To gain an edge, this is what you need to know today.

Potential Triple Top Concern

Please click here for a chart of Nasdaq 100 ETF (QQQ).

Note the following:

  • The chart shows a potential triple top.
  • The chart shows that yesterday on good news about the vaccine, Nasdaq was rejected right at the resistance line.  This is a negative.
  • The chart shows that yesterday after the rejection, Nasdaq closed near its lows. This is a negative.
  • The chart shows that Nasdaq is gapping down.  This is a negative.
  • Nasdaq is gapping down while Dow Jones Industrial Average (DJIA) futures are up 160 points. This is a negative.
  • This is a continuation of the trend we described in yesterday’s Afternoon Capsule.  Please click here to see the chart showing the trend.
  • The chart shows that the rejection occurred at high volume.  This is a negative.
  • The chart shows that RSI was not overbought when the rejection occurred.  This is a negative.
  • The chart shows that RSI was lower this time compared to the last time when the rejection occurred.  This is a negative.
  • The chart shows that RSI was lower last time compared to the prior time when the rejection occurred.  This is a negative.
  • The sum total of the foregoing is that a rotation is taking place out of tech stocks into financial stocks, small caps, basic materials, cyclicals and value stocks.

Caution

In the very, very short term, the rotation is overdone and may reverse itself.  Further, value stocks have now become very expensive in just one week.

Antibody Drug 

The antibody drug from Lilly (LLY) has been approved for the treatment of mild to moderate COVID-19.  This is creating optimism.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) stocks in the early trade. Of special note is that the momo crowd is 🔒 tech stocks. Smart money is 🔒.

Gold

The momo crowd is 🔒 gold in the early trade after yesterday’s selling gold.  Smart money is 🔒.

For longer term, please see gold and silver ratings.

Oil

The momo crowd is 🔒 oil in the early trade.  Smart money is🔒.

For longer term, please see oil ratings.

Markets

Our very, very short-term early stock market indicator is 🔒.  Expect the sectors named above to be bought and tech stocks to be sold at the open.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates are ticking up and bonds are ticking down.

The dollar is stronger.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $1879, silver futures are at $24.39, and oil futures are $40.90.

S&P 500 futures resistance levels are 3600  and 3630: support levels are 3520, 3460 and 3420.

DJIA futures are up 160 points.

Protection Bands and What To Do Now?

It is important for investors to look ahead and not in the rear view mirror.

Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or short term bond funds or allocated to short term tactical trades and short to medium-term hedges of 🔒 and short term hedges of 🔒. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, total cash level should be more than stated above but significantly less than cash plus hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

 

This post was just published on ZYX Buy Change Alert.

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