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It doesn’t matter if you traded currencies, precious metals, bonds, or stocks— it was a wild week of action in the financial markets…many are blaming the trade war as the catalyst… but I’ve been around the block long enough to know it’s never one thing. 

And despite the Dow Jones experiencing its fourth-largest loss ever this week… there was plenty of back and forth action… as the SPY, QQQ and the Dow finished down just 0.54%, 0.94%, and 1.53%, on the week. 

But that doesn’t tell the full story, so here’s a more detailed rundown: 

  • The Dow dropped 390 points-breaking below a key psychological level (26,000), while the SPY fell through its key level of $290 on Monday– a reaction to bond yields plummeting. 
  • On Tuesday, Trump came out and announced a delay on tariffs for certain Chinese goods until Dec. 15, sending the market higher by over 1.4%
  • By Wednesday, long-term Treasury yields were hitting record lows… causing the Dow to have its fourth-worst decline in history – will you be ready if stocks crash?
  • On Thursday, stocks took a breather and finished the day, more or less, flat.
  • Some dip buyers crawled in on Friday, pushing stocks higher, as the Dow closed up by 1.2% and the S&P 500 finished 1.44% higher.  

There are a lot of questions that traders have on their minds right now…

  • Is all this back and forth price action in the stock market the new normal?
  • What’s actually going on in the market– and are there any clear patterns that can help us make money during this stretch?
  • What are the upcoming catalysts for the week and what should you be looking out for?

I attempt to answer those questions, as well as, fill you in on where I’m putting my hard-earned money to work.

 

One Tweet or Comment Can Make or Break This Market

 

It’s the weekend… and that’s when the twitter fingers start firing. It seems like almost every weekend for quite some time now, Trump makes some comment about the economy or trade war… and the markets react… or we get a comment from Trump’s frenemy, Chinese President Xi.

Right now, traders are on edge and watching the “he said, Xi said” game very closely.

You see, the thing that really sparked this sell-off was the U.S. looked to slap 10% tariffs on $300B worth of Chinese goods… leading to China devaluing its currency… followed by a drop in bond yields as traders were fearful that the Trade War could cause a recession.

However, that all changed after Trump said the talks with China were “productive”, as well as the delay on the tariffs on some Chinese goods until Dec. 15.

There’s still a lot of back and forth going on… and just because there were some positive comments, it doesn’t mean the sentiment can’t change in a heartbeat… and that’s actually baked into the market currently.

How is it baked in?

Well, we’re neither in a downtrend or uptrend. In fact, we’re still in no man’s land.

Why?

Well, take a look at the daily chart in the SPDR S&P 500 ETF (SPY).

 

 

If you look at the chart above, SPY is trading between two key levels right now… $290 and the Death Line at $282. Sure, we’re close to $290, but that’s a resistance level. 

You see, at that level, traders may be willing to bet against the market… and if the bears win, it wouldn’t be surprising to see SPY get to the Death Line.

Why is that red line so important?

Well, if we break below that… we could see a sharp move down in the market…

… and one negative comment about the trade war, from either side, could spark that. 

Until we see a move above or below those key levels… this choppy market could be the new norm for the short term.

The key here is to wait for a clear move above or below those levels.

However, once we get a clear direction, whether the market runs higher or crashes, I’ll be ready to take advantage using my best setups.

 

There Are Still Money-Making Opportunities in This Environment

 

In times like these… the best thing to do is focus on your best setups and trade smaller than normal, as well as having a trade plan and respecting your stops.

Here’s what I mean by that.

 

 

When you have stops… you have to respect that. I made sure to make my stop a little bit wider than usual to take into account the volatility. Not only that, I had on a smaller position than I normally would have on. By doing that, you can reduce your risk in markets like these.

When you stick to your plan… your best setups could produce winners like this.

 

 

(If you’re looking to make money in this market environment and simplify your trading, you can get my highest-conviction trade idea delivered straight to you through email and text every week. Click here to find out more.)

Even though the market is all over the place, I’m still seeing a lot of opportunities out there… using my alpha-generating strategies

For example, one trade that I made was GOOGL.

 

 

GOOGL is looking pretty strong to me at these levels.

Big buybacks were announced, a great business that is outpacing overall economic growth… and we have a great chart pattern, as you can see above.

There’s a nice flag setting up… and generally, the next move from here is higher. 

I have a strong thesis and a plan in place… so I’m going to stick to it… and I’m also minimizing my risk.

Now, there’s going to be a lot going on next week… so let’s take a look at some of the upcoming economic catalysts.

We’ve got the Fed minutes on Wednesday… and that should add another degree of volatility to the market as traders will be looking for language clues and more details as to where rate cuts could be headed. This is going to be one of the most important Fed minutes of 2019.

 

Economic Calendar

 

Monday, Aug. 19

  • No Major Economic Data Released

Tuesday, Aug. 20

  • 7:45 AM EST               ICSC Weekly Retail Sales
  • 8:55 AM EST               Johnson/Redbook Weekly Sales
  • 4:30 PM EST               API Weekly Inventory Data

Wednesday, Aug. 21

  • 7:00 AM EST               MBA Mortgage Applications Data
  • 10:00 AM EST             Existing Home Sales
  • 10:30 AM EST             Weekly DOE Inventory Data
  • 2:00 PM EST               FOMC Meeting Minutes from the July 30-31st meeting

Thursday, Aug. 22

  • 8:30 AM EST               Weekly Jobless Claims
  • 9:45 AM EST               Markit US Composite & Services & Manufacturing PMI
  • 10:00 AM EST             Leading Index for July
  • 10:30 AM EST             Weekly EIA Natural Gas Inventory Data
  • 11:00 AM EST             Kansas City Fed Manufacturing Activity
Other Key Economic Catalyst
  • Annual Federal Reserve Policy Symposium in Jackson Hole, WY

Friday, Aug. 23

  • 10:00 AM EST             New Home Sales MoM for July
  • 1:00 PM EST               Baker Hughes Weekly Rig Count

 

Now, we’ve also got some large companies reporting earnings, like Baidu (BIDU), Home Depot (HD), Lowe’s Companies (LOW), and Target (TGT)… which can give us a better idea of how the underlying economy is actually doing.

 

Earnings Calendar

 

Note: AC stands for After Market Close, and BO stands for Before Market Open. Implied movement is based on weekly options expiring Friday. The average percentage move after earnings is based on the last 8 earnings, unless otherwise stated.

 

 

It’s a tough market out there… and if you’ve been struggling… that’s okay. Now isn’t the time to panic… it’s the time to pivot and look for strategies making money in this environment.

 

If you’re fearful of a potential market pullback and looking for a simple strategy that allows you to take advantage of crashing stocks… then check out how my trading system can help you profit during a market selloff.

 

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