Despite a 60 point advance since the March lows, the market is hitting its head on resistance, and for the first time during this bull market, the relationship between bullish and bearish stocks has remained negative despite mostly improved technicals. The fundamentally heavy Power Gauge ratings of the underlying stocks in the S&P. Though we trade what we see, not what we think, AA and I are cautious about what the summer months will bring. The Chaikin Analytics data is setting up for "Sell in May and Go Away" in our opinion.
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Every week, we take a look at the relative strength of ETF's across all asset classes and check the Power Gauge ratio of bullish to bearish underlying stocks in each so that we can develop our market posture for the upcoming trading week. This is especially critical with earnings season upon usere's our take on current market conditions :
Our plan: add international ETF's showing positive relative strength vs. US. Maintain current US stock positions positions but with tighter stops through earnings and what we see as a volatile late Q2 and 3. We'll look to add banks, drugs, insurers, retailers and medical service providers on positive forward guidance and Very Bullish power gauge ratings. We'll calls spreads on Energy, Basic Material and select Tech stocks as the market gets oversold in late April and the Vix moves higher. We expect "Sell in May and Go Away" to be a prevailing theme into the summer months. We're cautious and expect volatility.
After a decidedly choppy year, our portfolio is beginning to turn the corner and head in a positive direction. Remember, the Chaikin system requires 3 - 6 months for the average investment to play out, and having the bullish market conditions helps. Today, we managed our stops and brought them 2 ATR below the long term Chaikin trend. No new buys for us today.
With the Power Gauge ratio at one of its lowest points of the year, and market technicals looking weak we're being cautious about new trend-following trades. A sector that's suddenly gotten hot over the past few months is Telcom, and today we're adding Broadcom to the Chaikin Power User Portfolio. Here's why we like it:
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Today, we're attempting to sell a call spread above the market on a money flow sell signal. Why we like the trade:
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