The markets

Everything was up on Friday, especially the Nasdaq, which was up 1.05%. The transports were up 1.24%, which is very strong. The Russell 2000 was up strongly, 0.97%, the S&P 500 was up 0.64%, and the industrials were up 0.44%. The UVXY was down 6.76% by the end of the day and bonds were down, which makes sense as the market moved higher. Gold was down just over 1% as well.

The sectors

The retail sector has been weak recently and moving down. A good way of looking at the retail sector is with the XRT index. Given this sector has been so weak, we will be focusing on it with a few bearish trades. I’ve got a couple of excellent trades for the elite students that I will be passing on today. I am also looking for more weak stocks in the sector. That will be one of my focuses tonight.

If you are ready to start trading options, click here to watch my free training video:

Of course technology was up because the Nasdaq moved up more than 1%. Technology, the largest sector in the market, was up 1.16%. Tonight I will also have my eyes on the technology sector, to see which way it moves after that strong day on Friday.

Financials, the second largest sector of the market, was up 0.68%. The next strongest sector was consumer discretionary (XLY), up 0.89%, that was quite strong as well. The other sectors were also up, with the exception of energy down 0.16%. Energy has been weak recently, but it wasn’t down substantially. Overall Friday was quite a strong day with everything moving to the upside.

Earnings season approaches

It is again almost earnings season. I start to look at earnings trades around three weeks prior to the earnings report being released. It is still a little early for the majority of companies right now, but in a week or two we will be focussing on earnings in the elite program. The elite students have done exceptionally well with earnings in previous quarters and I am expecting them to do exceptionally well again.

The SPX’s inverse correlation with the UVXY

Let’s look a little more closely at the major index, the S&P 500, and its correlation with the UVXY, which measures intraday volatility. Between around 11am to 12.30pm (New York time), we saw a pretty decent move up on the SPX chart. It was a nice little rally from 2147 to 2426. Looking at the UVXY chart at the same time (11am to 12.30pm) you can see a nice move down. Obviously the S&P 500 and the UVXY move inversely so there was a great trading opportunity on the UVXY. This is the type of thing I teach the elite students. I also teach the students when to place this trade, according to our rules, which can make you substantial money!

Upcoming news

Please note that Janet Yellen, the Chair of the Board of Governors of the Federal Reserve System, is testifying before Congress on Wednesday and Thursday. That is something that could move the market, so please keep an eye on that. We have various Federal Reserve state representatives presenting as well. This could also impact the market, but Janet Yellen’s appearance is our main focus.

This Friday, inflation (CPI) and retail sales comes out. Again this is a sector that has been weak and the elite students are looking to get into some bearish trades within that sector. There are a couple of stocks that are showing relative weakness and also have bearish charting patterns. They already have established downtrends. How do I select trades? I look for over bought stocks within retail that are in a downtrend. We know that the retail sector is weak – always look at the big picture first – then I narrow it down to specific stocks. I look at charting patterns. I’m searching for established downtrends. The stock must have a bearish chart pattern, and a squeeze would be ideal! Basically overbought within a downtrend.