View from Toronto: 5 Challenges for Traders in US Equities this Week
11/28/2017 12:18 pm EST
Ziad Jasani shares strategies for short-term and long-term traders this week in a companion video and text commentary. Join him and the Independent Investor Institute for a 3-hour deep dive on markets Dec. 2, 12 pm (EST). Register here.
Watch the related Market Strategy Session (3 hours) recorded Monday, Nov. 27:
US Equity Markets
Thanksgiving/Black-Friday week delivered from a seasonality perspective, but it was really all about Merkel’s bluff working (“join the coalition or face voters”), along with OPEC headlines pushing Oil towards $60 and the Technology space continued to fly high on online retailers.
The S&P 500 Index (SPX) closed at fresh all-time-highs (2,602).
But this week ahead has a handful of challenges for the Bulls:
1. US bank stress tests (Nov. 28).
2. The Senate votes on their own tax reform bill Thursday, Nov. 30 and even if approved negotiating to one bill with the House is a big challenge.
3. OPEC meets on Nov. 29 & 30 and the usual pattern is “sell-the-news.”
4. Traders recognize the relatively expensive position of the S&P 500, Technology and the Nasdaq, while prices are stretched in the uppermost quadrant of the uptrend channel that started Nov. 2016.
5. Bond markets remain unsettled from the breakdown in junk bonds two weeks ago, while the spread between the 10-year and 2-year US Treasury yields collapses to “recessionary” levels, implying problems for Financials/Banks.
Our short-term strategy this week is to:
--play out the dead-cat-bounce in Energy (XLE, RYE, XOP),
--maintain our swing-trades in Healthcare (XBI, XPH, XLV) front end of the week but look to lighten up back end of week,
--trail our Consumer Discretionary (XLY) trades with tight stops,
--look to add to our Telecom trade (IYZ) above $29.27,
--while trimming any short-term positions in Technology (XLK, IYW, QQQ), Industrials (XLI), Financials (XLF, KBE, KRE, KIE), Staples (XLP), REITs (VNQ, XLRE) & Utilities (XLU),
--and look for the opportunity (front-end-of-week) in Materials (XLB), Miners (XME), Gold Producers (GDX).
Yellen is testifying Wednesday and likely keeps downward pressure on the USD (lame-duck situation with Dec. 13 rate hike “fully” priced in) allowing us to maintain or potentially add to the following trades: FXY, FXF, FXB, FXC, TLT, AGG, LQD, PFF, GLD, SLV.
The Eurozone gets its financial stress test results on Nov. 30, which may unlock further upside on the following trades we’re in: ACWX, EFA, FEZ, EWG, EEM, EWZ.
Longer-term investors should be looking for comfortable exits on Technology, Energy, Discretionaries, Financials & Industrials.
If the S&P 500 sustains above 2,600 into the week’s end, we continue to point north to 2,625. If S&P closes below 2,590, we’re likely on a path to retrace down to 2,555 (50-day average).
Join experts at the Independent Investor Institute for a 3-hour deep dive on markets Saturday, December 2, 12 pm (EST). The session will be held online. Register here. Or send Ziad an email with your request: email@example.com