Signals & Trading Plan for Tuesday 2/11/20

We received lots of messages today about $NDX making a new all-time high.  And indeed it seems very exciting. Just as exciting as TSLA parabolic rise on Feb 4.  

Many traders like to join the party and buy when prices reach a new high.   Alas, this is a dangerous signal to rely on. If you had bought QQQ at a new all-time high on 1/12/18, you would have felt great.  If you had bought QQQ at a new all-time high on 1/26/18, you probably lost sleep on many nights subsequently, and lost a lot of money too as QQQ dropped over 12% in a few days.  

Many times stocks run away from the underlying health of the market.   This happened over and over again: in late 1999, in late 2007 and early 2008, in late 2015, in late 2017 and early 2018.

Over and over again, traders and investors don’t learn from this mistake.   FOMO gnaws at all of us. We fear that we are missing out on a great party. We throw caution to the wind.  We jump in and buy. We party like it’s.. well 1999.

If you are a nimble short-term trader, you can make a lot of profit in this kind of market.   But you may want to think twice about deploying fresh capital into long-term or medium-term positions right now.  Stocks will not continue to keep going up, up, and away.

The full article covers:
Market Internal Indicators

• Volatility & complacency
• Market breadth
• Level of bullishness
• Overbought / oversold levels
• Bullish / bearish divergence

Short-term Support & Resistance Levels

• For $SPX $NDX $RUT SPY QQQ TQQQ

Market Projections and Trading Plan

• For long-term portfolio
• For short-term trades

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