Markets saw a significantly sharp drop, following the the sell-off from Friday. The Dow at one point was down 1,600 points, and closed 1,200 points down in the biggest drop in history. Selling activity reached near-panic levels- some of this attributed to automated, algorithmic trading. The pullback has gone global, with both Asian and European markets trading sharply lower. Financials saw a 3% drop today, which followed Friday’s declines of 2.2%. Energy shares slid as well, mirroring pullbacks in the crude oil markets. Another crucial component today’s events were renewed concerns around inflation, following strong jobs and wage growth figures on Friday. Investors are becoming wary that the Fed may be behind in its estimation of economic progress and thus behind in rates- signalling a much faster pace to rising interest rates in order to account for possible inflation boosts. Bond yields were rising on the heels of this news, but levelled off toward end-of-session. As yields rise, bond prices fall, making them more attractive to buyers and thus turns attention away from equities. Although today was turbulent and intense, it was normal and expected. Markets have been skyrocketing relentlessly and it was only a matter of time before a correction- albeit a dramatic one. In fact, the markets may now be returning to a state of normalcy as animal spirits subside and investors and analysts get a clear-headed view of things. We will want to look to the Fed for their reaction next, and there will likely be a policy update specifically around rate hikes. Jerome Powell has just been signed in as the new Fed Chairman, and he undoubtedly has his plate full for now.
At the time of publication, the DJIA is down 4.60%, or 1,175.21 points, at 24,345.75. The S&P 500 is at 2,648.94- down 4.10% from the open. The Nasdaq-100 is down 3.78% at 6,967.53.
Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows an extended drawdown. Today’s negative vector figure of -0.23% moves to -1.02% within three trading sessions. Today’s predicted support and resistance was 2,723.33 (± 4.58) and 2,746.63 (± 4.62), respectively. The predicted close today was 2,724.72. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
Highlight of a Recent Winning Trade
On February 1, we closed a long position for Adobe (ADBE) in our Premium Member Picks service- which is included in Tradespoon’s Premium membership plan.
The position was opened on January 22 and closed on February 1. The Net Stock Gain was $3.65 (57.03%), the Net Options Gain was $3.32 (39.52%) and the Net Options Spread Gain was $0.78 (24.00%).
While the market is down 2.0%, see how we trade the current market and what to expect next in our Live Trading Room highlights. Today, Feb. 5, we held a Live Trading Room Session where our winning trades ranged 16.60% to over 61% ROI!
Our Live Trading Room is open every trading day from 9:15 am Eastern Time, but these Live Trading Sessions are only available for Premium Members to attend Live.
We wanted to share the recording with you so you can see what you are missing.
Our featured stock for Tuesday is Caterpillar Inc. (CAT). CAT is showing a sharp near-term downtrend in our Stock Forecast Toolbox’s 10-day forecast. This stock is assigned a Model Grade of (A)– indicating it ranks in the top 10th percentile for accuracy for predicted support and resistance, relative to our entire data universe. Our 10-day prediction model shows vector figures moving past -10.00% within the next three trading sessions. Our benchmark for vector figures is +1.00%.
*Please note: Our featured stock is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader or ActiveInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
The stock is trading at $151.01 at the time of publication, down 4.11% from the open with a -3.30% vector figure.
Tuesday’s prediction shows an open price of $149.33, a low of $143.51 and a high of $157.49.
The predicted close for Tuesday is $143.83. Vector figures dip to -7.75% for Tuesday, then move and hold beyond -10.00% throughout the forecast. This is a good signal for trading opportunities, because we use vectors as a primary factor in determining price movements for stocks and ETF.
Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
Note: The Vector column calculates the change of the Forecasted Average Price for next trading session relatively to average of actual prices for last trading session. The column shows expected average price movement “Up or Down”, in percent. Trend traders should trade along predicted direction of the Vector. The higher the value of the Vector the higher its momentum.
Crude prices are extending losses from last week as the U.S. dollar remains relatively strong and U.S. domestic production is likely to continue rising in the near-term. Data showed U.S. production figures crossing the 10-million barrels-per-day level in November, which is a first in 50 years. To signal continued production activity, we saw numbers from Baker Hughes showing an uptick in active rig count by 6 last week. Oil prices are also reacting to the global sell-off in stock markets as well, with crude prices finishing at a 2-week low. West Texas Intermediate for March delivery (CLH8) is priced at $63.643 per barrel at the time of publication, down 3.09% from the open.
Looking at USO, a crude oil tracker, our 10-day prediction model shows consistent negative signals. The fund is trading at $12.77 at the time of publication, down 2.07% from the open. Today’s prediction sees support at $12.81 (± 0.04) and resistance at $13.13 (± 0.04). The predicted close for today was $13.12. Vector figures show -0.27% today, which moves to -0.65% in three trading sessions and hold negative. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
The price for April gold (GCJ8) closed down 0.01% at $1,336.50 a troy ounce after attempting to recuperate from losses last week. In atypical fashion, gold was outperforming a strong U.S. dollar and rising treasury yields. The overall takeaway from strong economic and wage growth data, coupled with rising yields, is a near-term interest rate hike from the Fed. The safe-haven asset may also be impacted by a ‘sell-everything’ attitude as investors move to shore up cash reserves during the broader sell-offs in equities.
Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows overall negative signals. The gold proxy is trading at $126.71, up 0.25% at the time of publication. Today’s predicted low was $125.97 (± 0.22) and the predicted high is $126.95 (± 0.22). The predicted close today was $126.28. Vector signals show -0.08% for today, moving to +0.13% in the next three trading sessions before returning to a downtrend. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
Recent inflation concerns and strong jobs data, which previously put pressure on bond prices, was overshadowed today by a flight to safe-havens. Government bonds are considered safe assets, so investors tend to divert capital from equities to bonds in times of volatility or panic. This has boosted bond prices for the time being, sending yields on a corrective downturn today. Sentiments around strong jobs numbers and wage growth data will be stoking inflation concerns in the near future, though.. The yield on the 10-year Treasury note is down 4.77% at 2.71% at the time of publication.
Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see overall positive signals in our 10-day prediction window. Today’s vector of +0.26% moves to +0.50% in three trading sessions. The ETF is priced at $120.71 at the time of publication, up 0.94%. The predicted close today was $120.28 with a low and high of $119.38 (± 0.26) and $121.22 (± 0.27), respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
The cryptocurrency sell off continues today as fresh news from U.K. banking giant Lloyds Banking Group (LYG) indicates they will no longer accept credit card transactions for cryptocurrency purchases. This announcement is just one in a series of regulatory crackdowns occurring globally, and will continue to pressure major coins until the smoke clears and market participants have a clear view of the broader industry.
The spot price for a single bitcoin (BTCUSD) saw a drop of 4.18% at $7,066.95 at the time of publication.
Ether coins on the Ethereum blockchain fell to a significant low compared to the start of this year. The spot price for an ether coin is $711.02 at the time of publication, which is a 15.10% 24-hour drop.
Ripple coins fell to about 70 cents at the time of publication, marking a 24-hour change of 15.70%.
The CBOE Volatility Index (VIX) is up an incredible 115.60% at 37.32 at the time of publication, and our 10-day prediction window shows sharp positive signals. The ‘fear-gauge’ has hit a significant high point, reflecting the myriad market components in flux today and broad, global uncertainty. A worldwide equities sell-off combined with strong economic data lending to inflation concerns and Fed rate hikes are all converging at once. The predicted close for Feb. 07 is 37.14 with a positive vector of +33.74%. The predicted lows and highs are 34.12 (± 1.00) and 40.36 (± 1.18), respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
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