MARKET SUMMARY (10/21/19) – RALLYING AGAIN

Bull markets can be boring sometimes.

But making money isn’t boring, so as long as we stay on the right side of the market, I’m happy to be bored.

If you’re a market bull (and you should be if you’ve been following my analysis), this past week did what it needed to do to turn the market up after a brief bearish turn.

We’re still early in this potential weekly bull cycle, so ideally we need follow-through upside momentum this week. 

Sure, there are potential warning signs, particularly with the daily charts losing momentum. This is normal after a decently strong 8-day rally. But I won’t even bother mentioning them, since the weight of evidence still points up.

We’ll keep it simple. If the SPX closes below 2,950, I’ll get cautious short-term. Until then, I’ll let my 100% long position ride.

I mentioned last week that we’re getting to the time of the year when Fear of Missing Out can be powerful fuel. 

As we get closer to year-end, with the market lingering at highs, I’d be surprised if earnings, trade war headlines, Trump tweets, or whatever else has moved the market this year will have the same effect.

Momentum and positioning will outweigh everything.


3 THINGS ON MY MIND

1. I traded institutional money during the market tops in 2000 and 2009. At the time, you could find a few smart, quiet voices making bearish predictions about the sky-high tech stock valuations and subprime derivative risks. 

What you couldn’t find were 1,000’s of amateur traders posting made-up charts on Twitter and making hysterical market-is-topping, sky-is-falling crash predictions everyday. In other words, until the FinTwit bear chorus goes away, we’re nowhere near any kind of market crash. Don’t get sucked into the Cult of the Crash.

2. That said, there’s a difference between market crashes and normal, bull market pullbacks. We’ll continue to get plenty of chances to trade buyable dips and possibly even make tradeable short bets. They’ll be tricky and hard, but there will be lots of opportunities. 

3. Bitcoin is building positive divergence on the daily chart. Sentiment is getting interesting because I’m definitely seeing a noticeable increase in people posting $6,000 and lower price targets and predictions of another collapse. As usual, I’ll err on the side of caution when trying to catch the bottom, but we should have our eyes open at this stage.


A CHART THAT CAUGHT MY EYE

CIEN – Ciena

Ciena is an interesting way to play the impending 5G technology spending cycle.

The global transition to next-generation 5G telecom networks will not only enable the next evolution in mobile communications, but will play a huge role in smart cities and the connected device world that tech geeks have been talking about for years.

From a pure chart perspective, the daily chart for CIEN has been drifting and chopping around for months, and has finally filled a big gap from June. 

Daily technicals are now turning up into a bullish configuration after looking bearish for months, and the weekly technicals have been beaten down and are set up for a bounce.

Strategy: Buy here after last Friday’s down trendline break. Stop out of the position in the near-term on a close below $37. 

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