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Protecting Winners, Looking For New Winners In Ag, Metals & Energy - Morning Market Squeeze

Key Tactical Takeaways:

> As we show on page 8, this is make or break time for the S&P 500. The bullish line in the sand is at ....


> Although we like the prospects for gold to start building a tactical bottom, we think the lack of commercial hedger conviction in recent CoT data suggests that bottoming could be more of a process than a V.


> Tuesday's Treasury swoon suggests that the bond market is finally waking up to the idea that favorable vaccine developments will be beneficial to growth in 2021. As a result, we'll be looking to ...


Some Quick Thoughts:

One of the lines of business at Extract Analytics is to provide one-on-one coaching during live market hours. During these sessions, we help retail traders turn down the volume on the parade of financial media guests talking their own book and focus more heavily on the importance of risk management and intermarket-based idea generation. For the most part, students come to us with a basic understanding of how important it is to trade in the direction of the prevailing trend. Unfortunately, and most professional traders have probably been guilty of this at some point, 9 out of 10 times we find that fear of missing out (FOMO) often leaves them too heavily exposed to assets with high correlations to the major indices at times when herd behavior reaches extremes.


We highlight this today because, as we show on page 8, this is a make or break moment for the benchmark S&P 500. Essentially, while the S&P 500's higher trend still warrants core long positions in highly correlated, higher trending stocks, profit taking on recent winners and perhaps some form of bearish protection is advised as frothy sentiment joins with long-term resistance to create an environment that has sparked corrections in the past.


Bottom Line: There's no doubt that the vaccines are a much-needed game changer that will help human nature feed economic growth once the vaccines make it through the system. For now, though, we're playing it safe, believing that the market may have gotten a bit ahead of itself. Specifically, we’ll be taking profits in our biggest winners (FDX, PD and ATLO) at today's open. In addition, we'll be looking for opportunities to start new longs across ..., ..., ... and ..., while looking to use any bounce in ...to get short, and any retrace of this week’s ... rally to get long ...


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