Hey There Income Hunter,
Last week’s trading in the S&P 500 started out well and attempted to stay above the 200-day moving average – but failed and closed on a new low for the week.
Bummer.
Heading into this week, my feeling is we may see some follow through to the downside early on, but hold and bounce later from a short-term oversold position.
As you can see in the sector tracker below, energy turned around. And it may correct further into the Fed tightening:
Also notice above that financials were the third worst performer and may bounce from here, which would be a good time to set up a bear strategy.
Remember, the financial sector does not perform well during a Fed tightening period.
Signs of any potential growth spurt from a reopening could cause a decent bounce in the SPX, but we are still in a “sell the rip” market – that’s shorting an asset that has declined sharply – until it gets low enough for the Fed to back off tightening.
Today, I’ll share charts that shine a light on upcoming stock plays.
GOLD
The precious metals saw some nice follow through last week. Gold and the miners measured by GDX led the way.
I think it is safe to say that the bottom is in for gold.
However, the Commitment of Traders report (COT) shows that what’s considered “dumb money” has doubled its net long position over the last two weeks and the commercials – made up of banks and producers – are carrying a large short position.
Daily RSI is also over 70, so hedging long positions or playing for a short-term correction offers a decent probability of success.
The chart pattern below shows the higher highs and lows that gold has achieved since October. This signals a resumption of the gold bull run since 2018.
We could see a retest of the 50 DMA at $1,820, which would be a great place to buy with a stop below $1,780.
I will be hedging my long portfolio in miners this week by purchasing put spreads and will alert my Power Income Traders members directly.
Uranium
Like most commodities in a disinflationary environment, uranium has been correcting after an awesome run of +191% since mid 2017.
Now, after a 40%+ correction, it’s time to accumulate a position you can hold for 1-2 years.
Uranium is a natural resource that will benefit from long-term growth in demand and a supply deficit that needs significantly higher prices to make it economical for miners to dig for the metal.
Uranium is by far the most efficient solution to help countries meet their net-zero carbon emissions promises. A great way to ride the uranium bull is by applying bull option strategies to the Global Uranium Miner ETF (Ticker: URNM)
I purchased a long-term call spread last week with a plan to deploy a dollar cost average strategy to build a core position, then trade around it in the short-term.
URNM Chart
United States Oil Fund (Ticker: USO)
Although I am longer-term for oil, I think it may correct in the weeks ahead. USO is a liquid ETF that tracks oil futures very closely.
Notice in the chart below that USO’s last peak at $66.88 triggered a negative price/RSI divergence. Many times when a commodity is in a longer-term bull trend it can trigger 2-3 divergences before correcting …
I would watch to see if that occurs on a new high from here. If so, that would provide an excellent low risk/high reward trade opportunity for a test of the 50 DMA at a minimum at 58.60.
Bring It Home
I am focused on accumulating positions in gold, silver, the miners and uranium. The thing is, in bull markets there are plenty of sharp pullbacks so you must closely manage your positions.
The same goes for shorting financial assets like US stocks. The probabilities are heavily in favor of further downside, and until we get down 20% in SPX, you want to sell every rip.
I will be aggressively trading the next few weeks to set up for what I think will be a very volatile Q2.
Power Income Traders have the opportunity to consistently profit by taking advantage of Fed policy mistakes.
Better yet, they’re doing it with the lowest risk/highest reward trades – delivered directly via text and email – not to mention step-by-step trade management guidance as inflation wreaks havoc on the markets and the economy.
We’re in a weird market – but one with incredible profit potential. Take advantage of today.
Live and Trade With Passion My Friend,
Griff