Trade Alert: Stocks To Drop Again
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It doesn’t take much more than daily one-thousand-point swings in the Dow to send a clear message to traders that they best have a phenomenal trading system to depend on in which to make the most of a highly uncertain trading landscape. Bond yields traded above 3.05%, the highest level seen since November 2018. It is a real disappointment for the bulls to see such a strong effort to regain investor sentiment only to have cold water poured on their short-term spike.
Grant it much of the rally was likely short-covering and program trading related buying, but clearly, Thursday’s sell-off validated the notion that selling into strength remains the pattern of choice until data on inflation shows a definite flattening out to where the Fed can curtail what looks to be two more half-point rate hikes.
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As for the stock market, the month of May is hardly delivering the bullish flowers following the April showers. This week’s post-FOMC massive rally followed by an even bigger Thursday sell-off sent a very stark message to traders that the Fed remains squarely behind the curve.
The bond vigilantes made this known after showing little conviction one way or another after the Fed raise the Fed Funds rate by 50 basis points, a measure most widely expected by the Street. But this measure came shy of what Wall Street really wanted, a 75-basis point hike to help narrow the gap between hyperinflation and where the credit markets are trading.
Poor economic data was to blame for the sharp reversal lower. It was reported that quarter-over-quarter productivity fell by -7.5% indicating rising wages and falling output that are a direct threat to corporate profit margins. It was one of the worst productivity reports on record going back to 1947 that incited the broad selling pressure that left almost nowhere to hide other than being short the market.
CURRENT TRADING LANDSCAPE
Traders should not be fooled by violent bear market rallies, such as what we saw on Thursday. Investor sentiment hasn’t been this bearish since March 2009 during what was a complete set of different circumstances. Back then the Fed opened the spigot of fiscal stimulus and the market rebounded. This time around, the market is correcting while the Fed is set to raise short-term rates for the next three months.
As of Thursday’s close, the $SPY closed lower 3.5%, at $413, below the 50 DMA and the 200 DMA. The value/reflationary ($VTV) closed lower 2.1%, at $142, right at the 50 DMA. The technology sector ($QQQ) closed lower 5.0%%, at $313, below the 50 DMA and the 200 DMA.
The $DXY closed higher, near the $103.6 level, approaching the March 2020 high. The $TLT closed lower by 2.7%, at $115, and below the July 2019 lows. The ten-year yield closed higher at 3.06%. The $VIX closed higher, at the lower 30 levels, above the historical average.
The $SPY short-term support level is at $420 followed by $410. The SPY overhead resistance is at $435 and then $441.
The market correction started earlier than I anticipated. At this point, it is just a matter of time for the $SPY to break below the February lows.
I would be a seller of any rallies in the market and have a BEARISH portfolio at this time.
I do not expect the $SPY to post new all-time highs in the first half of this year. There is a high probability that the $SPY main long-term support at $415 will not hold in the next 2-6 weeks.
"BUY" signal based on the Aggressive Power Trader Portfolio for tomorrow is at the $416 level using SPY and the "SELL" signal is at $430 for short-term traders.
If you are trading options consider selling premium with July and August expiration dates.
Based on our models, the market (SPY) will trade in the range between $415 and $470 for the next 2-4 weeks.
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This new service is special because it offers real-time alerts via SMS and access to Vlad's live positions and orders. When I put together this system, I wanted to be in the fight with other investors. That’s why I don’t play on your emotions to sell newsletters - I put my money where my mouth is.
Every trade recommendation that I make using this system – comes straight from the list of trade recommendations I use myself.
Not only that but every trade I make is logged in detail for you to review at any time. You can see my entire trading history, updated LIVE so that you can see, learn from, and even copy my trading strategy.
Signals have historically averaged over 85% accuracy in my live trading since inception. Sometimes we hold position 2-5 days by using options (selling OTM Calls and Puts spread) and targeting 1% target gain and 1% stop loss using stock price. The green color should be interpreted as a bullish signal and the red as a bearish signal.
How To Use Our Signals
Once you become a member, I encourage you to review our Live Trading Room recordings to see how I trade Aggressive Power Trader signals in my account. A snapshot of how we produce our Live Trading Room Sessions shows how we pack in a lot of information that can be accessed from whatever device you’re driving.
As a reminder, consider buying near the "BUY" level with a "10 days prediction" higher than the close price. In our live trading room, I usually hold a position for 1-2 days.
I allocate less than 5% of my portfolio if the position is being held overnight. On average, less than 1% of the portfolio should be at risk if you own a position for less than one day.
I enter a position at the predicted LOW (BUY) price or yesterday's close price. My stop loss is 1% and my target gain is 1% of the stock price. I target 75% accuracy using these signals.
Few subscribers asked about Options trading using the signals provided. Please review live trading room recordings. I often sell OTM credit put spread using weekly options and collect 0.5% using stock price. For example, if the stock is trading at $100, I would sell an OTM Put (strike less than 100) with an option BID price close to $0.5.
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SECTOR SPOTLIGHT
As per my opening comments, the technical damage is pretty severe, not just for the major indexes, but also for the majority of the market’s 11 sectors where even the most stalwart stocks are subject to being pressured materially lower.
To this point, the rolling correction looks to keep hitting all the great stocks that are considered the market generals. When stocks like Johnson & Johnson (JNJ) become sources of funds for institutional managers, then it sends a warning sign that investors should take seriously. Granted there are stocks that will buck the trend as is always the case in any market correction, but that number is narrowing with each day.
It's a good time to hedge portfolios in the event key technical support for the S&P at 4,150 is taken out. Investors should consider utilizing ProShares Short S&P 500 ETF (SH), a 1x inverse ETF. As I noted the long-term primary bull uptrend is in place for S&P, but that level is down at 3,500 with 4,100 being the next level of key support – and as of Thursday’s price action, the market is very concerned about another leg down.
This is a very high conviction setup for traders looking for a market hedge to work with. SH is one ETF that might be the right trade. It fits perfectly well in this market landscape, and we intend to put this ETF to work for our trading services in the week ahead. Readers of this column shouldn’t miss out and get in on our bullish strategy when we take action.
TRADE OF THE WEEK
This week’s pick is the same as our Sector Spotlight security highlighted - ProShares Short S&P 500 ETF (SH). The problem I see with this market is that this is the third time in as many months that the SPY is testing the 4,150-4,200 level. My data is signaling that this time the lows might well be taken out. If you hit on something long enough, many times it breaks, and it starts to feel that way.
When we apply SH to our AI-driven Forecast Toolbox for the near term, we get a Model Grade “B” rating with a Predicted Resistance price target of $16.68 which is 10% higher than where SH currently trades. A move to $16.86 would be a new 52-week high and imply the market buckling once again. Hence, with each oversold bounce, investors can leg into SH and protect their portfolios from material downside risk.
Our AI indicators will signal in the next week when we should buy into this trade on a forecasted minor pullback. This is where our AI tools are so crucial in determining precise entry and exit points.
I’ll be looking to trade SH this week if downside momentum picks up speed and volume.
We tie our Tradespoon Live Trading Room to help you manage the current inflationary wave. And we update our closed positions daily. Our AI platform works seamlessly to provide our subscribers with the most robust trading experience available anywhere in the market today.
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Considering the volatile landscape of late, we’re taking advantage of market dislocation and valuation distortion. We’re striving to help our members ring the register all the time and this is why serious traders should not trade without checking in with market-proven AI tools.
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Have a wonderful week ahead, continue to embrace the people of Ukraine in your thoughts and prayers, and let’s create some meaningful wealth together in 2022.