Tipping Point Tuesday – 5,440 and Fail on the Nasdaq

It keeps happening.

Apparently, there is a line where enough is enough and that just so happens to be our shorting line on the Nasdaq Futures at 5,440, which has been paying off like a broken slot machine all month (as we predicted), generally giving us 25-point drops ($500 per contract) back to the 5,415 line.  Granted you could have made just as much money playing long off the 5,415 line but, when the big one comes – we don’t want to be on the wrong side of that trade!

If you follow the link back to that April 5th Report, that shows you the set of charts we drew for our Members way back on March 21st which have, so far, been great predictors of the April action as we’ve been adhering to the fabulous 5% Rule™ – despite all the political turmoil that’s creating additional market chop.

When the 5% Rule™ is being obeyed, we know it’s a primarily bot-driven market which also let’s us know a lot of the market moves we see are fake and we can’t put a lot of stock in these late-day or pre-market, low-volume rallies.  We’re now looking for a 2nd test of the 5,300 line on the Nasdaq Futures (/NQ) and, if the Russell Futures (/TF) stay below 1,365 – that becomes a lot more likely with 1,350 the major failure line that we only tested in last Thursday’s overnight trading:

Patience is the key to this market.  You KNOW things are coming off the rails and, if you’d like, we can pretend it has nothing to do with who is President but blame it on whatever you like, as long as you use some caution, hedge your portfolio and keep a good amount of CASH!!! on the sidelines.  As noted by Dr. Brett:

At PSW, we trade the patterns, not the personality.  I may bitch and complain about Trump but I try not to let it influence my trading – that’s why we still have so many long in our Member Portfolios (but also why we are very well-hedged and VERY cashy).  

Speaking of patterns: You are very welcome for that long trade idea on the Dollar Futures (/DX), which we shared with you in our March 29th Report, when it had already gained 0.35 from our Members Only entry but I said on the 29th: “Our favorite long was the Dollar at 99.50 and it had a rough ride but 99.85 at the moment is back on track for a $350 per contract gain but plenty of room to run there.”

Speaking of patterns we should recognize:  In case you haven’t noticed, the Volatility Index (VIX) has jumped over 15 for the first time since October, when the S&P took a 100-point dive and the time before that was June – also followed by a 100-point (5% Rule™) dip in the S&P. 

Maybe this time is different and maybe we shouldn’t be concerned that the Vix popped 25% in the last 3 weeks and, for the first time in ages – is sustaining that level.  We’re concerned, that’s all I’m saying.  Obviously it can’t be anything Trump has said or did recently so I’m just stumped as I can’t figure out what could possibly be going wrong.  

See, isn’t it great to keep politics out of investing – it makes it all seem so mysterious and fun!  Even though pretty much all the politicians do is talk about the markets and the economy and business – the MAJORITY of the financial news sites have cowered their authors into not talking about politics.  This is the most ridiculous thing I’ve ever heard of.  It’s like trying to predict the weather but you’re not allowed to discuss temperatures.  

In non-political news (and another bad sign), Commercial Lending is in the crapper again, led down by the troubled Retail Sector with volume down 7% in Q4 and overall spending on Commercial Property was down 10% in 2016.  As you can see from the chart (and as we discussed yesterday) there is an unprecedented flood of stores that will be going on the market in 2017 and, as you can see from all the empty storefronts wherever you live in this country – prices haven’t come down to realistic enough levels to allow new stores to come in – that’s a reckoning that low rates have allowed us to put off for 8 years.

Unfortunately, we’ve only kicked the can 9 years down the road and now there is going to be Hell to pay.

So be careful out there!  

Provided courtesy of Phil’s Stock World.