The “flight to safety” continued this week as the big money stuck with the Dow for a weekly gain of 124 points. In contrast, we saw the Nasdaq consolidate throughout the week, with the close on Friday less than 2 points from where it opened on Monday. The SP-500 was unable to make any headway either, as it closed only 7 points higher from Monday’s open. What does this really tell us in the big picture?

The market simply ran out of sellers giving us an area of support and once again more evidence that the big buyers will buy just about any dip in this market. Despite all three indexes gapping down to open the week, and the prior week ending in a volatile down day, we did not see any of the indexes with major losses. The Nasdaq did drop 1.6% from Friday’s close to the lowest low from this week on Thursday, but this was the largest out of the 3 averages. This is a major sign of strength and another characteristic of a strong bull market.

While there was some rotation out of tech stocks, the group itself still looks strong. As we said in last week’s newsletter: “A period of consolidation of at least a week would be expected at this point.” And this is exactly what we saw. AMZN and FB bounced off their 50 DMA’s last week, showing there is still plenty of appetite for tech stocks, and GOOGL seems to be setting up for a new run. It’s looking more and more like Trump will be cleared of the Russia investigation (which was fabricated from the start), and this should give the market some new motivation for more buying as Trump can now become once again focused on cutting taxes.

Long-Term Herd:

The LTH is still not reset to a buy area, but when the market is moving up strong as it has been for the last 2 months, it is typical for this indicator not to completely reset.

Short-Term Herd:

The STH reset last Friday morning and is just now coming out of the buy area, giving us odds that we could see higher prices in the market this week, possibly as soon as tomorrow.

Bull Market Status:

Historical data shows from 1950 thru today, the month of June has seen 34 up years, and 33 down years. And July’ data shows only a mild improvement with 37 up years, and 30 down years. The data appears to be correct to this point, as even with our current bull market, the month of June is so far on track for negligible returns. But that can change on a dime if the institutions start buying again.

The Dow Jones volume on Friday was the highest since April of 2009, reflective of the quadruple-witching options expiration day. There was also higher than normal volume on the other averages, showing continued interest in keeping this bull market alive. As far as I can tell, the bull market is just as healthy as it was back in 2009, possibly even more so due to the Trump phenomenon. The market always needs a “wall of worry”, and there is plenty of that on the current geo-political stage.

Stocks & Trade Ideas

Amazon – AMZN bounced off the 50 dma for the 3rd time in a week, and launched Friday for a $23.54 gain. This was due to the announcement they will buy Whole foods for $13.7 billion. It may take a few days to digest the gain, but the odds ultimately favor higher prices for Amazon in the future.

Google – GOOGL’s large selling last week seemed to end on Thursday and Friday; this is worth watching for higher prices over the next week or two.

Netflix – NFLX found support at last Monday’s low as well as the 100 dma, and the big buyers jumped back in with both feet. Higher prices are anticipated this week.

Nvidia – NVDA found support at the 10 dma all last week and declining volume gives us odds of higher prices this week.

Powershares QQQ Trust – The QQQ’s found support from last Monday’s low and the 50 dma along with declining volume, giving us good odds of higher prices this week.

Wix.com LTD – WIX found support at the 100 dma as well as last Monday’s low, and this is one to watch this week. Declining volume is also in its favor.

Trading Psychology

Do you feel the need to make predictions? In my opinion, it’s a waste of time as tomorrow’s price is unknowable. All we have to do is follow price action and let the market tell us what to expect.

The Merriam-Webster dictionary defines a Prediction as “Soothsaying, Prophecy, Prognostication, or Guess”.

For me, the last one, “Guess” sums it up. OK, soothsaying might even be more accurate. Any prediction of the market, stocks, or index is really nothing but a guess. An opinion. Would any of the CNBC pundits bet their entire 401K on their own prediction? No, and the answer is always the same. Because it’s just an opinion or a guess.

The day you understand this is a game of odds and probabilities, and how to play the odds, is the day you become a trader who can succeed in trading for a living!

For this week’s content, I’ve included a snippet from one of my favorite books, “The Power of Your Subconscious Mind” by Joseph Murphy, Ph.D. Not enough can be said about the power of keeping a positive dialogue in your subconscious. It takes practice and you’ll find yourself constantly having to work at it, but it can have a big influence on your day-to-day happiness, health, and overall success. It may sound strange to some of you at first, but give it a try.

Take each gain (or loss) in the market with a grain of salt. Don’t let a series of losing trades get the best of you. Your next trade could be your best trade. Stick to your training and remember to trade with the odds in your favor, and of course, always use a stop loss.

All the best,

Coach

Randall Hudgens
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