Black Friday may have been greeted enthusiastically by shoppers, but it wasn’t a great day for investors. All four indices fell on Friday and halted a four-day winning streak for them.
The Russell was the worst performer on the day with a decline of 0.59%. The Nasdaq dropped 0.46% and that was the second biggest loss. The Dow and S&P experienced identical 0.40% losses on the day and those were the smallest declines.
[hana-code-insert name=’adsense-article’ /]All 10 of the main sectors lost ground on the day, but only the energy sector fell more than 1.o% with a drop of 1.01%.The second worst loss was on the consumer discretionary sector at 0.65%.
The two smallest losses were on the defensive sectors with consumer staples falling 0.03% and utilities dropping 0.10%.
My scans turned decidedly more bearish after Friday’s losses.
There were 69 names on the bearish list compared to only six on the bullish list.
The barometer dropped from 11 to -20.5 after the results from Friday were added in to the equation.
Something that got my attention on Friday was the number of stock ETFs that were on the bearish list as well as a great number of bond ETFs that were on that same list. Bond ETFs don’t count in the barometer calculation, but I found it odd to see stocks and bonds indicated lower at the same time.
One ETF on the bullish list got my attention more than any of the ones on the bearish side. The ProShares UltraShort 20+Year Treasury ETF (NYSE: TBT) appeared on the bullish side and I like the look of the chart. I also ran the ETF through the Tickeron Trend Prediction Engine and saw that it also generated a bullish signal on the ETF on Friday. Past predictions on the TBT have been successful 88% of the time.
What we see on the chart is that the TBT has been trending modestly higher since late August. A trend line connects the lows from August and October and the fund just came within a hair of that trend line last week. The daily stochastic readings are in oversold territory and turned higher on Friday, creating a bullish crossover from the indicators. We see similar moves after the lows in August and October, and the fund rallied nicely afterwards.
Buy to open the January 24-strike calls on TBT at $1.50 or better. These options expire on January 17. In order for these options to double the fund will need to reach $27.00. The fund was above the $27 level back in mid-November, so it won’t have to break to a new temporary high for these options to double. I suggest a target gain of 100% with a stop at $24.70.
— Rick Pendergraft
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