May Day or Mayday?

S&P 500 chart

Chart by Steven Sarnoff, h/t stockcharts.com

Stocks rebounded throughout the month of April.  The month ended with the market reaching a natural technical retracement level.  May Day not only started the new month, but May may see selling pick up to drive price lower over the weeks ahead.

Former support (demand) often represents new resistance (supply).  You can see on my weekly chart of the S&P 500 ETF (SPY), that price backed down after encountering the negative influence of a line of average price movement.

The character of the behavior of market price movement shows sellers regaining the edge.

Don’t be surprised to see the March lows taken out.

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Stay safe.

Best regards,

Steve

 

Resistance

bear catching salmon

Thomas Mangelsen’s iconic photo h/t mangelsen.com

SUBSCRIBER NOTE: Options Hotline monthly broadcast goes out after the close today

Former support (demand) often represents new resistance (supply).  April’s rebound brought the stock market right to technical resistance. 

A turn lower here indicates a change in the short-term balance of power.

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Best regards,

Steve

MU Shoo

Micron chart

Chart by Steven Sarnoff, h/t stockcharts.com

As you can see on our daily candlestick chart above, Micron (MU) shares look ready to leave their rally and head south.

The historic panic plunge in oil may grab the headlines, but it’s Tech shares that look terrible. 

The struggle is real, as Wall Street darlings like MU fade under the negative influence of a down trend.

We’re watching for a big test of underlying support (demand) in the low-$30s.  The negative character of the behavior of price movement is depicted by the appearance of consecutive black candle lines right at technical resistance (supply).

This indicates the likelihood, but not the certainty, of lower prices down the road.

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Best regards,

Steve

Land of Hope and Dreams

Seeing financial media report the market up sharply this morning, on hope for big Pharma progress in the fight against Covid-19, had me thinking of the great song above by Bruce Springsteen and the E Street Band.

Reports such as that trigger my contrarian senses.

The character of the behavior of market price movement actually has us quite skeptical.  Don’t be surprised to see stocks move south.

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Stay smart and stay safe.

As Bruce sings, “Tomorrow there’ll be sunshine and all this darkness past.”

Best regards,

Steve

 

Silly

John Cleese silly walk

John Cleese’s silly walk, Monty Python’s Flying Circus, 1970, h/t arstechnica.com

In the stock market, earnings season is known as “silly season.”  This week, a new silly season kicked off and it may very well mark a return of volatility to trip up complacent market participants.

As the catastrophic effects of the global Covid-19 pandemic bash corporate earnings, investors will be adjusting their once-lofty expectations. 

Throughout market history, a shakeout and break has been the catalyst for getting investors to examine earnings in their proper light.

We’ve seen the market move violently from fear to FOMO (fear of missing out).  I suspect we will witness another bout of fear before this chapter is through.

There’s a tremendous struggle going on between inflationary and deflationary forces.

I think it’s silly to try and know what the market will do.  Instead, our technical analysis focuses on what the character of the behavior of market price movement is saying.

In our 31 years of publication, we’ve built upon a knowledge based on experience. Subscribe to Options Hotline today to stay a step ahead of the crowd.

Stay safe and be well.

Best regards and in good humor,

Steve

Your Almost Daily Bit of Wall Street Wit & Wisdom

I view each day’s trading as a struggle between buyers and sellers for the advantage in price direction. 

The character of the behavior of market price movement tells us whether a particular day is positive, negative, or indecisive.

Though yesterday’s stock market session closed little changed from Monday, its character was decidedly negative (sharply higher open only to close near the low, producing the largest give-up of gain since 2008).  This sets short-term resistance and implies the likelihood of lower prices to come.

The struggle is on now with the Fed desperately printing and pouring money out (inflationary) in an attempt to quell a devastating economic decline (deflationary), spreading like a wildfire, ignited by Covid-19.

We shall see which side prevails.  Until proven otherwise by price, bears retain the edge.

Be well,

Steve

 

Your Almost Daily Bit of Wall Street Wit & Wisdom

William O'Neil warning about bear markets

h/t Joseph Fahmy, @jfahmy

“Be patient, keep studying, and be 100% prepared.  Later, at the least expected time, when all the news is terrible, winter will ultimately pass and a great new bull market will suddenly spring to life…So get prepared and do your homework.  Create your own buy and sell rules that you will constantly use.”

That’s some bear market investing wisdom from William O’Neil.

h is for holy $#*!

Micron stock chart

Chart by Steven Sarnoff h/t stockcharts.com

Options Hotline reco update, FYI: +35% in a single session on our Micron puts!

Sensible speculators seek to buy options that will move from “out-of-the-money” to “in-the-money.”  That’s where the greatest gains are made and that’s what our most recent recommendation (see 03-31-20 Options Hotline) did today.

The Micron June $40 put triggered at $3.75 and subsequently traded as high as $5.05, +35% in a single session, with an always known and strictly limited risk!

As you can see on my daily candlestick chart above, Micron, appears to be tracing out a potential “h” pattern. That’s where price has a sharp decline, followed by a bounce that rolls over and points to a likely test of the recent lows.  This bearish price pattern closely resembles a lower case “h.”  It’s counterpart is the bullish “y” pattern.

We recommended puts on Micron, because the character of the behavior of MU’s share price turned negative at resistance (supply).  We are looking for a move toward secondary support (demand) in the low-$30s.  The price action moving forward will tell us a lot about who the stronger force (buyers or sellers) really is.

I can’t guarantee all my recos will get triggered on the low or go on to reach multiplier status, but I do promise to continue to do my best to find options winners for my great subscribers.

If this is the kind of options action you are looking for, subscribe today to stay a step ahead of the crowd.

Best regards,

Steve

That’s Gold, Jerry! Gold!

The Midas metal is poised to do well, as central banks and sovereign nations open up the monetary spigots to full.  The classic Seinfeld moment above came to mind.

As you can see on my daily candlestick chart below, gold has roared back from a test of the positive influence of its longer-term moving average line.  Recent forced selling was met by demand.  That is shown by the long and strong red candle lines.

gold chart

Chart by Steven Sarnoff, h/t stockcharts.com

Neel Kashkari, Minneapolis Fed head, whose name reminds me of “cash and carry” futures trades, who gained fame/infamy for his role in the bailout from the 2007-2009 financial crisis, said the quiet part out loud near the conclusion of his segment on 60 Minutes this past Sunday.

Scott Pelley: To the person who is about to grab their car keys and go to the ATM and take out $3,000, you say what?

Neel Kashkari: You don’t need to. Your ATM is safe. Your banks are safe. There’s enough cash in the financial system. And there’s an infinite amount of cash at the Federal Reserve. We will do whatever we need to do to make sure that there’s enough cash in the banking system.

Cue the flight to gold.

Stay well and safe.

Best regards,

Steve