Stocks Running Into Persistent Resistance, Start Hedging Positions in QQQ SPY
We started hedging our positions in SPY, QQQ and IWM this week, as persistent overhead resistance is forcing the bulls to take a breather. Breadth and momentum indicators currently suggest a more defensive bias, on the heels of a broad market gain of more than 20% from the December 2018 washout lows.
Nasdaq hits Resistance – QQQ Hedging
The QQQ ETF is our preferred method of tracking and trading the Nasdaq-100 performance. To date the QQQ gained 22.54% from the December lows (143.46), therefore can reasonably anticipate a typical 5% drawdown in the short-term, if selling accelerates.
- RSI is dropping fast
- MACD is below its signal line, but still above zero-line
- 1st target 167.12 (+/-) 23.6% Fibonacci retracement
- 2nd target 165.23 (+/-) ascending 50d moving average
SQQQ Hedging
Given the state of the technology and biotech stocks within the Nasdaq-100, and the corespodning weakness in its tracking ETF, we are hedging our positions with the SQQQ. We’ll add to our position today if the markets continue printing lower lows during the Friday session.
- RSI is turning higher
- MACD crossed above its signal line
- Price action closed above the 20d moving average
- 1st target 13.40 (+/-) 23.6% Fibonacci retracement and 200d moving average
- 2nd target 14.55 max or the “zone” between 23.6 ~ 38.2% Fibonacci retracement
Short-term overnight traders will most likely take profits at the open, so we will anticipate this action could lift the oversold indices in the first 10-15 minutes. We will reassess the markets shortly thereafter.
Addtional hedge positions: SPXU, SH, DOG, SDOW, AGG, TIP, TLT, SHY and IEF.
Keep in mind that the above is the worse case scenario. We do not expect a major pullback as the following calatysts point to a bullish resumption at some point.
Remember NYMO and NAMO are already at extreme oversold levels.
- Corporate balance sheets are strong
- Earnings, sales and guidance are bullish
- The FED is supporting the market
- US bond and equity markets are safe havens
- International markets are still experiencing economic obstacles to growth
Join us today in the trading room for our LIVESTREAM broadcast during market hours, as we trade this market weakness. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.
Happy Trading,
Vinny
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