Published on April 25, 2018 @ 8:00am
A dismal day for stocks yesterday following Alphabet's (GOOGL) earnings report on Monday, as the theme of selling off stocks on good earnings continues. Today, there are 218 stocks set to report - the largest number of companies set to report so far this earnings season - with Facebook (FB) likely to have the biggest impact on current market sentiment.
And, it all comes right smack where the major indices need to find a bottom - especially if the DOW is NOT going to find its way down to our previously published final downside target on the DOW of 22,800. Meaning, the possibility of one more big swoon to the downside, which would likely trigger enough investors to run for the hills, and then more importantly start working its way higher from there.
As it stands right now, the April lows across all of the major indices remain intact, which is good for the forward bullish argument. However, we've continued to reference the light volume on any decent rallies, while sell-side volume continues to be much higher on sharp moves lower.
Provided here are daily charts of both the NASDAQ Composite and the DOW, and as you can see, both are hovering down around their recent lows. We've also provided the technical context here on both the NASDAQ and the DOW for why it's entirely possible both of these indices may be heading lower before they potentially bottom on the year.
Specifically, we're looking at slightly below 22,800 on the DOW, and slightly below 6,500 on the NASDAQ Composite. Of course if the early April lows hold, and the markets can find their footing, they are still in a position to move higher soon, but that's a very BIG IF.
The bottom line is until proven otherwise, these markets have clearly become a traders market on a near-term basis, unless of course you're looking to take advantage of discounted prices in many quality names for the long haul.
So which are you, short-term trader or buy and hold investor? This is the single most important thing to assess, because if you're the latter, there's nothing wrong with exercising some patience for the time being, and then averaging down in higher quality proven names if and when the markets move lower. However, it's probably not a good idea to run out and average down in anything quite yet. Remember, if you're a buy and hold investor, it's a marathon not a sprint, so there's no need to run out and average down in anything quite yet.
If you're more of a short-term trader, you've probably done very well with our ongoing index and ETF's directional calls over the last few months. From the February bottom to the NASDAQ's new high in March, our bottom call earlier this month, and then ultimately our reversal call on the NASDAQ last Wednesday. Then, our bullish dollar trade via UUP and EUO, as well as our bullish leveraged ETF healthcare trade via CURE, which we've already exited.
However, if you're preferred strategy is short-term trading, you've definitely had to stay on top of the newsletter here, as these markets have clearly offered some nice profits on a very short-term basis based on the volatility they continue to exercise.
Now, it's even more important to address your timeframes, goals and strategies more than ever before, because although these markets were clearly in a bullish thrusting mode higher ever since the extremely volatile behavior throughout 2015, which is what we're seeing again now, it does appear volatility is once again here to stay again for a while.
We've continued to suggest mild allocation in just about every long-term idea we've put out there over the last several months, and for good reason. There will be a time to get bullishly aggressive again, but we're definitely not there yet.
As for the preferred short-term trading strategy, we continue to believe the best strategy is to play the extremes in either direction. Meaning, only at those key pivot points, whereby the idea in question has gone too far in either direction, traders should fade the other way. In other words, playing extreme contrarian when the idea in question has gone too low or too high too fast.
With that being said, believe it or not, now's not a bad time to get long a bullish leveraged ETF like TQQQ or SPXL, as the risk/reward is pretty good right now. However, if the major indices do end up breaching their early April lows, you'll have to cut the idea, and wait for the above mentioned levels on either the NASDAQ or the DOW before taking another shot at re-entering the bullish leveraged ETF in question again.
Actions To Consider Today:
Hold UUP and EUO with a protective stop you're comfortable with.
Individual Company Updates:
To view current open individual company picks, log-in here: https://www.vikingcrest.com/member. Note: short-term ETF trades (leveraged and non-leveraged) are only provided within the daily newsletter.
If you have any questions or would like further details regarding any of the information provided above - or anything else you're thinking about buying or selling out there - please don't hesitate to call or email your Rep . at 619-369-9316.
Lead Analyst @ Viking Crest