The Massive Week Ahead
My full trading plan for this week. Detailed analysis below...
The major market indices were mixed last week with the S&P 500 and Nasdaq dropping ~50bps each. Underneath the hood, it was a very bullish week for stocks.
Bullish signals have been accumulating since the early April market lows, including the peaking VIX (which I telegraphed at the time), and the rapidly improving market breadth (which I covered in “Day 3”).
As a trader, I rely on individual stocks to gauge the true health of the market (i.e, whether we are in a Bull phase or Bear phase). It is a market of stocks, after all.
Back in late February , I turned bearish in large part because leading stocks and sectors were beginning to break down. I first outlined some of these bearish signals in my report “Red Flags Emerge” on February 23rd.
Now, we are seeing the exact opposite occur. The Q1 Earnings Season has been a bullish catalyst for many leading stocks, with several breaking out of long consolidation bases to new ATHs on massive volume.
High volume breakouts on earnings catalysts are the cream of the trading crop for me. Throughout my career, my best performing trades have typically all come from buying stocks with high volume following big earnings/news catalysts.
In addition to the improving market internals, we got news of a U.S. and China trade deal in Geneva today. Last week, I talked about how it will be difficult for sellers to gain any meaningful momentum without a notable bearish catalyst (due to the 95th + percentile mechanical buying flows). On Tuesday, I wrote:
Absent a negative catalyst, I remain bullish here due to outsized institutional buying demand moving forward (particularly systematic). During the -21% SPX decline, there was huge selling from institutions and foreign investors. That selling demand is now turning into buying demand, and has gone from a major headwind to major tailwind.
Today’s positive US/China trade news is certainly not going to help matters for bears. We are likely to see a gap up in the broader market to kick off the week tomorrow. While some are theorizing that it could turn into a sell the news event this week, I am going to stick with the theme of this report: Price will tell us.
As for us here at Marlin Capital, we are currently long 5 stocks in our Active Trading Portfolio. All 5 are in the green. 3 out of 5 have hit +10% + gains. Our trades are working. We are making money. This tells me all I need to know about the type of market we are in. As long as it stays that way, I stay bullish.
Active Trading Portfolio
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