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RoboStreet – June 25, 2020
Rising Virus Numbers Put Brakes on Rally
The rally of the past two weeks came to a sudden halt Wednesday as reports that the U.S. tallied its highest count of new daily coronavirus cases yet. Following a broad sell-off in all 11 sectors, the market found a bid yesterday by some key technical support and gains in the financial sector.
The benchmark S&P 500 index bounced off its 200-day moving average (3020), boosted by a turnaround in the financials after U.S. federal regulatory agencies eased restrictions on the Volcker rule. Following the financial sector in gains were the energy and information technology sectors amid higher oil prices and gains in several mega-caps.
Besides the relaxation of the Volcker rule for banks, the other positive-sounding headline today was New York Mayor Bill De Blasio stating plans to begin phase 3 of reopening on July 6. Texas, unfortunately, will pause its progression due to the state’s coronavirus situation.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
In other developments, weekly initial claims decreased 60,000 to a still-high 1.480 million (consensus 1.250 million), Walt Disney will delay its Disneyland reopening, Boeing was downgraded to Sell from Hold at Berenberg, and KB Home issued disappointing quarterly results.
The 10-yr yield is down two basis points to 0.67%. The U.S. Dollar Index is up 0.25 to 97.34. WTI Crude is trading at $38.70/bbl.
In other economic news, Durable Goods Orders for May increased 15.8% (consensus 11.6%) on the heels of a downwardly revised 18.1% decline (from -17.7%) in April. The key takeaway from the report is that order activity clearly rebounded in May, yet new order levels year to date are 13.6% lower than the same period a year ago.
The third estimate for Q1 GDP was unchanged at -5.0% (consensus -5.0%). The key takeaway from this report is that it is insignificant for the market given its dated nature and how the coronavirus severely impacted the last half of Q1.
What is becoming evident with the spike in the pandemic number is a need to pay close attention to volatility. For our RoboInvestor investment advisory service, we employ the Ipath S&P 500 VIX Short-Term Futures ETN (VXX) as our favorite vehicle for trading volatility. We’ve successfully traded VXX on a few occasions when the market starts to waffle following a big runup or when uncertainty enters the fray.
The VXX is an Exchange Traded Note (ETN) that tracks the VIX short-term futures. To be more specific, the VXX is a portfolio composed of the front two months/VX futures that bear continuously changing weights with returns based on the S&P 500 VIX Short-Term Futures Index Total Return (VIX). VIX is the commonly known name and ticker for the CBOE Volatility Index.
After testing its 200-day moving average in mid-June, shares of VXX vaulted from $29 to $45 in three days and have since settled back down to trade at just under $34 as of yesterday. The chart below shows how VXX is now settled into a lateral pattern, but up from its more complacent level seen earlier this month.
In light of the Fed’s promise to bring unlimited amounts of fiscal stimulus, they can’t resolve the coronavirus, trade tensions with China, further social upheaval or the unknown impact to the stock market of a Biden win in November and/or a clean sweep of the House and Senate by the Democrats.
It doesn’t mean the market won’t ultimately trade higher, which is my long-term view of the investing landscape but in doing so, volatility will likely be elevated. Our AI-driven Stock Forecast Toolbox gives an “A” Model Grade rating to VXX with a near-term price target of $39.43 if the market trades within a 1%-2% range.
This price target will spike if the market endures a few more days like this past Wednesday. And once end-of-the-quarter window-dressing and ETF rebalancing is complete, there will be a vacuum between July 1 and July 15 before the second-quarter earnings season kicks off.
Within this two-week timeframe, the market is vulnerable to negative headlines and is why I recommend readers of this column join RoboInvestor today. I’ll be providing timely buy and sell advice on not only VXX but many stocks and ETFs that are of key importance to the market’s underlying momentum.
Just in the past four weeks, we’ve booked profits in leading stocks like Chevron, Square, BlackRock, Freeport McMoran, CVS Health, and Cisco Systems. We only trade and investing in institutional favorites where the stocks, ETFs, and related options are super liquid, allowing for a smooth exit on big up days and on bad down days if necessary.
Our Winnings Trade Percentage is an obscene 88.36%, meaning we are booking profits for our RoboInvesor members at a rate of almost 9 out of every 10 trades we put money to work. I say “we” because I participate in every single trade that is recommended. We are a team and my AI platform that I’ve spent the past ten years developing and fine-tuning is the quarterback calling the plays that have us scoring almost 90% of the time we take the field.
Take me up on my offer to put my AI tools to work for your portfolio and take the guesswork out of making money in the stock market. Our methods are highly disciplined and highly profitable. Make RoboInvestor your biggest winning trade of 2020 and sign up today!
“I’m investing my own money in each and every stock as my AI platform identifies.”And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
*Please note: RoboStreet is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, MonthlyTrader, or RoboInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
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