Well… let’s just say the last two hours of the markets today wasn’t pretty.
Like I mentioned in my morning daily video, the Fed had already announced a quarter rate cut, so it should have been priced into the markets… but they did not take well to the 2pm announcement today. Take a look at the SPY chart:
Now I’ll take it one step further and show you the reaction after the news and the announcement from the Fed (which most traders think would be bullish).
My speculation is that #1 these markets are tired of running, and #2 the big players were hoping for a little bit of a surprise factor with a full half point rate cut – and when that didn’t happen, they didn’t take it lightly. Here’s a 15 minute chart to show some perspective:
Now here’s whats so cool about this… it’s setting up one of my favorite types of trades – the “Slingshot” pattern. Just yesterday I held my LIVE broadcast where I explained the setup, and how you and I could trade together in my all-new Trade Room – but spots are limited, so if you missed it click here and watch the replay ASAP.
How is market health overall? It’s been overcooked. We know that by looking at the percentage of stocks above their 50 day moving average… and I think we were somewhere at 80%+ today – which means they need to revert to the mean.
Secondarily the $VIX is at all time lows, but today’s decline provided a nice spike, but not a spike even near that 20 threshold level I typically spot.
BUT – am I saying these markets are turning bearish? NO! Earnings reports have been great for the most part, and the NYAD cumulative is still showing higher swings. See the chart here:
Now for the real deal… what trades do I love?
Well first off the bat, I love the trade that my Jump Trades members were in today. We bought puts on FXE and now the entire trade is currently profiting near 40%… Being a buyer of put options means we make money as the underlying declines… see what FXE did today:
Now for my favorite picks at the moment…
I really like the XLF sector, it showed strength today in lieu of the Fed announcement.
In there I have my eyes on HRB – H&R Block.
This stock shows strong relative strength, and has made new highs and retraced back to its 50 day moving average… If these markets recoup strength I would assume that HRB would make a nice bounce upward.
My next pick for the week is TMF – 3x Levergage 20 Year Treasury Bond.
When markets go down, this bad boy goes up and typically shoots up. I actually use it as a hedge in one of my best performing portfolios – click here to grab access to that portfolio.
That’s it for my mid-week rundown.
If you missed my class yesterday, click here to catch the replay (100% free)
I’ll be back tomorrow with a fresh update for you on what I’m trading.