Thank you to everyone who registered for the new All Star Charts membership. I'm super excited to have you guys as part of our team. Remember, we're all in this together trying to navigate through this market day in and day out. It’s a puzzle that is constantly evolving and what we’re here to do is look for major trends around the world and then break those down to find more intermediate-term investing opportunities based on those structural setups. The new All Star Charts was an idea we’ve been working on for a long time, so we couldn't be happier to finally be able to share the ideas and the homework that I already do with all of our new members. Welcome to our club!
For the past 2 months I’ve been very vocal about how there’s been no reason to own the major U.S. Stock Market Averages. If there’s been any trade to be made, it's
definitely been on the short side. So far this has worked out well, obviously, as the S&P500 and Dow Jones Industrial Average are both down since October 23rd. If you recall, this was the day that they each first crossed above what was then, and still is, a flat 200 day simple moving average. Anyone who knows me will tell you that when price is near a flat 200 day, I want to stay as far away from it as possible. I think this period will be useful in the future as a nice example of why. We generally keep a ‘stay away’ approach in these situations, whether it is a stock, commodity, currency, etc. But when it’s the popular S&P500 or Dow Jones Industrial Average that a majority of the investing public is so irresponsibly obsessed with, it grabs people’s attention.
Moving forward, we want to continue to be fading any strength and still see no reason to get long for more than just a few days. Readers know that we look out weeks and months, and therefore consider a few days of action to be just noise, not a trend. At this point, we are now entering the last couple of weeks of the year and fully expect this whipsaw action we’ve seen the past 2 months to continue. Breakouts tend not to hold and breakdowns usually reverse course quickly. I would continue to maintain a more neutral approach towards the U.S. averages and keep fading any strength towards the upper end of this range 17,900 for the DJIA and 2100 for S&P500. I am not suggesting we get up there, and I certainly would not be putting on aggressive trades positioned for it. Instead, I would still prefer to just sell into that if prices happen to get up there during these low volume, Holiday weeks. Again, this is no time to be getting cute.
As far as the Nasdaq is concerned, I would still maintain a neutral to bearish approach and would stay short as long as we are below the line in the sand that we’ve drawn at 114.40 in the Nasdaq100 ETF $QQQ. If we are below that we can continue to stay short the Nasdaq. Within this tech-heavy index, Amazon has been a favorite short of ours. Moving forward I would adjust the risk management levels and would only want to be short $AMZN if prices are below $671.50. If price is above that then there is no reason to be short. On that same front, Apple has been a fade since February when it first hit our $130 target. Since breaking down this Summer, the prospects of another leg higher diminished and it’s been a favorite short of ours, specifically selling into any strength towards
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