As tech stocks continue to surge, while the S&P 500 and the general economy lags behind, it is important to select the right sectors and stocks to invest in.
Also, as the US gradually opens its economy and talks of a new potential vaccine surfaces, will these be able to boost the V-shaped recovery of the stock market?
And more importantly, which specific stocks are the best to invest in?
While most of the markets are sideways or in weak trends, we see that a few things continue to remain strong, such as Gold, the US dollar, and the NASDAQ.
Upcoming News for the Week
How is the Economy Faring?
There seems to be a large disparity between various sectors, and last week several famous fund manager like David Tepper and Stanly Druckenmiller said that they feel the market is too expensive at current levels.
Some good news on the virus front, with a potential vaccine being found. It might still take months before we see an end product, but at least this gives us some hope.
As the US gradually reopens its economy, so far we have not seem any sharp spike in cases, so that is a good sign. However, since there is a delay between infections and testing, only time will tell.
Is Gold Starting a New Super Trend?
We have been getting some solid buy signals for Gold, and the charts show that it has potential to break new highs.
NASDAQ vs. S&P 500
There is a curious divergence on the NASDAQ versus the S&P 500, which is due to the fact that tech stocks have fared much better and recovered faster than the rest of the economy.
Since this divergence could persist or even widen, it makes sense that we should continue focusing our investments in tech counters.
Since my visit to Silicon Valley and various offices there in 2018, I have been very bullish on the tech sector.
Choosing the Right Sectors to Invest In
Looking at where the big money is flowing, Warren Buffett is selling off the airlines and financial stocks, while the Saudi sovereign fund is buying up huge chunks of US stocks.
Best Tech Stocks to Invest In
Here is the shopping list of my favourite tech stocks, which I plan to buy and hold for the long-term.
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Looking at the various markets, it looks like this week going into risk-off mode, where traders take on defensive positions, and possibly shorts on the stock markets.
Stock Markets – Next Wave of Selling?
While the US is gradually re-opening its economy and easing restrictions, this might lead to a new wave of infections, since their cases and death rates are still rising, which shows that they have not totally got it under control.
Also, tensions between the US and China have been escalating, as the US Secretary of State Mike Pompeo saying that there was a “significant amount of evidence” connecting the coronavirus to a lab in the Wuhan region of China.
Over the weekend, during an interview with Warren Buffett, he said that he had sold all his airline holdings. While he was optimistic on the long-term outlook, he also mentioned that the pandemic has damaged some industries permanently, suggesting that the economy may not “return to normal” that quickly.
On the plus side, Gilead’s antiviral drug, Remdesivir, will be available to coronavirus patients this week.
Bitcoin – Amazing Profits in One Week!
Bitcoin was our most profitable trade last week, with an epic price surge of close to 30% in a few days.
Congratulations to all those who were following our trades! 💰😎🔥
Forex Market Updates
Here are a list of various potential trading opportunities for this week, including AUD/USD, CAD/CHF, CAD/JPY, EUR/AUD, EUR/NZD, Gold.
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https://i0.wp.com/synapsetrading.com/wp-content/uploads/2020/05/telegram-signals-currency-strength-040520.png?fit=440%2C336&ssl=1336440Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2020-05-04 09:23:262020-05-04 09:23:26Weekly Market Analysis – Is the 2nd Wave of Sell-offs Coming?
Looking at the “Daily Trend Analysis” on our Telegram channel, we can see that the most bullish counters are Gold (XAUUSD) and the US Dollar Index (USDIDX), whereas the most bearish counters are Brent (BCOUSD) and Crude Oil (WTIUSD).
The stock markets are pretty mixed, with most indices either being in a weak bear trend, or ranging.
Can Gold Hit $3000?
According to analysts from the Bank of America, they now have an 18-month target of $3000 for Gold, which seems pretty bullish, considering we have not even cleared $2000 yet.
Normally, it is quite rare for the USD and Gold to trend strongly in the same direction, but we are seeing it now.
