Good day everyone! The 6110 level on the NASDAQ Composite was breached
last week. The index did, however, come firing back to close well above
that number though. So, just like we’ve seen so many times over the last
few years, the markets are going to make both sides of the trade fairly
nervous over the next several days.
If you’re interested in fading against these markets though, now’s
the time. Meaning, there is some pretty good technical context right now
to enter into a bearish leveraged ETF like SQQQ, the primary inverse
ETF tracking the NASDAQ 100. Just make sure if you do, you’re willing to
risk a sharp rebound higher on the index over the next few days.
In other words, there is the possibility these markets could continue higher, so we’ll suggest a SSL of 6,285 on the Composite for those traders interested in playing the markets lower from here via some slightly out of the money QQQ put options a month or two out, or by entering into SQQQ.
The other option would be to sit tight and see if the markets move even higher today, and then test the NASDAQ Composite if and when the index finds its way back up around 6,253 or so. That would at least minimize your downside short risk – problem is there’s no guarantee these markets are going to find higher levels before they move lower.
Nevertheless, when it comes to short-term trading anything, it’s usually best to enter into something at a level that reduces the downside risk as much as possible, so it all comes down to your own individual risk tolerance at this point.
It would be a lot nicer to see bonds rallying even further if the major indices are going to move lower. However, in the best interest of being completely objective, bonds have run into a potential resistance level, which “could” mean more upside ahead in stocks.
However, there was some very significant bond buying over the last few days, and when we drill down into the daily chart of TLT here, the primary ETF tracking 20-year treasury bonds, it does appears the ETF could try and fill the gap we’ve pointed to here.
If that happens, stocks should move lower in the interim. However, we’ll need to see further upside in bonds to be sure, because if you’ve been around the markets long enough, then you know bond money is very smart money. And with that, bonds have been rallying lately along with stocks, so something has got to give soon.
There’s no way bonds and stocks will continue to rally together for all that much longer, so we’re assuming stocks are going to run into some resistance soon, but we need bonds to continue higher to further support both the fundamental and technical context there.
In other words, there is the possibility these markets could continue higher, so we’ll suggest a SSL of 6,285 on the Composite for those traders interested in playing the markets lower from here via some slightly out of the money QQQ put options a month or two out, or by entering into SQQQ.
The other option would be to sit tight and see if the markets move even higher today, and then test the NASDAQ Composite if and when the index finds its way back up around 6,253 or so. That would at least minimize your downside short risk – problem is there’s no guarantee these markets are going to find higher levels before they move lower.
Nevertheless, when it comes to short-term trading anything, it’s usually best to enter into something at a level that reduces the downside risk as much as possible, so it all comes down to your own individual risk tolerance at this point.
It would be a lot nicer to see bonds rallying even further if the major indices are going to move lower. However, in the best interest of being completely objective, bonds have run into a potential resistance level, which “could” mean more upside ahead in stocks.
However, there was some very significant bond buying over the last few days, and when we drill down into the daily chart of TLT here, the primary ETF tracking 20-year treasury bonds, it does appears the ETF could try and fill the gap we’ve pointed to here.
If that happens, stocks should move lower in the interim. However, we’ll need to see further upside in bonds to be sure, because if you’ve been around the markets long enough, then you know bond money is very smart money. And with that, bonds have been rallying lately along with stocks, so something has got to give soon.
There’s no way bonds and stocks will continue to rally together for all that much longer, so we’re assuming stocks are going to run into some resistance soon, but we need bonds to continue higher to further support both the fundamental and technical context there.
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