The stock markets were closed Monday for the Juneteenth Holiday. The federal holiday celebrates General Gordon Granger notifying slaves in Galveston, Texas that, “The people of Texas are informed that, in accordance with a proclamation from the Executive of the United States, all slaves are free.”
Stocks rallied to close last Friday before the three-day weekend. What can investors expect when Wall Street goes back to work? The most likely answer is a rally. Friday’s green day was accompanied by higher than usual volume for the NASDAQ.
Rewind the calendar a bit and we see that the NASDAQ enjoyed a lift the last two times buy volume popped off the chart. However, don’t get too excited because both uptrends were brief, and buyers were quickly overwhelmed by sellers and the NASDAQ continued deeper into Bear Market territory.
Put a post-it note on the refrigerator as a reminder, bear market rallies can be aggressive and lull investors into believing the bear market is over. This is just a gut feeling and not based on anything fundamental or technical, but we are due for a significant rebound. I would not be surprised to see the NASDAQ build on Friday’s gains.
The first test will be at 11,000. There isn’t a lot of technical resistance at 11K, other than the psychology of an even number. As a result, it won’t take much enthusiasm from bulls to get past 11,000. From there, it could be the express train to stiffer resistance at 12,000 to the 50-day moving average of 12,086.86 and falling.
If the NASDAQ soars to its 50-day average, that is a 1,388.51 point move from Friday’s close of 10,798.35, or a 12.86% rally. Unquestionably, short people with funny voices that have noise making gadgets will tout that the worst is over and that it is the best time ever to get back into stocks.
In the prescient lyrics of Pete Townsend and Roger Daltrey of the classic rock band The Who, “We don’t get fooled again, no, no!”
Shot-term, aggressive investors might consider day/swing trading stocks and leveraged index exchange-traded funds (ETFs) if the NASDAQ starts the new trading week on solid footing as it has following previous volume spikes. Just remember to keep your losses to a minimum if the NASDAQ begins to stumble. Longer-term investors might think about raising cash if/when/as the NASDAQ approaches 12,000.
Biotechs and Technology ETFs dominated our sector leaderboard. Funds like SPDR S&P Biotech ETF (XBI), Invesco Dynamic Software ETF (PSJ), and First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) could fit nicely with our short-term rally thesis. But, remember to cut losses in a hurry if the markets don’t blow past 11k and hit new lows instead.
Short-term, aggressive speculators could fish for day/swing trades in technology, biotechs, and green energy stocks. For the third time, keep losses small in the event bears roar.