Dear Trader,

Have you ever wondered why they say volume is a trader’s best friend?

Bitcoin like the rest of the market is susceptible to people hopping on the hope train especially right now. There is a pattern in BTC that we have seen recently in the market as a whole.

With this pattern it makes crypto and stocks alike more volatile if you know how to time you trade properly, let me show you what to look for right here

We’re Beyond a Light Volume Moment

The last two weeks in the market have not been risk based, there has been a big move into some risk assets.

The reallocation of assets have been into riskier assets and away from the ‘safe zone’ of the market.

Two weeks ago the market was all about the FOMO trade as investors waited for some of the most important earnings reports of the season, the mighty QQQ top 5.

The cumulative success of those reports – Bizaro World or not – took traders to another level though as we’re now beyond a “Light Volume Moment” and volume on the QQQ is on the rise.

With the QQQ trading above its 50-day moving average, I’ve got to maintain an eye on the short-term upside potential, but remember that the rise in volume can be a double edged sword in a bear market… yes, we’re still in a bear market.

What Secotors Are Hot Right Now?

The risk-on rally has been driven by semiconductors, housing and Clean energy. While I love these sectors to rally I like it better if the banks, materials and energy (yes I said energy) are continuing to show signs that the long-term trend is still in play.

Over the next couple of weeks we should be looking to add some put exposure in the energy, materials, retail, and financial sectors. We are going to see more opportunities in these sectors as the ones at the top of the list that have far outpaced QQQ are really the stuff you find in the barging bin as your local Wal-Mart. They did well those who got in had their fun, but they are not going to go back and re-watch the DVD it is going to sit on the shelf just to be thrown away.

One thing the top performers have in common is the external force that pushed the stock higher thanks to the FOMO trade. Jo Mansion got behind clean energy last week that was the force pushing ICLN higher. XBI found its strength in seasonality. XSD if the chips act wasent around do you really thing the semiconductors would be doing anything special? The answer is NO.

How to Play the Coming Weeks.

This isnt my first rodeo, as a matter of fact, I was thrown to the ground and kicked in the face during a little known FOMO rally known as the .com bubble.

August typically is a pretty flat month for the market as a whole which we have discussed before. This gives us a bit more time than normal to position ourselves for a market that is going to roll over and fall off the FOMO cliff.

We are still in the midst of the disbelief stage of the market, we saw the low volume come and go people scooping up shares all over the place quickly driving the stock up due to how easily the markets can be swayed on a low volume day. Those who understand this will be taking a trip to the bank those who don’t, will get lost in the noise.

As we head into September the market will stop moving sideways and start its next descent. Will we have finally entered the acceptance phase of the market sentiment cycle? Only time will tell but, once that train takes off there is no turning back it’s a straight through ticket to the market bottom. It make take weeks, or it could take months, but the aggression we have seen in the market lately means we are bound to see the market unable to pull up from its crash landing so we need to be ready to get in now.

This week actually positions us perfectly to find the market hotspot because we are going to see a very solid cross section of the market for earnings. There are some lesser known companies reporting this week but there should be a correlation between the reports and what we see in the sector break down for my Night Traders. Those are the spots we are going to look for, tear apart, and find the next profit opportunity.

I’m going to leave you with this, if we are in fact in a recession (the technical definition has been met) energy cost has to come down, gas has to come down. Demand will drop rapidly especially as the ‘driving season’ comes to an end. The energy companies are trying to wrestle their way out of a situation caused by the global climate and that fight is going to get harder for them day by day. Right now, we are starting to see a bit of the flat lining start which is just the primer for the markets next move.

That’s one of the beautiful things about my Night Trader crew not only will you be watching the market but we watch the market together they get to see the sector breakdown before everyone else and we can dive into it during the market close so we know how to play those hotspots and I even give you trades during that afternoon session so there is no guess work needed. If you havent taken advantage of my new quarterly offer, give Gabe a call in the morning, (877) 212-9163, I will tell him to expect your call. That will get you through the rest of earnings season and the next market move could even cover an upgrade to a full year with me.

Talk soon,

Chris Johnson
Quantitative Specialist, Penny Hawk


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