In the short/medium-term, since USD is a reserve currency, it is in demand when liquidity dries up, whoever with the aggressive money printing, it might decline in the long run.
As proposed by Ray Dalio, we are nearing the end of a 75-year debt cycle, which could see massive deleveraging and devaluation of the US Dollar. If that happens, then it will definitely be bullish for Gold.
This is the reason I have been actively adding Gold to my long-term portfolio.
Normally, commodities tend to lag Gold, and eventually “catch up” once inflation kicks in, however this time demand is at an all-time low.
We have had great success buying the dips on Gold, and our most recent trading positions are already in the money. 💰😎🔥
Will continue to hold for more upside.
How Long Will Oil Stay Cheap?
After seeing the May Crude Oil futures hit negative, traders are getting spooked for the June contracts, because they are afraid the same thing will happen if the lockdown is still in force, and demand remains low.
Looking at the virus numbers, the possibility is high.
Even if the lockdown does end, there is too much pent-up supply, and a lack of storage.
Hence prices could remain low or continue falling.
We have taken full profit on our crude oil shorts, and will not be taking any new positions for the time being, since many brokers do not allow new positions to be initiated due to the liquidity.
This has turned out to be one of the most profitable trades of the year. 💰😎🔥
< h2>Ranging Stock Markets
Lastly, for the stock market, I would say I am 65% bearish, and 35% bullish.
Since there are no clear signs, I will testing the waters with small positions, but will not be taking any large positions yet.
Stay tuned in our Telegram channel to continue monitoring the stock market for the right time.
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https://i0.wp.com/synapsetrading.com/wp-content/uploads/2020/04/telegram-signals-gold-260420.png?fit=439%2C570&ssl=1570439Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2020-04-26 22:08:482020-04-26 22:17:47Weekly Market Analysis – Will We See Gold Hit $3000?
For the past few weeks, we have seen a strong rebound in stocks, but at the same time, we have also seen a plunge in Oil, crazy volatility in the USD, and a surge in Gold.
How can we make sense of this crazy market, when it seems like everything is moving in different directions? Does it mean it is risk-on for now, and is the market bottom already in?
Due to popular request, I will be doing a 1-hour Facebook Live session which is open to the public, where you will get the chance to ask me any questions you have about trading or investing, or the current market situation.
After reading all the different articles, news, opinions and data, it seems the consensus is pretty split on this.
I also did a poll on Telegram, which seems to favour more downside.
So is it possible that we are actually here?
Let’s take a look at the arguments for each side.
Bullish case:
Slowing number of cases and hospitalisations after lockdown measures
Possible that lockdown will end soon and economy returns to normal
Unprecedented fiscal and monetary policies to boost economy
Only certain industries are hit pretty bad, the rest of the economy is still ok
It is a matter of time before a vaccine is found
China is already “back to normal” after lifting their lockdown
Bearish case:
Permanent damage to the economy – lost jobs, businesses shut down, loan defaults, etc
Less future spending – change of habits, less discretionary spending
Lockdown (full or partial) may last a really long time
2nd wave of infections after lockdown is lifted
Domino effect of economy failure has yet to really kick in
Fiscal & monetary policy is insufficient to save the economy
How to Swing Trade the Stock Market?
If I had to put a number on it, I would say I am 60% bearish, and 40% bullish.
Based on this opinion (and of course studying the price action), my general strategy is to do short/medium-term bullish swing trades, while at the same time looking for an opportunity to take a long-term bearish trade.
This will allow me to profit from the short/medium-term price rebound, based on the price action, but also not miss out from the potentially bigger long-term move down, should it happen.
From the chart, the strongest level of resistance is the gap around the 2900-3000 level, so if prices manage to close and stay above that, then I will reconsider my bearish hypothesis.
Tesla – Very Strong Price Rebound
After the sharp plunge when the stock price was almost hitting $1000, Tesla fell sharply to the $380 to $400 buying zone, which was the area I was planning to accumulate the stock.
It had an amazing rally after that, and as of today’s closing it is up almost 90% from my initial entry price. Congrats to those who took the trade with us!
