Key Markets To Watch Moving Into Monday

Welcome back! As you can see we finished strong in the week and that surprised a lot of people. I want to remind you the reason why was the $VIX strategy that I laid out for you. It keeps working. We’re caught between that magic 12 and 11 area on the $VIX. As long as the $VIX is in that area we can continue to either blow off, grind up, etc. It’s a long arduous push up. We topped over $19,700 on the DOW. Only 300 points away from my target. That was 1600 points ago. Not too shabby. Right now as we go into next week as long as we stay down on the $VIX, I’m going to look for continuations. However, if this $VIX starts spiking up and fear starts kicking in with the interest rate stuff kicking in next week could bring the whole thing down. For now, as long as we’re above the speed lines and the $VIX is in the 11 to 12 area, I’m going to be looking for long-side trades. Once that $VIX pushes above 12 and to and through the speedlines, I’ll be looking for short-side trades.

Another market to look at is crude oil. Crude is continuing to play around with these all important areas. We still have not officially made the dollar level support because we have not broken through this key resistance that’s holding us down. This is a Hoffman IRB of the distribution kind. We can’t break through that. Until we can break through, the $50 level is considered resistance. We have to get up to that 52.50 level, which can lead to some nice rallies. We’ll be looking at that very closely.

Let’s take a look at the drug index. With this market, we’re finally getting a positive divergence but make no mistake that we’ve had other opportunities where the markets have attempted to rally but we’ve been caught in some massive resistance levels coming down on top of us. That’s called catching a falling knife. What can happen is you get your hands cut off. I want to get on the north side of this downtrending channel. I want to pull back and build it as support. The trend is your friend until the bend in the end. You can see here where we broke down through the channel and it became resistance. How about if we make that channel support so we can get a nice trend to the upside. You can see it can continue to be very nasty resistance and is holding us down now. As we break down now, you can break it down into stocks like GLID. Look what happens, once that trend is no longer your friend, that trend is no longer resistance. It’s very important to make sure we don’t get too aggressive. There have been lots of positive divergences that have failed miserably. They would have led to short-term gains had you traded them in the short-term. If you tried holding them through short-term resistance, you would have had your head handed to you. Again, as far as those people who are looking to go long, we let the base come in then worry about riding the rally up. In the meantime, this has been an extended period short riding the channel to the downside.

Have a great night and great weekend. Can’t wait to see you on Monday in the live trading room as well as in the nightly videos.

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