New Market All Time Highs Dead Ahead and More Trades For the Next Leg
The notion that the Federal Reserve is stoking another Asset Bubble looks more correct every single day. “Federal Reserve Stokes Another Asset Bubble”. (https://markonomics101.com/2019/03/22/federal-reserve-stokes-another-asset-bubble/).
First the Cryptocurrencies resurrected. “Cryptocurrency Sector Explodes Higher”. (https://markonomics101.com/2019/04/06/cryptocurrency-sector-explodes-higher/). Bonds are already near their all time highs in segments such as High Yield and Investment Grade. European Bonds, which were already negative yielding, are even more negative. The stock markets are just lifting up for Leg 2 of the Bull Market of 2019. “Trades For The Next Leg Up In the Bull Market”. (https://markonomics101.com/2019/03/25/trades-for-the-next-leg-up-in-the-bull-market/).
If you’ve been a regular reader, you’ve gotten to see, in REAL TIME, the accuracy of research and CHARTS. Often WELL ahead of the financial media and especially Wall Street itself.
New ALL TIME HIGHS Lie Directly Ahead
The First Slide Show below sheds light on future expectations. A few takeaways are as follows:
- The Dow has finally overcome key resistance at 26,250. It is within a whisker of NEW All Time Highs. We still expect to see Dow 30K.
- The Nasdaq 100 is also within a hair of ITS ALL TIME HIGHS.
- The Russell 2000 has not yet broken ABOVE resistance but the probability is high that it will.
- The S & P 500 is also within a couple percent of New ALL TIME HIGHS.
- The Dow Jones Transportations have made a new interim high and CONFIRM the new HIGHS in the DOW. This triggers a “Dow Theory” Buy Signal.
But, lets look at some appealing trades….
The Oil Sector is About to Add Its Weight To the Rally
The Oil Sector, recently AWOL, is now getting ready to join the party. This is VERY significant because that Sector represents a couple Trillion dollars in combined market capitalization. The sector is comprised of Oil Producers, Shale Oil Producers, and Oil Field Equipment Companies or the Drillers. All are still near their lows and have SUBSTANTIAL upside remaining.
A Second Slide Show of Oil Companies is below. The key takeaways are as follows:
- Schlumberger and Halliburton are both Drillers. They are up against resistance, which turns them BULLISH. These are likely excellent trades once resistance is overcome.
- The Oil Index is about to break out from a very BULLISH “Cup and Handle” pattern. This is a very BULLISH sign for the individual companies.
- Oil Producer Occidental Petroleum and Shale Oil Producer Chesapeake Energy have VERY BULLISH patterns and are at very attractive levels to be bought.
Even More Trades That are Ripe
Many of these have been mentioned in prior articles as in BULLISH patterns and on the “Watch List”. These include some Chipmakers, which we are STILL bullish on. “Chipmakers Poised to Lead Nasdaq Higher”. (https://markonomics101.com/2019/02/06/chipmakers-poised-to-lead-nasdaq-higher-chart-of-the-day-13/).
Our THIRD Slide Show is presented bellow. Some commentary and takeaways from these charts are as follows:
- AIG’s pattern is a “Picture Perfect” Cup and Handle. It broke out on Friday and has substantial upside left in all likelihood.
- Micron Technologies is just below resistance and ready to turn BULLISH. It lagged the Semiconductor Sector which is already at NEW ALL TIME HIGHS. Nvidia, the other Chipmaker, broke out from resistance at $170 and is currently above $190. Even though the timing to buy now is not as good as Micron, it still has substantial upside.
- Alcoa and Nordstrom are close to their LOWS. However, each shows a BULLISH pattern, especially in light of how other stocks in their respective sectors are making new highs.
These Trades Can Be Hedged At Low Relative Cost
One can use options to hedge risk at a low cost. The S & P 500 Volatility Index (VIX) has fallen to 12.82% from 36% in the depths of the Christmas Eve mini-massacre. The Nasdaq 100’s Volatility Index (VXN) is at 16%, down from a high of 39%. The cost of an option, all things held equal, are directly related to their respective volatilities. High volatility, the result of Fear, drives the cost of a “Put” Option sky high and often at the bottom.
A perfect strategy would be to either hedge with Index puts or even in on dividual stocks. Keep in mind, that it is a “COST’ of the trade and if the stock rallies, the complete loss of your option value is a certainty.
An alternative is to set logical pre-set “Trading Limits”. We recently outlined the logic of where and when in this article. “The Importance of Setting Trading Limits”. (https://markonomics101.com/2019/03/28/the-importance-of-setting-trading-limits/).
Another re-emerging sector is the Financial Sector. That will be discussed in a future article.
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