Now that my new book, Make Money Trading Options, has been released, I can speak about the trading strategies I use. In Part 2 (at bottom), I discuss the winning stocks of the week using The Test Trading Strategy. You don’t need to buy the book to understand the strategy, but if you want to, here are the links: Amazon: https://amzn.to/3kqw5zQ. Barnes and Noble link: https://bit.ly/3rbr28Q
PART 1: WHAT THE INDICATORS ARE TELLING US
This is what the technical indicators are telling us this week:
One-month trend = Bullish. The indexes continued moving higher during the week, closing at 3943, or 102 points higher from a week ago. The bulls ran with the ball, and are firmly in control. The Fed meets this week, which often leans bullish on the days they meet (Tuesday and Wednesday). Futures are slightly higher on Sunday night.
Mid-term (50- and 100-day MA) = Bullish. The S&P 500 rose firmly above its 50- and 100-day moving averages.
RSI: (S&P 500) @ 64.44 (WEEKLY) = Slightly Overbought. RSI is getting closer to 70, which would be a red flag. We are not there yet, however.
MACD (WEEKLY) = Neutral. MACD is above its zero line and even with its 9-day Signal Line. It’s another coin toss.
Daily Intraday Volatility (VIX): 20.69= The VIX plunged again, which indicates no fear. Once again, how low can it go?
Comment: A week ago, everything looked bleak, but the buyers quickly entered, lifting the indexes to all-time highs. With volatility in the basement, the algos and their friends are running the market higher. The Fed meets this week, and often, the Fed has sweet things to say. If the Fed says all is well, the market could keep rallying.
Bottom line: There isn’t much to say except don’t step in front of a Steamroller to pick up dimes. Short sellers have been banished for the time being. We’ll see if they dare to show their faces this week after botching the selloff a week ago. Bitcoin at $60,000 per coin? We’re either in the Twilight Zone or “Happy Days are Here Again.” Only time will tell who is right.
Note: I added a new stock evaluation program from Barchart (at bottom). It uses a dozen indicators to determine if a stock or ETF is a buy, hold, or sell. Cool program.
PART 2: THE TEST TRADING STRATEGY (TTS) DIARY
Note: Below are my notes of the market during the week using the Test Trading Strategy. The goal is to find winning stocks.
Monday: The Test Trading Strategy (TTS) found Disney, which turned into a Bullish Steamroller. GS started strong in the morning but flatlined along with the market. In fact, the TTS saw a divergence between the Dow (up over 600 points early) and the TTS, which showed most of the winners faltering.
Tuesday: The Test Trading Strategy found these winning stocks early: DOCU, TWLO, TSLA (too risky to own for very long), NVDA, and BIDU. It was an early Bullish Steamroller that stalled out in the last hour.
Wednesday: The futures market was strong at the open. The TTS found 35 stocks that were ready to skyrocket (up by 1% and 1 point) at the open. After the market opened, every stock on the list collapsed! Only LULU and BA made it to the Winner’s Circle. The Dow was up by 1.50% in the afternoon but QQQ was down by -19%. Very dangerous day. The collapse of the 33 stocks was a warning not to participate.
Note: A reader in Asia read my book and is using the strategy exactly as it is written in the book. He told me he has made money every day except for one day by using the Test Trading account to find a winning stock. He made one adjustment: instead of buying only calls, he buys vertical spreads on the stocks that the TTS identified as a winner. Interesting. I will have to add that strategy in the next edition of the book.
Thursday and Friday: Finishing a writing assignment. Unable to monitor market or trade.
Here’s a MarketWatch article I wrote about the Bullish Steamroller: https://on.mktw.net/3bkuicI
Excellent evaluation program from Barchart: https://bit.ly/3v9Nj9G Enter a stock symbol and it gives BUY or SELL recommendations based on various indicators, and opinions.
For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA
For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com
For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com