Stocks took major losses again on Friday, but it wasn’t nearly as bad as it could have been thanks to last-hour rally took the indices well over their lows. Fed Chairman Jerome Powell made a statement that the Fed would do what it needed to do to help the economy and the market. This was a huge boost in confidence for investors.
Stocks rallied enough in the final hour that the Nasdaq managed to post a small gain. It was only 0.89 points, but that was much better than the 300-point loss we were looking at when it hit its low of the day.
The Russell finished with a loss of 1.43% and the Dow finished with a loss of 1.39%.The S&P was able to climb enough that it trimmed its loss to 0.82%.
For the week, all four of the main indices were down over 10% and these were the worst weekly losses since 2008.
Two of the 10 main sectors managed to close with gains on Friday.
The tech sector gained 0.76% and the communication service sector gained 0.30%.
The utilities sector took the worst loss on Friday with a drop of 3.34% and the financial sector fell 2.71% as the second worst performer.
The energy sector fell 16.38% on the week.
Something historic happened with my scans on Friday night. There were 403 names on the bullish list and only two on the bearish side. The difference of 401 was the largest reading ever for these scans that I started doing in January 2009. The only other date that was even close with a positive reading of 366 came on December 26, 2018. That was at the bottom of the fourth quarter selloff that year.
The barometer jumped from 10.6 to 170.7 once those results were added in to the equation and that is the second highest reading ever for the barometer, second only to December 26, 2018.
I will be honest, I didn’t go through all 401 charts and I didn’t go through the EPS and SMR ratings for them either. When I saw the scan results, I knew today’s trade idea was going to be a bullish one on the overall market. The fund I chose the Invesco QQQ Trust (Nasdaq: QQQ) and that was partially due to it gaining ground on Friday, but there was something on the weekly chart that jumped out to me as well.
If you connect the lows from June and October, we get an upwardly sloped trend line and the QQQ low on Friday hit right on that trend line. I also like the fact that the fund didn’t break below its 52-week moving average like we saw with some other ETFs that represent indices.
Buy to open the April 200-strike calls on QQQ at $16.00 or better. These options expire on April 17. In order for these options to double the fund will need to reach $232. The fund was at $237.47 at its peak in February. I suggest a target gain of 100% with a stop at $194.50.
— Rick Pendergraft
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