Market Performance

Historically, June and July are the worst performing months in the market.  Trading Volume during the summer months is low too. Brexit occured on June 23rd and the market plummeted 5% within 2 days with volume 2 times the daily average.  I quickly changed my sentiments of the market towards a bearish stance since all the 3 major indexes that I monitor - $DJX, $SPY and $QQQ -  had dropped below the 50 dma (daily moving average)  That is an appropriate thing to do when the market makes such a dramatic move.  One needs to preserve the capital and it is prudent for retail traders to raise CASH.  Monday morning June 27th, the bears were still in charge.  Tuesday morning the market brushed off the Brexit risk and the 3 major indexes gapped up the following 3 days.  Market was up 5% within 3 days from June 27th lows and IBD called "Market in Confirmed Uptrend"  According to IBD rules, one must buy something and dip their toes in the market to test out the new trend.  This requires a trader to have a ready Watch List of Stocks at a moments notice.

Current Market Outlook

Currently the market is still grinding higher.  We have surged past the highs we had in May 2015.  Institutions are harvesting their profits from gold mining, utilities and dividend paying stocks and investing in technology, health care, material, financial and consumer discretionary stocks.  There is a distinct sector rotation occurring right now.  As a retail trader, we also must start harvesting our profits from defensive stocks and deploy them into sectors that institutions are rotating into.  Last week of July we had the tech titans $AAPL, $GOOGL, $FB and $AMZN, report earnings. They account for over 25% of the NASDAQ index.  In my July 24th post, I had highlighted $QQQ to reach 119 as a near term target.  We are just 2% away from that target now.  I still have a bullish outlook for the coming week.

My Stock Watch List

1. $PE
2. $EBAY
3. $ISRG
4. $SPGI
5. $AMZN
6. $MHK
7. $MBLY

These stocks are currently accumulated by the institutions and most of them have an RS rating above 86.  I prefer only the ones that are above 90  Some of them are however good candidates for an option trade.  Earnings surprise is out of the way since they have all reported their 2nd quarter results.

Trade of the week

If you would like to follow along with me on one of my Credit Spread Option Trades on $QQQ to learn and practice with a simulated  "Virtual Trade"  than here are the details of the trade:

$QQQ August Credit Option Trade Buy 115 put and Sell 116.5 put for total Credit $41:$109 Risk per contract

Manage the trade to harvest profits @ 80% of targeted Credit or if the index trades above 118  Conversly, close out the trade for a loss of $55 or if the index trades below 115

This will be just 2 weeks in the trade. Good Luck.

Mentoring Service

If you would like to schedule a FREE 30 minutes discovery call to explore our mentoring service, please contact us at:

investorspotlight@gmail.com

We have just a few spots left for August.  Reserve them before they are gone.


Happy Trading!

Amin