There is a correction in progress in the stock market. Our forecast for weakness into today proved to be accurate. We are favoring a bounce tomorrow with more possible weakness into the end of the week. If tomorrow’s rally can clear certain levels, though unlikely, we would consider a more short term bullish picture. The depth and length of this consolidation period remains in question. We are tracking two different scenarios as outlined in last night's briefing. We will have our answers in the coming days. Our posture will remain defensive. The Federal Reserve is relentless with its liquidity. Today, they gave the green light on individual corporate bond buying. Prior to today it was only bond ETF’s. Shorting the market is not wise at this time. Expect very few trends and violent whipsaw for markets in general: a true short term traders delight. We will be trading these coming swings and will extract profits from the market during this environment while we wait for our upcoming longer trending trades to develop.
Small trader call buying is at an extreme. A very reliable indicator of a large drop in the near future.
Our favored path for gold is a quick spike into June 18th-22nd and then a possible collapse into early July. If you are not long, it's not wise to try to squeeze the last bit of juice from the lemon. If you are long, this is an opportunity to lighten or liquidate positions into this coming spike.
Our computers update data in the evening. By Tuesday, we will have a higher probability outlook for the markets. Tomorrow, we may take profits in one or both restaurant stock positions. Long term investors can ride out any correction in BLMN/ DENN and hold for higher prices into summer. Both are extremely undervalued. Several earnings upgrades were issued today in addition to new long institutional positions. These are stocks with 90%+ institutional ownership. On red days the big smart money adds names like these.
Natural gas has been a tedious position for us. We await a confirmation day with big volume in levered ETF’s to signal our spike low has been set and our sharp upward reversal is in progress. Today may have been it. Natural gas does well when the stock market struggles in addition to it entering the most bullish period of the year.
Bottom line: extreme bullish sentiment is resetting in stocks, metals, energy and volatility (a normal event) which will give us a strong bottom and trigger many great trades in the coming days. The bull market is not dead and the world is not ending. We see Dow 40,000+ in the next 2 years led by AI, robotics, semi-conductors, nano technology, biotech and other human sciences. And the biggest metals bull market in 40 years has just begun.
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