Crude Oil – Double Whammy Selldown
Crude oil was very unfortunately to suffer a confluence of bad news, including price wars, and a huge decline in demand due to restriction of travel.
As price continues to drift down, we have seen the main exporters try to put together some deals and supply cuts, but the problem is that demand is too low, and even with a decrease in supply, there is still an increasing supply glut.
So unless we see lockdowns being lifted, and the economy going back to normal, we can expect crude oil to continue falling. This will get worse the longer the lockdown lasts.
Gold – The Hedge for USD
After seeing how the Fed (and almost every huge economy) is printing billions and trillions of dollars to save the economy, it is highly possible that we might see a devaluation of the US Dollar in the long-run.
For many traders and investors, they see Gold as a good way to hedge against the decline in value of the USD, which could explain the huge surge in Gold prices.
Thankfully, we managed to start buying in near the lows, and slowly accumulated on the way up.
As I mentioned in the post, I think this is a good medium/long-term trade, so for investors, you might want to add some of this in your investment portfolio as well.
Want to Start Your Trading Journey?
Here are some very practical trading tips which will be very useful, especially during such market conditions.
In trading, it is important to find the right mentor and the right community, because having the right support is very important if you want to succeed as a trader.
Recently, we have seen huge volatility and huge moves in the market, which have confused many traders and investors, so in this blog post, I am going to take a step back and look at some weekly charts to give an overview on the market direction for various markets, including stocks, forex, bonds, commodities, etc.
While the first wave of sell-offs were mostly panic-driven, the next wave of decline would likely be driven by fundamentals.
Looking at this strength meter, we can see that the safe haven assets like the USD, Gold, CHF and JPY have performed the best, while commodity-related currencies like the NZD, AUD and CAD have fared poorly.
Here’s a video on how you can use this knowledge in your trading:
Daily Trend Analysis
To make things easier, you can also join our free Telegram channel to get a daily summary of trends and trading opportunities.
Click here to join: https://t.me/synapsetrading
US Dollar Index (DXY)
Despite the Fed cutting rates to zero, launching QE4, extending the repo program to $1.5 trillion, extending USD swaps to multiple central banks across the globe, and a potential $1-2 trillion fiscal package, actions which should technically weaken the USD have instead caused the USD to surge.
The reason for this is that about half of global trade is denominated in USD, and a lot of corporates and governments take up USD debt. When liquidity dries up, you will see people liquidating all other assets to buy USD, hence the tandem plunge in almost all assets, and rise of USD.
Looking at the chart, the USD has been on the rise since 2008, and as more businesses fold up, and liquidity dries up further, this could very possibly push the USD to new highs.
Thus, we can expect most currencies to be in decline relative to the USD, but to varying degrees.
Euro vs. US Dollar (EUR/USD)
The EUR/USD has been in a large uptrend channel for more than 40 years, and now it is hovering at the lower edge of the channel.
If the trendline is unable to hold, we might see prices head down to test the 0.8250 levels.
Currently, Europe seems to be one of the worst-hit regions, and this could cause lasting damage to its economy.
British Pound vs. US Dollar (GBP/USD)
The GBP/USD is also showing great weakness, breaking to new lows. It has been on a downtrend since 2008.
In the medium-term, we can expect a test of the most recent support-turned-resistance level of 1.2084, and if that holds, we will likely see a continued slide of this pair.
Australian Dollar vs. US Dollar (AUD/USD)
The AUD is one of the weakest currencies in recent times, and after breaking below the lows of 2008, we could see the AUD/USD heading to the next support level at 0.4873.
In the medium-term, we are likely to see a test of the most recent support-turned-resistance level of 0.6113, before it continues lower.
NZ Dollar vs. US Dollar (NZD/USD)
The NZD/USD is sightly less bearish than the AUD/USD, but it is also falling fast against the USD, and might be heading to test the next support 0.4905.
Currently, it has found some support at the 0.5596 level, so there might be some medium-term rebound or sideways movement.
