Stocks wavered back and forth on Tuesday, but at the end of the day three of the four moved higher. The Russell fell 0.58% and it was the only one that ended in the red. The other three were pretty tightly clustered with the S&P gaining 0.29%, the Dow tacked on 0.26%, and the Nasdaq moved up 0.22%.
The sectors were mixed on Tuesday with six moving higher and four moving lower. The utilities sector reversed course and moved up 1.36% after being the lone sector to lose ground on Monday. The communication services sector gained 0.93% as the second best performer.
[hana-code-insert name=’adsense-article’ /]The energy sector took the biggest hit with a decline of 1.6% while the financial sector dropped 0.25% as the second worst performer.My scans did a total flip on Tuesday and turned in a solid negative reading.
There were 56 stocks on the bearish list and 19 on the bullish list.
The barometer dropped from 25.5 to 2.6 after these results were added in to the count.
There were a number of stocks and ETFs on the two lists last night that were of interest for today’s trade idea, but ultimately it came down to a bearish play on the SPDR S&P Metals and Mining ETF (NYSE: XME).
Gold shot up pretty strongly from the end of May through the end of June and that has led to a number of overbought ETFs and rather bullish sentiment toward gold related funds.
You can see on the daily chart how the XME jumped from the $24 area at the end of May and it recently hit a high of $28.55. That caused the oscillators to move in to overbought territory, but now they have turned lower over the last few days. I look for the XME to drop over the next few weeks.
Buy to open the August 29-strike puts on XME at $1.65 or better. These options expire on August 16. In order for these options to double the fund will need to drop to $25.70. That is only 8.1% below the current price. I suggest a target gain of 100% with a stop at $28.60.
— Rick Pendergraft
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