Happy Saturday
I have never been one to try and make bold predictions about the economy or the market direction in the long or short term. As we all know the markets have a tendency to make those that try to make those types of predictions look like fools.
Just ask Dennis Gartman who just this week made the bold call that we are officially in a bear market and to sell and go short accordingly. It was almost as epic as his call that oil would never see 50 dollars a barrel again or at least not in his lifetime. With all due respect, I think Mr Gartman should consider a new line of work or at the very least stop making bold calls and if he feels the inkling to do so, he should probably call out the exact opposite of what he is thinking.
Reality is that no one knows what will happen with the markets. There have been a lot of articles recently and talk of a recession in 2020. That may wind up happening. However, we could also be enjoying the longest bull market in history that continues to run with an economy that is healthy and vibrant. Only time will tell.
One thing I have come to realize over my many years of being involved with the markets and stocks is that fear has always been the more powerful emotion. Don't believe me> ? What articles do you think get more attention and more clicks. Is it the positive articles on the economy or a company or is it the article with bold predictions and biased opinions that lean negative and stir the fear emotion and the potential for significant loss?
If you read a headline for a stock you own that says "Good things happening @ XYZ corp potential for 20 percent upside." or " XYZ extremely overvalued, questionable accounting, management incompetence, staggering debt and increased competition lead us to believe its worth ZERO!" Which one would you be more inclined to read? Could you be emotionally impacted enough to take action by either article?
Maybe its just human nature to look for reasons to be pessimistic. Maybe it is just too difficult to be optimistic when everything all around us is screaming that there is a huge shoe waiting to drop and its all going to end badly. I think everyone should read this article I found on the way our minds process positive and negative events. https://www.nytimes.com/2012/03/24/your-money/why-people-remember-negative-events-more-than-positive-ones.html
in case you don't read the article I wanted to highlight a few comments that stood out for me.
As the article, which is a summary of much of the research on the subject, succinctly puts it: “Bad emotions, bad parents and bad feedback have more impact than good ones. Bad impressions and bad stereotypes are quicker to form and more resistant to disconfirmation than good ones.”
"So Professor Baumeister and his colleagues note, losing money, being abandoned by friends and receiving criticism will have a greater impact than winning money, making friends or receiving praise.
** In an experiment in which participants gained or lost the same amount of money, for instance, the distress participants expressed over losing the money was greater than the joy that accompanied the gain.**
“Put another way, you are more upset about losing $50 than you are happy about gaining $50,” the paper states.
In addition, bad events wear off more slowly than good ones. As with many other quirks of the human psyche, there may be an evolutionary basis for this. Those who are “more attuned to bad things would have been more likely to survive threats and, consequently, would have increased the probability of passing along their genes,” the article states. “Survival requires urgent attention to possible bad outcomes but less urgent with regard to good ones.”
The point I am trying to make is that yes there are risks and at any time everything could come crashing down. There will always be that possibility and there will always be those that try to trigger your inner fear. Take everything at face value and try to understand the intent behind the fear mongering. Whether it is about the economy or a stock that you have invested in.
I remember articles for the demise of Weight Watchers and Netflix> look at them today. I remember the prediction of Sirius Satellite radios demise, look at it today. Marvel Enterprises was destined to fail until they were bought out by Disney to become Disney's most powerful franchise of entertainment properties.
Will there be failures? Of course there will! Will there be another recession at some point? Absolutely!
Does anyone know exactly how and when it will happen? Highly unlikely!
Do your own due diligence and rely on your own analysis to help you navigate through all the smoke and noise. Never be afraid to be an optimist.