US Dollar vs. Canadian Dollar (USD/CAD)
The USD/CAD has a huge pattern forming since 2008 that resembles a hybrid between a cup and handle pattern and a double bottom pattern.
Both are bullish patterns, which suggest that in the long-run this currency pair will continue to stay bullish.
In the medium-term, it has run into strong resistance and may take a while to break past that.
US Dollar vs. Swiss Franc (USD/CHF)
The USD/CHF has been on a long-term decline, and for the past 8 years or so, has been forming a giant rising wedge, which is a bearish price pattern.
The pattern had a breakout this year, but the USD has surged back to the covid crisis to test the breakout point.
I believe that in the long-term, the downtrend will continue, so I will be looking for good shorting opportunities once the USD demand starts to wane.
US Dollar vs. Japanese Yen (USD/JPY)
In 2014, the USD/JPY managed to break above the long-term bearish trend line, but instead of heading up, it went into a sideways movement for the next 5 years.
This pair is tricky to trade because it is rangebound at the moment, and both the bulls and bears are quite balanced.
In the long-run, we will need to see whether it breaks up or down from the consolidation pattern.
US Dollar vs. Singapore Dollar (USD/SGD)
Since the Singapore economy is very export-oriented, and perhaps because the SGD gets lumped in with other Asian currencies, it has seen much much weakening since the start of the crisis.
The USD/SGD has soared strongly to the resistance (prior swing high) of close to 1.46, and looks like it will be breaking that to test the next level at 1.5572.
I have taken many swing trades to ride this strong trend, which has been very profitable for me and my students.
Since I live in Singapore (and use SGD currencies), but the bulk of my investments (and warchest) are in USD, I have actually seen a 8-10% ROI on my whole portfolio just due to the gain from the exchange rates.
S&P 500 Index (SPX)
The S&P 500 has corrected to around 30-35%, in the steepest drop ever on Wall Street, and it has broken past the previous swing low in 2018.
There is no doubt that it will continue to decline, and various analyst estimates have predicted targets ranging from 1800 (which is the 2016 swing low) to 2200.
This suggests a further decline of 10-30% from current price levels.
Since I have bought in near current levels using about 20-30% of my funds, my maximum portfolio drawdown is only 10%, which is pretty much offset by the forex gains (from the appreciating USD).
So for those wondering if they should liquidate their portfolio now, here is some useful advice:
I was expecting a short-medium-term rebound of sorts, before the next wave of selling kicks in.
We started accumulating longs near the low in anticipation of a rebound, but the rebound fizzled out, so we only manged to make a small gain on our positions.
Originally I was expecting a small rebound (correction in price) due to the extreme oversold conditions, but if the bearish sentiment is so strong, it might just drift sideways (correction in time) instead.
If the lows of the 3-bar range are taken out on Monday, then we can expect the downtrend to continue, if not we might see a correction (either in time or in price) play out.
Either way, we are looking for a good opportunity to short, but the precision in timing is important.
US Long-Term Treasury Bonds (TLT)
While bond prices usually spike when interest rates get cut, the TLT had a spike, but it was immediately followed by a plunge, perhaps due to liquidation of bonds for cash.
Technicals-wise, it has broken above a bullish trendline, which could suggest an acceleration of the uptrend in the long-run.
However, with interest rates already at zero, it is hard to see what other catalysts might push it upwards, and we might see short/medium-term cash outflow for liquidity, and long-term outflow into stocks once the market bottoms.
Gold (XAU/USD)
Typically, Gold is supposed to act as a hedge against market declines, by having an inverse-correlation with the stock market.
However, this time we saw a sell-down in Gold as well, probably due to liquidation for cash as well.
On the chart, from 2013 to 2019, we saw Gold carve out a sort of double bottom consolidation hybrid pattern, before breaking out and surging up.
While the price action does not look good in the short/medium-term, I think it still looks bullish in the long-term.
Crude Oil
Due to a confluence of price wars (increase in supply) and a sharp drop in demand, we have seen the price of Crude oil drop sharply to new lows.
The next major support level is at around $10, but we will probably see some intervention before that.
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