I’m going to make a bold call – the market tops out here in the next two weeks.
Early this week, I started seeing internal market indicators flashing warning signs. Even though the indexes kept closing higher—there were some key laggards.
I told my Total Alpha Members that it was time to put my money where my mouth is.
That’s why I began selling deep-in-the-money call spreads in some overextended names.
Currently, I’m sitting on 50 spreads— betting against TSLA.
If I’m right, I make $14,500. If I’m wrong, I lose $10,500.
By the way…I have 6 trades on 6 different stocks just like this in my Total Alpha Portfolio.
So why am I such a bear all of a sudden when I just pulled down a massive $42,455 Win on AMZN being a bull?
What would make me give up on trades like these?
Because that’s what my analysis tells me.
Let me walk you through my thought process, and see if you agree.
Leaders Rolling Over
I first spotted the leaders slowing down. We’re talking Apple, Amazon, Tesla…all the heavy hitters didn’t continue to make new highs.
Here’s what I’m talking about. Let’s look at the hourly chart of AAPL.
AAPL Hourly Chart
There’s two critical pieces of information here. First, I want you to see that the 13-period moving average is getting closer and closer to crossing over the 30-period moving average. That’s what I call my ‘money pattern.’ This pattern isn’t just for trade setups. It highlights potential trend changes in a stock.
Second, look at the two arrows. The left arrow points to the last consolidation area. The bottom of this consolidation is support. Now, the second arrow points to the candle that closes below that level. That is a telling break of the hourly support.
At first, you’re like ‘Who cares…one stock means nothing.’ That’s true. Now, I want to draw your attention to the same phenomenon on several other leaders.
Amazon looks significantly worse. Take a look at its hourly chart.
AMZN Hourly Chart
You can see how Amazon already had the crossover occur. It went back to test the underside of the 30-period moving average before heading lower.
This stock looks much weaker and likely headed for the gravitational line.
Do yourself a favor, take a look around and see if you can spot some of these. They’re most prominent in the tech sector at the moment.
VIX Holding Its Ground
Under normal circumstances, the VIX and markets have an inverse relationship. This means that as the VIX climbs, stocks fall. When stocks rally, the VIX falls.
Right now, that’s not the case. We’re seeing the same markets up 10-20 points every day on the S&P 500. But the VIX isn’t playing ball. While it hasn’t rallied hard, it’s not dropping either.
VIX Hourly Chart
I know that the VIX can fall lower than $12. Heck, it spent most of 2017 below $11. But when I see stocks rallying every day, and the VIX not rolling over, it makes me wonder.
Not to be left behind, the VVIX – which measures option demand on the VIX – is also rising.
VVIX Hourly Chart
This is my favorite leading indicator for the markets. You can see how the VVIX already jumped and is about ready to create a money pattern crossover to the upside. That signals more demand for VIX options (normally calls), which should indicate traders buying protection against a downturn.
Let me take it a step further and discuss the gold trade. Gold continues to be on an absolute tear. You often see traders stash money here when the market goes down as a ‘safety trade.’
Right now, we’re seeing a lot of buying in gold.
GLD Hourly Chart
Initially, it looked like gold might roll over…and it still might. But it’s rallying while the rest of the market is as well. If it gets any more steam, we’ll see a bullish money pattern crossover here as well.
Let me give you one last piece of evidence to support my thesis. Bonds tend to trade inverse the stock market. While this isn’t always true – and certainly hasn’t been the last few years because of the Fed – short-term, you will see money hide there.
Right now, bonds look really bullish.
TLT Hourly Chart
My Conclusion – Hide The Kids
With so many stocks overbought, and a run that’s virtually gone on for 90 days straight, we’re due for a correction. 2018 ripped higher in January only to get throttled in February. That’s precisely what I see happening here.
I’m working with my Total Alpha Traders to get a portfolio that profits from the next move. You can join us before the big money is made.
Join me for my upcoming options masterclass. You get a full week of live education hosted by me.