I’ve been anticipating new all-time highs in the S&P 500 for weeks now and we finally got it last week. Now, can the Dow Jones Industrial Average do it too?
The Russell 2000, the Software sector ETF, the Telecom ETF, the Retail ETF, the Technology ETF, and the Healthcare Equipment ETF also hit new all-time highs. Check out our new ETF Investor for awesome ETF trades!
While the NASDAQ composite made a new all-time high, the NASDAQ 100 did not. It certainly is within striking distance of doing that, but the Internet sector ETF (FDN) has been lagging since the big drop in Facebook that occurred in July.
Last week, the FDN was able to negate the daily sell set up that occurred on August 9th. If it can continue to move up as it did on Friday, we should see the NASDAQ 100 join the party of new all-time highs.
The Transportation Index made an attempt to push through its all-time high but, after pushing up for multiple weeks in a row, sellers came in and pushed it down.
That doesn’t mean it can’t make a new all-time high. It should based on the fact that it’s in an uptrend in multiple time frames.
Certainly, there are other sectors of the market that are lagging, but it’s the Dow that’s widely followed by the media and retail investors.
The technical chart pattern in the Dow does suggest the possibility of new all-time highs.
However, a retracement back down to the area of the 25,000 level would change that opinion in the short term.
As Master Traders, we always have two scenarios that keep us objective about the broader markets — and, of course, our investments and trading positions.
Next week, you will want to keep an eye on interest rates.
They fell last week back toward the bottom of the trading range that they been in the majority of the year.
The price patterns and trading ranges are essentially the same in the 10- or the 30-year yield charts.
A decisive break below either is likely to be viewed as bearish for the markets.
The reason for this is that long-term interest rates would be moving lower as short-term interest rates are moving higher. This happening would threaten an inverted yield curve, a recession, and would result in a bear market for stocks.
The other scenario is that yields turn up from the bottom of this trading range. Those yields moving higher would be supportive to financial stocks moving higher.
At Master Trader, our goal is to always be teaching you our approach to the markets so that you understand not only our bias, but how to be a self-directed trader and investor on your own.
Over time, you’ll learn how to analyze trends, price patterns, multiple time frames, inter-market analysis, market internals, options strategies and more.
This education occurs every day in the Green Room along with the trade recommendations.
Dow Jones Industrial Average
Above is the chart of the Dow Jones Industrial Average that we review each week.
The Dow certainly wasn’t the focus last week with the bullish news of many indices hitting new all-time highs.
Actually, while it started off the week bullishly moving higher and able to push above the immediate Major Resistance (MR) area above, it pulled back afterward.
If it wasn’t for Friday’s rally, the Dow would’ve closed slightly negative on the week. Friday’s rally did save the week and the Dow closed up just over 121 points.
Ideally, the bullish scenario the Dow is that it takes out last week’s high decisively leaving last week’s low as new Major Support (MS) on the daily time frame.
If a pullback should occur early in the week and the Dow is to move below last week’s low first, however, that would not negate the bullish scenario.
However, pulling back as far as 24,400 would certainly put that in question.
Because of the sharp pullback that happened in February of this year, the Dow now has an open “Void of resistance above.”
Last week’s bullish move to new all-time highs in the indices mentioned earlier continue to support our bullish bias for the markets.
The market internal gauges that we monitor are not at a bearish level yet, so we view this as the “Coast as Being Clear” for the markets to move higher.
What could turn us bearish in the short term?
The Dow and the Transportation Index moving to new all-time highs and the “wrong-way” options traders making big bullish bets at the same time.
When and if that happens, we will sound the warning bells. Stay tuned.
Market Overview Video
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Internals
NEW STOCK TRADING IDEAS
Below is a daily chart of United Continental Holdings, Inc. (UAL).
Trade: Over $85.52, consider buying stock.
Technical Setup: Master Trader Buy Set with reversal bar after breakout to all-time highs daily.
Stop Loss: $83.58.
Below is a daily chart of World Wrestling Entertainment, Inc. (WWE).
Trade: Over $82.57, consider buying stock.
Technical Setup: Breakout from bullish consolidation at 20-MA daily, bullish weekly and monthly (although extended so just swing trade).
Stop Loss: $78.58.
Below is a daily chart of CarGurus, Inc. (CARG).
Trade: Over $50.50, consider buying stock.
Technical Setup: Master Trader Buy Setup after gap to all-time highs on r20-MA daily.
Stop Loss: $48.98.
Below is a daily chart of JD.com, Inc. (JD).
Trade: Under $31.13, consider shorting stock.
Technical Setup: Master Trader Bearish -123 Setup in downtrend daily, bearish weekly and monthly.
Stop Loss: $33.06.
NEW OPTION TRADING IDEAS
Below is a daily chart of United Continental Holdings, Inc. (UAL).
Trade: Over $85.52, consider shorting Sep (9/21) $81/75 bull put credit spread (26 DTE) for mid-point but limit of $.47/share (closed at $.54/share).
Technical Setup: Master Trader Buy Set with reversal bar after breakout to all-time highs daily.
Option Strategy: Bull Put Credit Spread (BPCS).
Stop Loss: $81.48.
VIDEO ON OPEN TRADES AND ADJUSTMENTS
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Trading the Pristine Method — Origin and End
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