Welcome to Surge Point Trader, I’m Garrett Baldwin, and it’s a new day to trade.
As I explained last week, we’ve altered our strategy to take advantage of price strength in smaller cap stocks and institutional investments. We aim for fast 20% to 30% gains on stocks and much higher returns on short-term options trades.
Welcome, officially, to Surge Point Trader. Your future communications will come with this banner:
The reward of this service is high. The risk comes with exposure to broader market sentiment.
This is why we want to keep our trailing stops tight in cycles of negative market momentum. I’ve recommended that we focus on 5% to 7% stops on the underlying stocks. An options loss of 50% should be an exit. In addition, I advise that you remain very active in the management of these positions. Finally, I’ll provide directions on how to trade our recommendations quickly.
An Update on Momentum
Today, we remain in negative momentum conditions due to the ongoing weakness in the Russell 2000. I remind everyone that we have been under pressure in the market since July 2. And the continued weakness leaves small-cap and price-trend stocks exposed to volatility price swings. Again, we’ll keep our trailing stops very tight.
This has been a very choppy market dating back to March. We saw a significant upswing in stocks from the November election through early March. Since then, the Russell 2000 has remained range-bound.
I breakdown in my video today how the markets have been top-heavy for the last few weeks. We might see all-time highs on various indices, but mega-cap stocks like Apple and Amazon drive these gains, and other tech giants extended in their rally cycle.
We have to be cautious right now, but we have a lot of time to identify opportunities. I’ll have two stocks and options plays for Monday morning. In these market conditions, I urge some caution. However, I’m far more confident this week as stocks from last weekend’s watch list like Eastside Distilling rallied late in the week after Monday’s selloff.
I anticipate that the price-trend picks for this weekend can deliver substantial gains in the week ahead. So, look for my recommendations on Sunday night.
Broader Market Focus
As I note in the video, I’m listening to the latest insight from Scott Minerd – CIO of Guggenheim Partners. Yesterday, he warned about the stability of the markets heading into September and October. The statistics show that you want to exit around Memorial Day and come back in when we see the first pitch of the World Series.
He’s projecting upwards of a 15% pullback.
There are two major factors at play.
First, the ongoing spread of the Delta variant and other variants of COVID-19. This has been a severe problem, particularly in places like Alabama and Florida. About 90 miles from me, certain ICUs are overrun in Miami. There remains talk that Japan could also shut down or delay the Olympics at any moment. This would effectively pummel market sentiment.
The second is the clarity that people anticipate around tapering by the Federal Reserve. The expectation is that the Fed will need to provide insight on when it wants to start reducing the purchases of bonds to support the economy. Minerd projects a taper tantrum.
As I note – another matter must be addressed. China, which continues to crack down on its technology sector and impact broader sentiment on stocks like Alibaba, Baidu, and other large-cap companies from the world’s second-largest economy.
There is good news in all of this. If the markets start to rotate out of mega-cap stocks and we see a selloff, there will be a price-trend flow into specific bond ETFs, defensive small-cap plays, and various other companies. We’ll be able to ride that wave of capital.
I’ll be back again on Sunday with at least two trades. Look for my watch list on Monday.