Manage the Momo, Maximize the Gains!

March, march, march! Stocks continue to stair-step higher this week as we are treated to new 3-month highs in the S&P 500…

The S&P is now just a little more than 8% away from its pre-COVID all-time highs following this week’s rally. If you’ve followed along from the comfort of your quarantine couch, you know that we’ve been all over this move since the market started showing signs of life more than two months ago.

Of course, I was never interested in trying to play the fool’s game of precisely picking the exact bottom during a market crash. Instead, I weigh the evidence and try to decide whether or not the bulls are gaining the upper hand.

First, I told you how the S&P held super support at 2,800 on the weekly chart like a champ.

Then we focused our attention on 3,000 and the jump above the 200-day moving average.

Finally, we had liftoff above 3,100 after brief retest of recent lows at the end of May. As of yesterday afternoon, the S&P is now 40% above its March lows.

spx

Our job now is simply to manage this momentum and maximize our gains!

Remember, it’s all about following the money. The political backdrop is very clear: The Fed is going to do anything and everything to keep this market afloat. They even talk about buying stocks. The Fed said that it’s not likely, but they didn’t rule out! This money flow is unprecedented — and it’s going to continue.

Finally, let’s talk oil…

We witnessed the capitulation several weeks ago — and oil is now more than 300% off these lows, posting its best month ever in May with a gain of 88%. That’s almost DOUBLE its previous best month performance back in 1990 when crude registered a 45% gain.

I’m looking for oil to continue to surge and play catch-up with the rest of the market. It just hit 3-month highs, bringing us one step closer to our $40 target level.

Keep it In the Money,

Alan Knuckman

Alan Knuckman
Editor, In-The-Money

Chart of the Day: The “Reopen” Trade Strengthens

Greg GuenthnerWe began exploring the idea of the Great Reopening last month — and we’re still stuck with more questions than answers.

As political leaders began reopening some parts of the country, we were left wondering whether the market would see the return of public life as a bullish event. Would the epic run off the lows continue, or would we end up with a “sell the news” situation?

So far, the stock market’s recovery rally has remained incredibly strong. But the evening news continues to get worse. With huge protests gripping many major cities, coronavirus spikes will certainly be one of the stats we’ll need to watch in the weeks ahead.

Even so, some reopening trades are soaring. Just look at airline stocks…

jets

The US Global Jets ETF (NYSE:JETS) is taking off this week, gaining more than 10% Thursday following a key breakout from a nice bottoming pattern.

You might want to personally avoid flying the friendly skies right now. But riding airline stocks has been anything but a bumpy ride this week…

Trading Tip of the Day

Name all the stocks that were listed on the Dow back in 1960.

You can’t do it. Neither can I.

Investors tend to lose sight of the fact that major averages are actively managed. Every few years, new and better companies are selected to replace the laggards so the averages better represent the best stocks on the market.

As a trader, you shouldn’t get too nostalgic about the stocks that posted unbelievable runs higher over the past decade. Instead, be on the lookout for the next potential market-leader you can add to your portfolio.

— Greg Guenthner

You May Also Be Interested In:

Alan Knuckman

Alan hails from the home of options trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT). Beginning with his days on the floor, Alan’s worked with all aspects of the options markets for the past 25+ years.

Transitioning from a clerk to a floor...

View More By Alan Knuckman