The overbought conditions will need to be worked off with some choppy back and forth action over the next 7 trading days. Small traders need to be flushed out of positions to allow sentiment to reset and become a bit more bearish so we may climb the wall of worry again. This is how modern markets move.
Great news for the stock market today! It appears the larger correction we mentioned (scenario 1 from last night’s report) is a less likely possibility. Anytime the Federal Reserve chairman testifies before congress expect a good day in the stock market. Markets today were also aided by a headline regarding an old steroid drug that is being used to minimized Covid-19 complications. Expect back and forth into the middle of next week, but no collapse. A trending rally should develop toward the end of next week into early summer. Currently, ignore the saber rattling between China/India and the Covid spikes. The Fed is the only thing holding the global economy up and the stakes are quite large. Do not expect them to stop helping the markets as the global economies mend from the forced shutdown. At the end of the day, the Fed will buy stocks if they have to. The economy will not be shut down again.
We were questioned by many people in early April regarding our market projections into May and June. The same people are calling for a crash or a retest but they will get the same result into July: higher equity prices. Ignore the noise.
Thursday into early next week appears bullish for bullion and the miners. Silver is currently weaker but should get some traction. Silver is fighting a dominate cycle that will pull it down into the end of next week, possibly along with gold.
Based on the levels regained today in the SPX we did not elect to trade out of our restaurant stocks. We show the weekly chart of DENN above and its uptrend is very much intact.
The weekly technical picture of our two restaurant stocks could not get any better.
The next two weeks you will see the bulk of the country reopen its restaurants for unrestricted dining. As the end of the quarter approaches, there are only a few pockets of value left in the marketplace. If you want to pay for a year of your Hedge Fund Z membership many times over, just continue to hold DENN and in particular BLMN. Hedge funds are beginning to pour into these names and won’t stop until July 1 as they chase alpha into the end of the quarter. We expect these two names to significantly outperform the SPX over the next 3 weeks. They will not creep up every day .50 at a time. Expect 20% of the trading days to account for 80% of the move. We remain focused on the big picture.
We were stopped out of our UNG position today, but remain bullish on natural gas. Today may have been the final flush and bottom. We will continue to provide coverage on it for our members.
We should trigger several new trades we are watching in the coming days with excellent profit potential.
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