically and fundamentally many charts do not look well. This stock market will be soon having another birthday. 7 Years and one of the longer bull markets. However in the following charts things do not seem to be looking all that healthy….I received this email this morning with all types of economic charts….you decide and let me know…