Friday turned out to be another wild day. The debt ceiling and budget debate continued in Washington D.C. and that meant volatility. Just today, there is word out that a deal is near. Should a deal be reached, it will be voted on this coming Monday. If a deal is said to be reached, expect a rally on Monday. Shorts will have to cover and the markets should see a solid advance. The key to any agreement is obviously the debt ceiling being raised, but also the amount of cuts to stave off a credit downgrade. Should no agreement be reached by Monday, expect selling.
As of the close on Friday, the up cycle has been negated. The negation was completed because the S&P 500 closed below the cycle date low. This does not mean the markets will not go up, but what it does mean is that any sharp bounce on a debt ceiling resolution will quickly turn to choppy action, then downside.
I continue to be confident that a deal will be reached and that means I will continue to look for long positions. On Friday, MMM was triggered at a buy price of $86.90. I continue to hold SSO at an entry price of $51.85 and BAC at $9.70. While I was stopped out of MOTR on Friday, I continue to believe it has significant upside. It appears the shorts are pushing it lower, in full control while this market is weak. At some point a short covering rally will take place and pop the stock significantly higher. I will continue to watch this as a future trade at the right level. CREE was a great trade this week. In a choppy to down market, I was able to take a nice profit on it. Congrats to all those that held with me. There are many other great charts out there. However, considering the uncertainty on the debt ceiling and the possible downgrade, it seems wise to only hold 20% - 30% or so long in my swing trade portfolio.
Next week looks to be another volatile one. Keep the methodology and discipline on point during this period in the markets. Usually, summers are quiet but not this year. Let's make it profitable week.
Chief Market Strategist