Stocks rallied again on Tuesday and the rally allowed the Dow to reach the 30,000 level for the first time in history. All four indices moved higher and they were all in positive territory for the entirety of the day.
The Russell led the way again with a gain of 1.94%. The S&P was the second best performer with a move of 1.62%. The Dow gained 1.54% and the Nasdaq moved up 1.31%.
All 10 sectors moved higher on the day with the energy leading the way again with a jump of 5.14%. The financial sector was the second best performer with a gain of 3.50%.
The smallest move of the day came from the healthcare sector at +0.29%. The only other sector that failed to gain at least 1.0% was the consumer staples and it gained 0.68%.
The positive skew for my scans didn’t last very long as the results for Tuesday showed 22 bearish signals and 11 bullish signals. The positive result from Monday is the only positive skew in the last 15 trading days.
The barometer did jump quite a bit despite the bearish result. The final reading for last night was -33.7 and that was up from -62.0 on Monday.
Even though there were 33 stocks to choose from between the two lists, there weren’t very many trade setups that I liked last night. The one I liked best should be familiar because I have suggested bearish trades [Editor note: see here and here] on the stock before. Slack Technologies (Nasdaq: WORK) was on the bearish list and its fundamentals are poor. The EPS rating is 23 and the SMR rating is a D.
The daily chart shows how the stock has been trending lower since early June with a trend channel forming that defines the different cycles within the overall trend. The stock is close to the upper rail at this time. Another factor that I liked was that the stochastic indicators made a bearish crossover while in overbought territory. We see similar setups in June, September and October. The RSI being close to an overbought reading is also a sign that the stock is due for a reversal.
Buy to open the January 33-strike puts on WORK at $5.00 or better. These options expire on January 15, 2021. I suggest a target gain of 100% and that means the stock will need to drop to $23.00. That price is below the low in September and from earlier in November, but the lower rail of the channel is already below $22.
— Rick Pendergraft
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