Folks it’s time to stop the requests for me to fix your trading errors. I do the best I can to get everybody in when I think it’s the right time to buy. Because I’m a contrarian it means we will be buying when it’s hard to pull the trigger at cycle bottoms. Many people just can’t bring themselves to pull the trigger when their emotions are running wild so they end up missing the opportunity. Then they let price run away from them. Then they can’t pull the trigger because they believe the market is overbought. This happens over and over at every ICL and DCL.
I will never be good at fixing your late entries. If you couldn’t buy on my suggestion then it’s going to be up to you to figure out how to enter. I try to give warning that I am going to recommend a trade in advance like our latest stock index trade so that you have the mental capital saved to pull the trigger when I say it is time. I know it is hard. I always say that futures trading is hard and I have never said this is easy money. If it were easy, I guess nobody would have real jobs and we would all be sitting at our computer like it is some kind of ATM.
With futures, we are using a LOT of leverage. This is why it is so emotional. If pulling the trigger is a gut wrenching experience for you, then back off the leverage. We have micro mini accounts now that allow you to trade with 10% the money of a regular contract. You can also trade using ETF's that are traded in the stock market that have no leverage. Most normal people don't like having a draw down with no leverage so imagine what it is doing to you with the leverage.
I have used this analogy many times but it seems so true to what we are trying to do here. My wife jumps horses. A good horse rider makes jumping fences look easy but it is not. My wife did not hop on her horse and begin jumping 5 foot fences. She began by laying a rail on the ground and walking her horse over that. She did it hundreds of times until she became incredibly bored. Then, she raised the rail 6" off the ground and jumped her horse over that hundreds of times until she became incredibly bored. Then she raised the rail another 6", then another 6" and so forth and so on until she was jumping over 5' rails. This is a lot like trading with futures. If trading futures causes you great anxiety and you can't sleep at night and you continually look at your phone instead of your spouse, then you should probably back off the leverage. There is nothing wrong with taking small position sizes until you get bored.
This is my expectation. Take the trades at the time I make the recommendation. If you cannot do this because your emotions don't let you, then wait for the next daily cycle low. If you don't want to wait, then you should plan your trade, detailing what you are willing to risk, and how you wish to enter, and where to apply the stop. I think this is fair to ask.
Now, just so you don't have to ask, stocks are only on day 3 of a new daily cycle. You are hardly chasing if you buy something now. Silver is also on day 3 of a breakout and the metals are still fairly early in the intermediate cycle. You have my blessing if you want to buy something still. Just please don't ask me in a week.
We got a swing low confirmation late Friday. It is time to get an early start on the second daily cycle.
But it was not just the S&P. All the major index's gave swing lows Friday.
Intermediate cycles that only have two daily cycles usually have a stretched first cycle. The intermediate cycle as we came out of the Dec. 2018 ICL had a first daily cycle that ran 49 days.
The first daily cycle in this intermediate cycle lasted only 38 days. That would mean we will need 3 normal daily cycles or this next daily cycle is going to be extremely stretched. I am more in the camp now that believes we will need 3 daily cycles, and that the next intermediate cycle low will not occur until September.
Look, I get it. The fundamentals of our economy are terrible, but with the trillions of dollars created out of thin air money is flowing freely into the stock market. Sadly, it appears to be flowing entirely into the tech sector. In the 35 days since the March 23 bottom, the top 5 drivers within the S&P 500 have accounted for 138 points out of the total 565 that the S&P has gained. So, only 5 stocks have accounted for more than 24% of the total point gain.
The new economy is going to be driven by a hand full of companies that drive the stock market. These are the FAAMG stocks (Facebook, Amazon, Apple, Microsoft and Google). I think you could also throw Netflix in there. Anyway, these companies are the leaders in the NASDAQ 100 which is what we trade. Going forward, I will be using the S&P still as a barometer but will be recommending trades in the NASDAQ.
Even though this was the most powerful V shaped recovery in history, sentiment levels are still far from bullish. There is still enough bearish sentiment to drive the indexes to new all time high.
There are still a lot of bearish investors left out there who are going to wind up chasing this market. We will not be part of that group. The liquidity pumped by the fed has been unprecedented and more is likely on the way. As the economy re-opens, there is still a lot of room to the upside for the market to go. I think the NASDAQ blows through its previous all time high and touches 10,000 before this cycle is complete. This would be some time in mid June.
I am not buying at the open, but barring some sort of plunge at the open I think we want to put orders in tonight. We would be buying on day 2 and would put the stop just below the swing. If we can buy at 9100 with a stop at 8845, we would be risking $5100. The potential gain on a run to 10,000 would be 900 points, or $18,000. That is better than a 3 to 1 risk reward ratio.
If that is a little rich for your blood, trade how ever many micro contracts that will allow you to sleep at night.
The margin on the NQ is $16,500 and $1,650 on the micro's.
It was March 24 when I first recommended buying stocks for this daily cycle. This was the first daily cycle out of the intermediate cycle low which happened on March 23. I believe we will be beginning a new daily cycle by Friday or early next week.
I am not pulling the trigger yet, but we are very close. Daily stock cycles average 35-45 days, and today is day 37. We are now in the timing band for a daily cycle low. We have the daily cycle trendline break and the price looks to be forming a head and shoulders topping pattern. With the trillions of liquidity that is flooding the market printed by the Fed, I don't expect this will be a very deep correction. I will be ready to pull the trigger at the next swing low.
I am looking for this head and shoulders pattern to complete. Once that happens and we get a swing low, we will want to buy. My best guess would be somewhere between 2675 and 2700. I doubt we pull the trigger Thursday but we could on Friday.
Short term sentiment values have reached oversold levels already. This is consistent with daily cycle lows.
I recommend the ES Futures to track the S&P and I recommend the NQ futures for the NASDAQ. Margin requirements for the ES is 13,200 and for the NQ 16,500. Every point on the ES Futures is worth $50 and every point on the NQ is worth $20. Don't forget there are micro mini contracts that are 1/10 the size.
You need to plan what you want to do now so that when I send out the notification on WhatsApp you won't have to make a panic decision. I am notifying you of this trade in advance so that you will have time to think about it while you are thinking rationally. We will be in gold AND stocks at the same time, so plan your position size accordingly.
Between the stocks and the metals, I really like the metals better. They get stuck in these consolidation patterns and wear you out but when they go, they are really going to go. There has been so much damage to our economy, I am concerned about the stock market long term. I think the money printing is creating an environment that will favor metals over stocks down the road. For now however, we can only worry about this next daily cycle.
We got our first confirmation that the bottom in gold is in. There was no exhaustion candle or hammer but the second level of a low is a swing which we got. I think if we can get in at 1715 or lower it would be a good entry.
The closer we enter, the less we will risk. The longer we wait, the chances for a good trade improve but we have to risk more. There is not a wrong answer here as to when to enter. It is all about what helps you sleep at night. If you go the micro route, you could keep adding to your positions as we pass each confirmation level.
Recommended entry or exit prices may not necessarily be reflected on the track record. Markets can change quickly resulting in stops being moved or profit levels changed based on new information. Brokerage customers are the recipients of these potential price adjustments made after initial recommendations.