Tuesday saw all four of the main indices move higher and all four experienced decent gains. The Dow led the way with a gain of 0.68% followed by the Nasdaq with a gain of 0.64%. The S&P notched a gain of 0.63% and the Russell lagged the other three, but still gained 0.30%.
All 10 of the main sectors moved higher yesterday with the materials sector leading the way with a gain of 1.64%.[hana-code-insert name=’adsense-article’ /]The industrial sector gained 1.04% and it was the only other sector to log a gain over one percent.
The biggest laggards yesterday were the financial sector (+0.41%) and the energy sector (+0.42%).
My scans produced more bearish signals than bullish signals for a third straight night.
There were 39 names on the bearish list and 14 on the bullish side.
The barometer dipped to -21.5 as a result of the bearish skew.
Today’s trade idea is yet another bearish one. I didn’t really want to make it four bearish trades in a row, but none of the combinations looked all that great. The subject of today’s trade is the iShares MSCI China ETF (Nasdaq: MCHI).
The chart shows how the fund has been trending lower over the last four months. A trend channel has clearly defined the swings and the upper rail was just hit for the fourth time. I look for the next cycle to be another downward move and it should take the fund below the $50 level.
Buy to open the December $57-strike puts on MCHI at $3.40 or better. These options expire on December 21. These options will double if the fund drops to $50.20 and that will be above the lower rail. I suggest a target gain of 100% with a stop at the 50-day moving average. I wouldn’t close the trade unless the fund closes above the 50-day.
— Rick Pendergraft[hana-code-insert name=’MMPress’ /]