Saturday, September 5, 2020
Broader Market Review
Friday was day two of the broader market reversal lower we have been expecting and the next week or two could define direction for the next couple of months.
As you know I have been trimming positions, raising cash and reducing risk for the past month in anticipation of a likely secondary collapse into the election. The current reversal, which might be the start of the move down, began on Thursday, almost exactly when and where I had forecast weeks ago. Weeks ago, I projected Nasdaq would likely fill the gap up to 12,000 where a reversal was likely to occur. You can see my Exit forecast at this level highlighted in every weekly report I have published for the past five or six weeks.
I wrote on August 3rd..
“The Nasdaq is maintaining it’s higher trajectory from late June and has room to run up to 12,000 if it can stay above the ascending yellow line.
In fact all three proxies (driven by Nasdaq) might fill the higher gap before rolling over later in summer and into the election. The Dow and S&P 500 just might try to challenge the pre Corona Crash highs if the Nasdaq continues to push higher as tech is still running led by the software and semi bulls.”
I have not updated my charts for the Dow, S&P 500 or Nasdaq for some time as there is no need to. My forecasts have not changed. Market behavior is “as expected” and I have positioned my portfolio in preparation for the potential volatility and drift lower into the election I have been forecasting. I’m comfortable in my positioning, I have reduced risk and I have dry powder for lower entries should they present.
I have only added four positions recently. I started a small position in TSLA that I will add to at lower levels. I bought some CRWD for a little more software exposure since I sold ZS and OKTA recently for huge gains. I bought some SPCE to have some exposure to this “space” and I bought some DKNG as this should do well if we ever get back to normal sporting events.
Last week Nasdaq traded down into important support and got a pretty good bounce so this area is holding..so far. The Dow is doing the same. It is sitting right at this important support area after briefly violating it intraday last week. The S&P 500 is still above its important support but I would look to Nasdaq as the leader in direction and the Dow and S&P 500 should follow its lead.
Look to the yellow line support on Nasdaq to define direction over the near term. If violated, it could track down into the lower support zones I have drawn in on the chart below. If supported, we could keep marching higher. I will be looking at those lower Entry levels to add to current positions and put on new ones should we get there.
Nasdaq
Dow
S&P 500
If the market continues higher I’m well positioned. If the market collapses into the election I have a pretty good idea when, where and what to add.
Premium subscribers will receive my new price forecast for Tesla (TSLA) via separate email.
Don