Stocks Are in No Man’s Land Waiting for the Next Move

The stock market rally has stalled. The S&P 500 traded as high as 1,946 on Monday and since has given up 50 points to the downside. We are placing on hold all open positions within the ETF Trader’s Edge portfolio. We are waiting for the market’s next move before recommending any new trades.

If there is a break to the downside, we will add inverse positions to take advantage of another leg lower. If the market breaks higher, we then will add exchange-traded funds (ETFs) and options that would benefit from a rising short-term trend. We have included a chart of the S&P 500 to give you some perspective of the last three months.

Those of you who are new subscribers should get prepared for new buys as early as later this week. We advise new subscribers to use a specific account for trading on our recommendations. Make sure you are prepared to buy options with your brokerage firm and plan to have 4-8 positions in ETFs and ETF options within our portfolio.

Open Positions Update

Short gold.

We have two open positions in the gold market: ProShares Ultra Short Gold Miners ETF (GDXS) and Market Vectors Gold Minters ETF March $17.50 put options (GDX160318P00017500). Both will take advantage of a short-term pullback in gold. So far, gold has not cooperated. We are in a strong uptrend and money has continued to flow into gold despite being over bought on many measures. We will allow a few more days to evaluate this trade’s prospects going forward.

Long financials.

We continue to believe the financial sector has sold off unjustifiably. While the Financial Select Sector SPDR Fund (XLF) has recovered from the lows, time is beginning to work against us in our related options: XLF March $21 calls (XLF160318C00021000). Hold the position for now. The market will dictate our next move in financials.

Short Utilities.

Uncertainty and volatility in the markets have kept investors moving into defensive sectors such as utilities. The sector has worked off some of its high overbought conditions. However, with indicators still showing favorable conditions for a sell-off, we remain positioned for such an event with our Utilities Select Sector SPDR Fund (XLU) March $46 put options (XLU160318P00046000). As with all options, time decay is a factor, so we will be keeping a tight leash on all of our recommended positions that expire in March.