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Stocks erased morning losses

S&P 500  2,644.69 +30.24 (+1.16%)  Dow 30  24,264.30 +230.94 (+0.96%)  Nasdaq  7,042.11 +100.83 (+1.45%)
 

Crazy Stock MarketToday, it definitely was a crazy market. A market I haven’t expected at all after China announced tariffs retaliation on the US goods worth $50 billion dollars.

By the morning bell the futures were down more than 34% at S&P and DOW was losing over 450 points. It all looked like that we would have yet another significant selloff. But something was different today.

Early in the morning I posted in our Facebook trading group that given the China’s retaliation the stock market was suspiciously calm. I recommended caution and not to trade aggressively. Well until the market started spiking aggressively up.

We recovered all morning losses.

 

 

Scared investors pulled out over $40 billion dollars from the market in March.

Obviously, this is an old song about being patient and wait through sell offs if you are a long term investor as these times of correction will pass away and few weeks later no one will remember them. Telling this to people is useless. They do not listen anyway.

Most people were selling at lows just to be buying back at highs later on (given that this bull market still has legs to continue which I believe it does; if not, all those investors will turn out to be pretty smart guys and I will be the stupid one.).

Although in my older posts I show my disgust for Trump, I understand that this correction has nothing to do with the current administration. And believe me, it is a fact. Trump’s trade war is just an excuse to sell off, get the gains, and correct overpriced stocks. It was a pure technical event no matter how scary it was. It will pass away and it will be forgotten.

Many investors wanted, and called for, this correction! In the past, I read many bloggers and investors selling out their portfolios in 2015, 2016, and 2017 due to valuation! Just go back to my older blog posts and you may find many posts telling them that it was a bad idea.

And now, that we finally have that correction, those same people begging for it before are now scared to buy cheap and they are bailing out instead.

However, this is a bullish sign for the market. All who were scared and sold out are now gone and there will be no more sellers out there. And I do not have to express what will happen when there is lack of sellers and those who sold want to go back in.

I believe, we just have witnessed it today when the market opened 30 points down and closed 35 points up. Lack of sellers were overwhelmed by institutional buyers later later on today. Today was a perfect bearish squeeze.

From technical perspective, this appears to be bullish too. We are not yet out of the forest but today we have a confirmation that the 200 DMA support will hold. However, I still must stress out that all this may change anytime. I am horribly bad at predicting the market so whatever I say, take it as unimportant blabbing. Remember, you must know what you will do next, not what the market will do next.

 
S&P500
 

I expect this bull to continue higher as the trade war is an old story, inflation is an old story, interest rates is an old story… and there is not much left to be freaking out about (unless Trump invents something new). No more scare news? Possibly.

About a year or two ago, when everybody was predicting this bull market’s end I found an article stating that there was still over $70 billion dollars sitting on the sidelines and not being invested since people didn’t believe the sluggish recovery of Obama era. If that amount stayed the same, with March addition of $40 billion dollars pulled out, we may have now $110 billions of dollars sitting elsewhere. Let’s wait when that money will want to get back in.

The chart above just formed a double bottom which is a bullish pattern. I expect the market going up. But again, be careful and do not place everything on this expectation. Do not predict the next move! It still may be a bumpy road! It still can develop to a completely different path!
 

What should you do in this market?

Still be cautious and wait for the market to show its direction. If you have open trades, manage them according to your plan. I still stay aside with new longer term trades. I only trade an ultra short trades against SPX (0 to 1 DTE trades) and rather keep closing old trades as much as possible and raising cash for new purchases once this market shows its direction.

If, on a day to day basis, I see the market tanking, I take quick bearish trades which expire the same or next day. If I see the opposite and market rallies, I day trade the bullish side.

But understand that this trading is not for everybody so if you are not confident, stay aside and wait.

As a dividend investor I have some cash saved to buy more high quality dividend stocks. I still think we may see more selling and then I may add new positions. I use 50% of all our options trading proceeds and invest them into high quality dividend stocks (preferably aristocrats). I keep holding open positions to collect dividends and plan on adding more shares later on.

 

 · Trading activity today

 

A summary of opening and closing trades.
(premiums received / paid: – $157.00)

Note: This is a cash flow of credits, not profits!
 

We rolled a few trades such as FDX and some SPX calls as they got in the money (converted them into put spreads; also noticed that it is a lot easier converting put spreads into call spreads than calls into puts). Also opened new SPX put spreads as the market was recovering from negative opening. And it was a stunning recovery. From a loss of 35 points to a gain of 35 points. A 70 points intraday swing!

Trump is softening down on his tariffs rhetoric and market may take this as a good relief and catalyst for new grow.

 
0404trading
0404trading
0404trading
 

 

 · Dividend stocks to buy

 

Out of our watch list of 37 dividend stocks the following ones are a good buy at today’s prices (04/04/2018):

 
S&P500
 


Disclaimer: The list above is based on calculated fair value and 52wk high offset valuation. The values are subjective to our calculations and opinion and may differ from your own. If you decide to trade or buy these stocks, do so on your own risk and do your own homework. The list is not our recommendation to you.

 





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