Trade talks are back on track… and that goes to show you how fast things can change.
On Friday, Trump came out with a series of tweets… and that actually caused the futures to gap down by more than 1%… and the S&P 500 was briefly below the Death Line…
… until early this morning after China called and asked to renegotiate and continue trade talks.
That caused the market to reverse and run higher… but that doesn’t mean things can’t change in a heartbeat.
Even though trade war headlines calmed the market earlier this morning… there’s still a possibility that it escalates this week – potentially causing the market to sell-off.
You might be thinking all this volatility can hurt your trading account… but if you make the necessary adjustments… the trade war could actually boost your performance.
Despite some Trump tweets hitting the wires and causing a 2.57% drop in the S&P 500 ETF (SPY), I was able to pull in this massive winner in Amazon.com (AMZN)… in just about an hour.
But that wasn’t the only winner I had last week… in fact, I nailed my biggest single trade ever – a $100,650 winner in FIVE on Thursday – and I actually bought calls with all this volatility.
How was I still able to pull in these colossal winners, despite all the back and forth action, as well as headlines last week?
With a little bit of help from trade war headlines and using my money-making patterns.
Right now, I’m going to stick to what’s been working for me… and there are some key levels and patterns to keep an eye on this week.
With all this volatility, I’m going to be looking for some potential plays in tech stocks and the SPDR S&P 500 ETF.
We’ve seen some weakness in tech stocks, as the NYSE Fang Plus Index – which tracks some of the largest tech companies – is still stuck in a downtrend. Not only that, but it’s still fairly close to the Death Line… and if we see a break below…
… that weakness could spread throughout the market, potentially causing a selloff.
FANG stocks have been stuck in a range, and until we see a clear break above the blue downtrend line… I’m going to look for quick profits and remain nimble.
One interesting thing to note is the “Death Line” setup on AMZN around $1,750. If that gets taken out, it could drop a lot lower… and it will drag other FANG stocks down with it, as well as the overall market.
We’re still pretty close to it… and AMZN is just about 1% above that line… but as we all know, things could change pretty quickly. My thesis still stands and I’m going to be keeping a close eye on it.
Here’s a look at the returns of SPY vs. AMZN.
When you look at how AMZN has been performing in relation to SPY over the last several weeks…
… things don’t look too pretty. You see, with such a big chunk of the market not keeping up with SPY, that tells us there has been big money coming out of AMZN… almost as if they know something is up.
If there’s continued selling pressure in AMZN… it could cause SPY to break below its Death Line.
We’ve seen SPY already test the Death Line multiple times already… and it might be a matter of time until AMZN breaks below its key level – leading to contagion risk in the overall market – potentially causing stocks to crash.
Sure the market is up a bit today… but that doesn’t mean you should be a dip buyer just yet. What I’m going to be doing is focusing on the above charts and the Death Line… because if we do get below that, I’ll be ready to make moves.