Rinse and Repeat

The Dow caught up with Nasdaq and the S&P 500 index making a new all time high last week.

SPDR Dow Jones Industrial Average ETF (DIA)

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The 10 year Treasury yield popped and closed above 3% last week.

CBOE 10 Year Treasury Yield Index (TNX–X) weekly

Market and sector breadth (participation in the advance) is strong.

SPDR’s S&P 500 Trust Series ETF (SPY) weekly comp

The bond market sold off pretty hard last week and stocks just powered higher. TLT, the 20+ year Treasury Bond Fund, is nearing that all important support level again. 115 has supported price consistently since 2011. Look at the horizontal yellow line to see how price has bounced off 115 over and over. Please note as well how price has mostly traded in the range bracketed by the two yellow lines; support and resistance. Bonds are likely to continue this range bound action if 115 holds. If 115 fails to hold (support price) then bonds are likely to fall further, interest rates will rise and stocks will likely suffer.

iShares Barclays 20+ Year Treasury Bond Fund (TLT) weekly

So far, so good.

Moving abroad, I think it’s time to rotate from Mexico to China.

I recommended the Mexico index ETF (EWW) on July 2nd. It is up 11% and can’t seem to break through resistance. It is likely to trade down into rising primary support before going much higher so it’s time to reap the rewards of a good trade. Longer term I still like EWW so I will look for another entry if it can get down into rising primary support. Another rinse and repeat trade. I recommend selling EWW and re-deploy to the China Index ETF (MCHI).

iShares MSCI Mexico Index Fund ETF (EWW) daily

I recommended selling MCHI on July 9th for a 27% gain from March 2107. It has since traded down into rising support from 2016 and bounced. Time to rinse and repeat. I am recommending buying MCHI.

Is it coincidental that MCHI is bouncing off support at the exact time that Trump slapped China with $200 billion in trade tariffs? I’m not sure but I do know this…”if you try and trade the news you are going to lose”.

iShares MSCI China Index Fund (MCHI) daily

Speaking of the news. Have you noticed that Intel Corp (INTC) has been mostly absent from the Wall Street conversation lately? That’s because it has corrected almost 20% from its summer highs. Three months ago I recommended selling INTC for a 25% gain. It’s getting close to rinse and repeat time. Prepare for re-entry soon. Do you see how it’s setting up into support and getting compressed in a wedge formed by support and resistance? This is forming a good risk/reward entry; asymmetric risk. Stay tuned.

Intel Corp (INTC) daily

So, another good week in Stock Market Land. Keep an eye on bonds. Go Dodgers. And, Happy Fall!

Oh, one more thing…don’t forget…”If you try and trade the news you are going to lose”.

Trade Smart,

Don