What was Tuesdays’ up day in the Dow Hiding?
Well, it was certainly hiding some horrendous market internals. The volume was on the light side at 741million but the advancing volume was only 276MM while decliners traded 448MM or 1.7 times of the advances. The actual adv. / dec. numbers for the stocks were 1221 up, 1746 down or 1.45 times the advances.
So, how does this happen? Well, the Dow is a price weighted index, which means a higher priced stock has more meaning than a lower priced stock. Monday after the close, both IBM ($156) and JNJ ($122) both had positive numbers and helped the Dows gain. The S&P500 and the NASDAQ were both lower at the close as was the NYSE Composite index, all much broader indexes. For this reason I will keep the longs we have, but also the balance using the SPXU and the QQQ puts.
Enough about what’s happened already, let’s look at trades that look good now. The US$ index has spent the last month consolidating after the massive move up on Brexit. While it looks a little expensive, it may be able to move even higher and that should mean lower gold (GLD). The GLD may have a little rally off the last 4 days but the chart looks a little “diving boardish.” On an unchanged or slightly higher open I would be a buyer of the 8/125.50 @ market. If you don’t trade options, I’d short the GLD and use a buy stop over the market @ $129.29 on a close only basis.
If we’re right on the US$, then the other trade would be in the Oil. It too looks like it is in a consolidation here with a bottom between $47 and $44.50 on the bottom. A break below $44.59 on a closing basis looks like it could test $41-$42. The ideal trade (if you can stomach the volatility, it’s a 3:1 leveraged ETF) would be to be a buyer around $85-86 with a stop @ $81.44. If the oil does come down $2.00, the leveraged ETF would move close to 15% on the upside. CAM
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