NDX will have the largest swings over the next 2 weeks. A short term low occurred today or early tomorrow at latest. We expect a reversal Friday into early next week for a bounce, then a second low into the first few days of October. The early October low may be a higher low or an undercut low, too early to tell. SPX and the DOW are more likely to produce lower lows into early October. Big money has been selling their most concentrated positions to lock in end-of-quarter profits prior to the election. Once the selling subsides, NDX may not see the same sell-off severity as the past 2 weeks. It will most likely have a more bullish profile after this week than DOW and SPX.
We examine the market through SPX which produces the purest data. SPX also has proven to give the highest hit ratio with our own data fed into our system. In order to generate a worthwhile long trade for a bounce into the end of the quarter, we wanted to see SPX 3220. This simply did not occur, yet. It is a key support level that is capable of ushering in a profitable bounce. We cannot go long even at SPX 3300 early tomorrow AM, which we think will occur and reverse green, possibly into next week (September 22). We will not alert it, but will give a strategy if you are willing to take the risk of getting caught in the October 1-3 bottom, possibly SPX 3000-3100. One could go long tomorrow at the close or mid-morning if markets are green by noon, and look to trade out near SPX 3400 early next week - no later than September 22nd. This trade is not recommended. The end of quarter rally may just be a blip based on the Fed’s agenda and appetite. The trend we are currently seeing is liquidation into end of quarter - not buying, but locking in pre-election profits by funds to secure their hefty year-end bonuses. The mega tech names are also being dumped, dragging NDX down the most. We are monitoring a 40-year cycle from 1980 which produced a low on October 1-2, as well as the 2-year cycle low from 2018 which also bottomed October 1-2. This date should produce a powerful rally for us to use leverage short term in major indexes NDX, SPX, and DOW into our estimated October 22-25 top. That will be followed by a short in SQQQ into late November.
We sold US steel yesterday for an 8% gain with expectation of stock market weakness and dollar strength into early October. Our posture will always remain defensive first and foremost. Yes - we will miss out on some profits, but practicing good risk management is key to consistent long term results and there is always another trade. As we have said in the past, the steel sector can rally in a declining market as we saw today, with fund managers looking for places to deploy capital on a pullback in sectors that have not had rotational money flow. Mid-morning today, the steel sector was plummeting, but TSLA came out with a report of the need for more iron in their vehicles. At the same time, several pundits on CNBC profiled the lackluster material sector, highlighting steel stocks and iron ore companies like Vale. We finally got the close over $8 on X, but rather than repurchase it for a short term trade we feel CLF will have more upside short term. There remains risk for long term share dilution once price goes over $10. CLF has a habit of rallying into earnings which are next scheduled for mid-October. CLF also has the largest short position of any iron ore mining company or steel stock. The latest attention to the sector will cause some short covering and price could jump quickly. Our first target is $8. It should be noted this is a short term play, and the best long term steel names are NUE, STLD, and SLX.
Materials have risen steadily for months showing early warning signs or price inflation. It was just a matter for time before the steel sector was the beneficiary of cyclical rotation.
The SEC investigation into Rochester, NY based Eastman Kodak began just after the Trump administration granted the company a huge loan - close to a billion dollars virtually interest free to manufacture key ingredients for generic drugs. The company had a roller coaster ride up from $3-$60 in a matter for days as market makers shorted shares out to Robinhood day-traders and pressed price back down on the negative investigation news. They were cleared yesterday by the SEC and the stock spiked to $11, with short sellers attempting to cap the rally by beating price back down to $9. We believe more than half of the float is short. Legally borrowed shorts appear as 16 million on a 57 million share float. Add in another 10 million from naked shorts - shares sold short without receiving legal borrows from clearing agents. We saw today what we were waiting for: heavy volume (70 million shares) and price escalation. There should be a huge scramble to cover by short-selling hedge funds into tomorrow. A major hedge fund recently purchased approximately 5% of the company in the open market with a cost probably above what we paid today. We expect news to flow from Kodak any day giving more firepower to momentum traders. This is a great long term trade, but we plan to take profits on a spike and sell the principal investment while letting free shares ride. It is a personal choice. Our first Fibonacci level of $23+ should be easy over the next 30 days for Kodak. Since added to our short term portfolio, KODK is already up more than 20%.
Technicals looking great for BTC and GBTC.
The biggest trade of the year is coming up for HFZ members. We have an AI target for gold of $2250-$2300 by early December. Gold will be pushed by a major 4 year cycle top in said time period. Silver and miners should follow, but as we have seen, the metals rotate in advancing strength. It is likely gold's time to lead again after silver just finished its blow-off top into early August. Gold will receive safe haven panic buying due to geopolitical and election risk. Make sure you are approved for options trading, minimum level 2, if you wish to purchase call options. We will be giving out an alert in stages, layering in and spreading our buys through different strike prices in the ETF GLD. Our first purchase may come as soon as the next 10 days. A final low may occur right before the election. We will take positions over the next 30 trading days. This trade should produce a minimum of 100% profit with an exit window of December 3-10. Options are potentially an all or nothing bet, so risk only what you can afford to lose. We will offer a leveraged gold ETF trade at the same time for those who do not want to trade options. The next big advance we have for silver is February. We will repeat the same strategy then. HFZ
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