There has never been a better time to become a member of Alpha Wolf Trading
The annual membership to only $197.00 a year. That means, for just over 50 cents a day, you will have access to all my pre market prep and post market wrap videos with stocks to watch for trading and investing ideas, my trade plans for swing and long term investments, a live chat room, a live webinar during trading hours with screen share, 10 hours of educational videos and real time alerts when I execute my swings or long term hold plays. CLICK HERE TO TAKE ADVANTAGE OF THIS INCREDIBLE OFFER.
https://www.alphawolftrading.com/membership
Lets take a looks at what some sectors markets are telling us technically
The S&P QQQ and IWM all had nice bounces at the end of the week and all three have some potential resistance overhead. The IWM and QQQ are looking at potential new all time highs if they can break through that resistance. Either way I expect we will at least pause at the potential resistance areas. The SPY also has some potential resistance overhead and has a way to go before testing all time highs but for now all three indexes are putting in higher lows off of potential support areas and the long term upward trend for all three remains in tact. Just pull up a monthly or weekly chart and you will be able to confirm that view.
Both the health care and biotech sectors have been weak sectors that appear to have been in consolidation mode. Both sectors broke out last week. Money seems to be flowing into those sectors. We have gaps that could fill but it would not be surprising to have the strength continue after taking a bit of a pause to absorb the recent move I have been saying for several weeks that there are a ton of good looking setups on the daily in the biotech space. FYI I own BMY and GILD in my long term hold account and could be looking to add
Oil and energy has been a real winner recently and there are still some great looking setups out there but we may see an extended period of consolidation after the recent move higher. We may not see a big correction but we may not see a big move higher either. We could just consolidate and chop around as money flows into new areas. Is there more risk to the downside than there is for reward to the upside? It doesn't seem likely to me that oil is going much higher with the POTUS already complaining the prices are too high. The USO is right at resistance XLE and XLP are both making short term lower highs
Consumer discretionary and retail are both sitting near potential support areas and they are very close to there all time highs with their long term upward trends intact. We may need to wait for earnings season to decide if that trend continues but for now we just have some healthy consolidation
Consumer staples have had a very nice bounce as we have seen some M&A activity in the space as well as some value investors getting involved in some of the really beaten up names. The concern here is that we could be coming up to some price resistance and the underside of a long term trend line and the 200 day ma. Earnings season could decide whether or not the sector can reclaim them. SMPL reports earnings this week I am interested to see how they come in and how the stock reacts
Homebuilders The good news is the homebuilders are above their long term upward trend the bad news is they are below the 200 day. The sector seems to be holding potential price support over the 38.50 area and is approaching the 200 day and potential price resistance in the 42 range. We had a couple of good earnings reports from the sector but rising interest rate fears seem to be keeping a lid on the upside we could see more choppy action in the space
Semiconductors have seen a some pessimism recently and strong earnings from MU did not give the sector a lift. the 50 week moving average is acting as support along with a long term trend line as it tries to hold onto the 200 day MA. The sector could be waiting on earnings before we get a significant move in either direction
Transportation is trying to hold onto the 200 day and the long term upward trend remains intact however high energy cost inputs and trade war concerns could continue to put pressure on the space. There is a potential bear flag pattern developing on the daily and the sector is guilty till proven innocent.
Aerospace and defense has been taking a breather with all the world peace and love between North Korea and the US but that does not mean that the sector is going away. The tariff fears and trade war threats have more of an impact on this sector and as long as their is fears of an escalating trade war this sector could continue to struggle it may just consolidate here and as long as it stays above the 200 day there is nothing too ominous to be concerned about.
Industrials are another victim of the "trade war" the difference is the sector is below the 200 day and if things escalate with tariffs and trade war talk this sector could continue to struggle. Earnings season could shed more light on the sector but for now it is guilty till proven innocent. The good new is the long term upward trend remains intact
Financial stocks are under a lot of pressure below its 200 day and sitting at potential price support. The sector is guilty till proven innocent but that could start to happen as early as Friday of next week as we get earnings from JPM CITI & WFC. Now this could give the sector a lift and a glimmer of hope or it could be a nail in the short term coffin. Remain cautious of the space until there is more clarity
Last Weeks Pro Member Stocks to watch for trading and investing and their performance for the week
6 Sample stocks from this weeks Pro member Video
$ENDP $KSHB $TWTR $ARQL $SFIX $ATVI
Highly anticipated earnings
Source Earnings Whispers
Best of success to all in trading and in life.
