Wheeeeeee, this is fun!
Aside from our $2,750 winner on the Dow (/YM) Futures shorts from yesterday morning's Report, we also had a $7,000 per contract gain on the Nasdaq, which fell an amazing 350 points, from 6,850 to 6,500, paying $20 per point, per contract for our Members.
Playing the Futures is not hard, you can join us today at 1pm (EST) for our weekly Live Trading Webinar and we'll be happy to show you how it's done. It's really no different than any long or short position other than it's highly leveraged and it's playable almost 24 hours a day – so we can react to news any time it hits the wires.
Dow 24,350 (weak) and 24,550 (strong)
S&P 2,666 (weak and satanic) and 2,688 (strong)
Nasdaq 6,850 (weak) and 6,950 (strong)
Russell 1,565 (weak) and 1,580 (strong)
The markets are back up to our weak bounce lines**(*see yesterday's report) \\though I think we'll be using them as shorting lines this morning as the Dollar is recovering quickly, up 0.6% and that's bound to put a bit of pressure on the markets as they finally hit some resistance. Dow (/YM) 24,350 is my favorite short at the moment, with tight stops over the line and 6,850 on the Nasdaq (/NQ) will make a fun shorting line as well\**.
Why short? Well, nothing at all has changed other than it's POSSIBLE that China and the US will have a trade agreement instead of a trade war but, other than that – all the other stuff that caused the market to fall off it's highs all month haven't gone away – Thursday's trade talk just made them worse and now they are not worse – they are the same – not better either.*
Our 5% Rule™ is not Technical Analysis – it's just math. It's math that determines the actions of the trade-bots that control the market and it's very, very good at predicting levels – because machines are very predictable. The system is actually based primarily on Fundamental Analysis where I very tediously come up with a fair value for the major indexes and those then determine our primary ranges.
Nasdaq (/NQ) was 35% over it's Must Hold Level (5,400) that did not account for Amazon (AMZN) trading at 250 years worth of earnings along with other silly valuations like Netflix (NFLX), Tesla (TSLA) and AliBaba (BABA) but even FaceBook (FB) and Alphabet (GOOGL) had gotten ahead of themselves – which is why our main hedges are ultra-short Nasdaq ETFs (SQQQ). Anyway, 7,290 was the 35% line and we actually topped out at 7,200, which is close enough to count it. From there, back to the 25% line at 6,750 is a 540-point drop and we know the Nas loves the 25s so we'll use 100-point bounce lines to 6,850 (weak) and 6,950 (strong) but those don't matter because we're testing 6,700 at the moment and again, looking at the news flow – they are never gonna make it.
That's what not making it looks like! These are the same lines we've been using all year and there are similar ranges at the 30% line but it's the 20% line (6,480) that should concern us as that's the level the Nasdaq bounced off and that fall, from the 25% line at 6,750 is 270 points but we'll round it up to 6,500 and call them 50-point bounce lines (20% of the drop) to 6,550 (weak) and 6,600 (strong) for today.
In the bigger picture, 6,850 is still the weak bounce line off the big drop from 7,200 and there's nothing bullish about the Nasdaq below that line and there's no way we're making that line today or tomorrow so, I can tell you now, we're heading into the weekend tilted bearish – no matter what the market does today and tomorrow.
The same Nasdaq Ultra-Short (SQQQ) hedge we gave you Friday Morning at net $400 that was up $950 (237%) on Monday and was back near $400 yesterday morning is now $2,550 for a net gain of $2,150 (537%) but it's still a $10,000 spread so another $7,450 to go from here if the Nasdaq heads lower. We'll come up with some new hedges for the Webinar as well.
This morning we're testing that 6,550 line on /NQ and, if that fails to hold, it's a good short play with tight stops above that line. Usually, into the end of the quarter, we get some Window Dressing as funds try to pretty up their books but this Q is already a disaster and they would probably rather force a lower close on Thursday (Friday is a holiday) so they can get a better rebound in Q2 so I expect more downside from here.
Also, as I noted, nothing has fundamentally changed – the same concerns we had last week are still with us this week and there's not much the President can do to "fix things" this time – especially when it's very questionable whether or not he will still be President next year.