Last week we underwent what I call an “election relief rally” on news the government would be in a “gridlock” state. I opened the live trading room with one of my E-mini futures strategies, anticipating lots of volatility on election night, states John Person of PersonsPlanet.com.
What a great idea, the results were amazing. There were five trades, uniquely all five were winners that generated over $5,200 in profits on trading just two positions with a scale-out feature. The algo 17 program did its job.
The Wednesday strong "gap up" strength followed into Friday as market pundits switched their assessment of a Trump defeat with a checks and balance of a signal political party sweep that Republicans could remain in control of the Senate and more moderate Democrats leading the House with a Democrat as President. Thus, the condition known as “gridlock”. As of this writing this scenario is not yet official. Personally, I am not prone to believe anything “experts” on TV are prognosticating, let alone diving into buying weak-volume market rallies. One industry group that seemed to outshine the rest was the semiconductor section.
The VanEck Semiconductors (SMH) gained 12.6% based on explosives moves in NVIDIA (NVDA), Microchip Technology Incorporated (MCHP), Applied Materials (AMAT), Advanced Micro Devices (AMD), and Micron Technology (MU). All these names posted surreal key reversals from the prior week’s decline. However, the volume pattern is not sending me the positive signals and strong enough trends one would like to see if there is going to be follow through. This suggests either a “relief rally” or some short covering. Either way I do not trust this move for the technology sector as a whole and would wait at least another few trading sessions before trusting this as a sign of more gains ahead. In fact I’m more prone to view this as a near-term topping pattern for the NASDAQ 100 (NDX), yet I need more time to see if there’s signs of selling distribution at higher levels versus more buyers being attracted on this “retest of highs.”
On a side note Bitcoin futures gained 14.77% last week while VanEck Vectors ETF (GDXJ) gained 12.08%. The subtle message here is, one may not need to buy Bitcoin when other, more liquid markets, have similar percentage point moves. Lastly, with massive country-wide celebrations that VP Biden is proclaimed the “unofficial” winner, the whole superspreader Covid 19 hysteria seems to have not worried those Americans. Perhaps the work President Trump enacted with operation Warp Speed is truly working. With that said I am more confident healthcare, medical devices, and services will present long-lasting investing opportunities, plus there is no way in hell technology is becoming an obsolete industry group, therefore we need continued exposure to that sector, but at good price points and “fair valuations.”
I do not have any clear-cut directives or fiscal policies based on the political landscape. I know global central banks will continue to provide deeply discounted rates that provide liquidity, at least for the next six months. I have not heard how foreign policy will be under a new administration. I can surmise fossil fuel will be in jeopardy under a Democratic Party, so how will that effect fuel costs for airlines? Since I do not know, I can state I will not be buying into that sector for now. Will the stimulus bill be passed? if so, then Discover Financial should do well, but I am not convinced having unprotected longs in this space for the near term is the best trade concept and am holding on to the bull call spreads in that trade. Moreover, it was financed with profits from the proceeds on the stock.
The last word is this, I am not clear on which sectors to participate in other than the current positions we have on (TEVA, PDCO, NTAP, WBA, MS, DFS, GDXJ). Let me say thank you to all our veterans as we give homage to the men and women who have served our country on Wednesday, Veterans Day.
To learn more about John Personn, please visit PersonsPlanet.com.
