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Morning Market Outlook 05152024

Hello, everyone, and welcome to Wednesday morning. It’s Stephen Whiteside here from In the pre market right now, things are very quiet. They may not be quiet after 8:30 this morning. We’ve got consumer prices coming out. We also have retail sales coming out. Retail stocks have been on a tear for the last week and made a new high yesterday. We’ll probably see a shift in the bond market on Wednesday depending on what these numbers look like. We also have energy inventories coming out later in the morning and that could affect the energy sector. Now the VIX pulled back. It traded up into the channel yesterday, closed slightly lower on the day. Things would change on Wednesday if we were to see the VIX close above 14.32. Now the topic of shorting came up yesterday. Everybody’s watching these stocks that are being short squeezed at the moment. I never want you to be on the wrong side of a trade like that. I also heard this morning that copper has a short squeeze on at the moment and that’s fine. We’re already long copper, so we don’t care what causes it to move higher. We’re still long copper.

Now if you don’t want to learn how to short, you don’t want to take the risks. You certainly can’t do it in a retirement account. But what we can do is play the bull and bear ETF. So right now, most of the bull ETF’s are long. Certainly any of the bull ETF’s for the major indices are long at the moment. At some point we’re going to get a sell signal in the bull and then we’ll get a buy signal in the bear and we can make money if the market wants to head lower. So you don’t need to learn how to short. You don’t have to get involved in that at all, but you can still make money when the market is falling. Now if you do want to short a stock, we want to do it when we actually get actual sell signals in the stock. And if you are going to short a stock, you have to be willing to take the buy signals when they show up. Now you can either just exit the remainder of your short position or you can actually take that money and go long the stock. That is your option, but you have to be willing to take the signals as they come up.

Now a lot of people get screwed up when they short because they actually do it because they think the stock is going to fall. And there’s a very famous story of a hedge fund manager that wanted to short Herbalife. And he spent a billion dollars shorting herbalife. Not only did he do that while the stock was rising, he also spent $50 million telling the world why he thinks Herbalife should go down. And once everybody saw that he was doing that, other hedge fund managers actually bet against him and almost drove him to bankruptcy. At the same time, he could have probably just sat on his hands, not said a word. And Herbalife has not been a very successful stock over the long term. And you can see that was once trading up at $60, now it’s trading at $10. So, yeah, he could have made a lot of money with herbalife. He wanted to drive it down to zero. And I don’t know why he would do that or want to do that, but, you know, that was his, you know, that was his strategy, and it was a stupid strategy, and he paid dearly for it.

So we want our short stocks that are falling. We don’t want to think that they’re going to zero. That’s not the game. The game is to get in and out as quickly as possible and to follow the signals. Now, here’s an interesting one that came up yesterday. And I heard from a couple of people that play Plug Power. And what happened yesterday? Well, the stock gapped sharply higher at the open. And then gave up a lot of its gains going into the close. Now, before yesterday, here’s our price targets. And if we look up, 3.91 was our next price target. And if you look back, you can see that was a realistic target, as we were there back in March. And then above that, 4.69 would have been our next target. So, of course, once you get filled, you want to put orders in to sell at both of those levels or just below them. And what happened yesterday? Well, we actually opened up at 4.89. And so if you had orders in at 3.91 and 4..69, they would have been executed at the open. You may not have got the $4.89 price, but you would have got something up in that area.

And then those gains were deflated going into the close. And we actually closed at 3.44. So you would have given up all that money if you had not had your orders in ahead of time. So it’s very important to, once you get a fill, to place your profit target orders, get them into the market as quickly as possible and let them just sit there. So now you’ve got a remaining position in plug power. You can just sit there and wait and see what happens next. Now, we haven’t talked about Bitcoin or Ethereum in a while. The reason for that is both of them are still on sell signals and no change there. Most of the stocks in the crypto world are on sell signals right now. So if you’re looking at Bitfarms, you’re looking at Coinbase, you’re looking at Hut8. Microstrategy, still on a buy signal here. No change. It’s been just treading water for the past week or so. And certainly there’s possibility of a sell signal on Wednesday. Then looking at the major index, ETF, starting off with the Dow, the Dow was up slightly yesterday, didn’t take out the previous day’s high.

We’re still trying to get to $398.44. If we can do that, then if we take that out, then of course dollar $400 would be our next major psychological target. Then looking at the SPY, we’re trying to get to 524.61. We’re just a little more than a dollar away from doing that. So we could actually hit that on Wednesday. And if we can take that out, then our next mathematical target is 531.25. Then looking at the Nasdaq 100. Cha Ching. We hit our next target yesterday. So you got to take some money off the table. Then our next target above that is the recent high from back in March. And if we can take that out, then our next mathematical target is $453.13. Now, if you’re playing the equal weighted Nasdaq, we’re still waiting to get to $121.88 if you’re playing the next generation, we’re just a few cents away from hitting that target. And you might have actually hit it yesterday if you had your order in a little less than the $28.13. Now, if your long semiconductor is using the XSD, then we’re trying to get to 237.50 and haven’t got there just yet.

Looking at the Canadian market, the ishares for the TSX 60 are down for the third day in a row. Not major losses here. We’re still closing at the upper channel line on Wednesday. We’re looking for a close below $33.54. Looking up, we’re trying to get to $34.38. And so far we have not been able to do that. We did see energy stocks pull back yesterday, not by much, a little less than 1%. But we are back on a sell signal. So there’s a high there, a lower high, and now another lower high. So that’s looking pretty bearish for the Energy sector going forward. Now, that could change on Wednesday with the energy inventories coming out. We’ll have to see how that affects the commodity prices. Now we had Utilities pull back for the second day in a row and we had Infotech continuing to move lower on Tuesday. Let’s finish off looking at the commodity related ETF, starting with USO. No joy there. No joy for gasoline making a new low. But we did see natural gas move up yesterday, so cha ching. If you had an order in at 17.19, it got filled. Now there is of course a different look between the ETF and the futures contract.

So you need to follow the chart of the one that you’re trading. We do have the futures contract starting to break out above the midterm tether line there, so that’s bullish for natural gas. And you can see momentum is starting to shift, so that looks bullish for natural gas. We’ll just have to see how that works out going forward. The GLD is is still on a buy signal. Gold is trading up slightly in the premarket this morning. We had Silver make a new high for this move yesterday. No joy for Palladium. We’re still treading water here. We’re on a buy signal, unlike Platinum which made a new high for this move on Tuesday. Okay folks, that is all for this morning’s presentation. Waiting for those CPI numbers to come out and for the market to overreact to whatever the numbers look like. We’ll just have to wait and see. Otherwise, we’re getting pretty close to some upper targets on all the major indices, and we may be able to hit those today depending on how much volatility the market gives us after the news at 830. Enjoy the rest of your day. Next time you’ll hear my voice is on Thursday morning.

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Stephen Whiteside
Wednesday, May 15, 2024

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