Market Report 1/18/16

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Market Report for Week of January 18th, 2016.

Before I get into this week’s report I want to discuss something real quickly.

If you are reading this post shortly after it was published, you are one of the “insiders”. You were part of the small group of traders that arrived from the old service, the Research Lab. No doubt you are Grandfathered-in with a great deal and I will honor that going forward as long as you wish to stick around.

As you know at the beginning of 2016 I rebuilt everything from scratch – to take advantage of the latest technology and to create the best “trading service” available anywhere. We officially launched in January 2016, during the worst start to a market year in history.

Rest assured you are part of an elite group of members and no matter what the market does this year, I will provide TONS of great charts, ideas and trading opportunities across multiple timeframes. From here on out everyone that joins this service pays $99 per month and as you know, it’s well worth that price.

I sincerely appreciate your past support and look forward to serving you in the future. I know some of you have been here since 2008 and others for many years. I’ve always worked as hard as possible to bring you the best stock picks, swing trade ideas and charts that I can. All day every day I am here working on your behalf.

This brand-new platform is not the old one. Things will be different – and much better.

Thank you for your support.

Now on to the markets. As you recall last week we looked at the big picture – the Monthly chart. I pointed out it wasn’t a pretty picture. We were off to the worst start ever and it didn’t get much better last week. Keep in mind Friday was options expiration day.

Here’s where everything stands year to date – a few weeks into 2016. Note the S&P Futures vary slightly from the actual SPX index.

YTD_1152015

The market are officially “In Turmoil” and stocks have been crushed.

As all of you know, my Rule #1 is to always use stops to prevent large losses. I’ve been reiterating that rule since the beginning and never waver. With that said there are times where stops need to be re calibrated to deal with the current environment. Going forward into all this volatility my plan is to adapt by giving some of our trades a bit more wiggle room. Not all, but some.

The sentiment is terrible right now and the market is the most oversold it’s been in a long time. I’m almost positive there is a big bounce coming at any time. I have no idea what Tuesday’s open looks like (I’m writing this on MLK day and the market is closed) but get ready for a huge relief rally that likely starts within the next few days.

The rally could start from lower levels but it’s coming. I know I said something along those lines last week but now that we’ve retested the area of the August lows, it’s very likely we are going to get the bounce that forms somewhat of a right-shoulder on the chart.

Be sure to look at that Monthly chart from last weeks report but keep in mind on the daily chart things look a bit different. Here’s a look at the daily SPX.

SPX_D_1182016

The arrow I drew goes out a couple months and it could happen faster, but the next bounce is critical. Depending on how high it goes, how it manifests and how much it resembles a right-shoulder are key. Notice the October low. that’s a critical level should things continue down before the bounce.

Last week felt like capitulation but you never know. I’m thinking we are due for a relief rally and then everyone will be afraid they are going to miss out. Bear market rallies are fierce and tend to suck everyone in.

I’m playing XIV for the inevitable rally as a way to participate broadly, while at the same time I want to have a few stock positions when the time is right. We already have PAYC as an Open Trade and it closed strong last week amid all the carnage.

One of the keys here will be to see what stocks and sectors lead the next rally. So far this year everything has been sold off hard and nothing has really been spared, not even the FANG or previous leaders among the big cap stocks. The next rally will provide insight into what stocks “they” are interested in accumulating.

Even though there will be days where the energy stocks rally hard, I’m leaning towards not trusting them and likely will avoid them. I’m almost certain a few of them are bargains down here so perhaps I’ll change my mind at some point. But I think it’s best to avoid the sector for a bit until things settle down.

I actually have a decent watchlist of stocks that don’t look so bad here. I’ll be posting them in the Chart Feed this week once I see how they look when things get rolling. The market is very oversold as you can see by this chart.

SPX_A50R_11816

We’re getting close to an interim low and it may not be pretty, but we are going to put in a bottom and rally. I’ll be ready for it and I’ll know when I see it. There will come a point when the “recent low” holds and once everyone else thinks they see it, there will be a rush to buy beaten-down stocks.

I want to play that for some quick trades and then get out.

We will trade it as we see it play out and the contrarian in me says it’s coming very soon. Likely in the next few days.

Please join me for the live shows this week and we’ll work with whatever the market decides to do.

See you there!

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