This market is a bit more dangerous than you might think. Here’s why. (May 12, 2020)
SPY NVAX SPY QQQ DIA IYT MDY IWM MDY SPY QQQ SPY DIA IYT QQQ MDY IWM SPY T2107 RDSPY SPY
We are out of our Novavax ( NASDAQ: NVAX ) trade. This was a really, really strong trade. I wish it would happen all of the time; 100 percent gain in just a couple of days, I’ll take it. But again, this trade was because the stock rocketed up on news regarding some money that they are getting in the COVID virus and all of that. That is why the stock went up.
But nobody, other than people that work on Capitol Hill, could have predicted this. I didn’t’ get in because I thought it was going to be a double. I got in because I saw this entry. It looked like a good low-risk entry, defined risk entry because you just keep your stop there, so I am in the trade for that reason.
It’s trending higher, I think it’s going to go up, I’ll buy some stock here and I will keep a tight stop on it. Yes, that’s it, I can do that; speculation, that’s what you do. You put your chips on the table, know how much you are going to lose, and then you are in. And then boom, you get that thing and then it turns out, hey man, this is awesome.
I am just explaining this because entry is everything, it’s not predicting the double. Only idiots and those that think you are an idiot will predict this kind of stuff. It is just lucky, but the luck comes from good entries.
That takes me to what I want to talk about now in this, which is, I don’t think this is the time to be buying stocks. I get it, we are still in a squeeze here ( NYSEARCA: SPY ), and just yesterday the market looks pretty frisky like it is kind of ready to go up. You can look at the QQQs ( NASDAQ: QQQ ), those are clicking. The Dow ( NYSEARCA: DIA ) is good, even the transports ( BATS: IYT ) are not bad. The MidCaps ( BATS: IYT ) are good. The Small Caps ( NYSEARCA: IWM ) are good.
And then we get a day like this, now suddenly everything is reversed. The Small Caps ( NYSEARCA: IWM ) are not good. The MidCaps ( BATS: IYT ) are not good. The SPY ( NYSEARCA: SPY ) is not good, The QQQs ( NASDAQ: QQQ ) are not good. This is where the rubber meets the proverbial road. Look at the chart, this is a 15-minute chart; what happened was, it just looked to me like first there’s some profit-taking here at 1:30. And then comes along like 3:15, maybe 3:00, it sure looked like a sell program just kind of hit the tape because everything started going at the same time.
So I have got no trade for you today. In fact, I have the opposite. The trade is, you’re in cash so stay there. Be very careful about this market right now; I just get the sense that we could have more downside here.
I mentioned yesterday that from a long-term historical and technical standpoint, this is actually a bullish environment; because if you look at this percentage (T2107) of stocks above their 200-day moving average, we are just ticking up above 15 percent. And over time every time that has happened the market, which is the red line here, has still gone up quite a bit. So I don’t really see any reason why this wouldn’t do this.
I am just saying that we are in a good position right now with respect to the market health in general but when we are talking about specific to today and what to look for tomorrow I would be really careful. We’ve got options expiration on Friday, typically not a big deal but it is something to be aware of. We’ve got the Congressional Hearings; the politicization of the Coronavirus, and who knows what going to happen. The Fed is now buying corporate bonds so that is definitely all good in the hood. They are doing everything they can to prop up the market. I don’t have any indication that they are not going to be successful.
I am just looking at the price action and this is what I am telling you: We’ve been on a good run; if you are a member you know this. The stocks that we’ve been in just on the Growth Stock List, buy here, put your stop here. Sell half here, get out here. Like all the specific trades, they have done really well but at some point you have got to start protecting profits and that is where we are right now. Not every day is a great day to buy. Sometimes it’s a great day to take profits or stand aside and let somebody else lose that money.
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