For about a week and a half now we have had a nice stock market rally after the S&P 500 held its 2662 level, but now that momentum appears to be stalling out and some things need to be sold now.
Here is the Nasdaq, which had a reversal Tuesday and looks extended anyway.
Maybe the Nasdaq will just go sideways and digest these gains, but even if just that happens many weak sectors will dump.
And here is the DOW, which simply looks droopy.
Since the January peak in the DOW strength in the market has narrowed to big cap tech stocks and bank stocks, but most of the banks stocks got slammed hard Tuesday too.
And the two dozen big cap tech leaders have gone up so much in the past two months that it’s hard for me to expect them to continue higher like this at this rate without having a pause or a dip first. Take a look at AMZN or example.
This isn’t to say that the stock market is going to crash, but I wouldn’t be shocked if we don’t see the DOW test its 150-day moving average over the next six to eight weeks.
Over the next few months I’m looking to see internal weakness in the market grow with big cap tech remaining the area of strength.
Right now though with stalled momentum there are some stocks very vulnerable and even sectors in danger.
If you bought in one fad sector in particular last year I think it is time to get out now, before it totally collapses.
I’m talking about the Blockchain/Bitcoin stock sector.
Last year I actually talked about buying stocks such as RIOT blockchain BEFORE the Bitcoin fad exploded everywhere in December.
Now when I talked about RIOT I said it was pure hype and made no money, but was worthing buying for a trade and not as an investment.
Then in Thanksgiving it exploded higher, but even as it went up I never thought it was something worth investing in to hold.
I could not predict the top in the stock so I just thought it was good to take any profits if you happened to buy it before December.
I said to sell.
And In January I said to get out of Bitcoin as the Bitcoin cartel lost price control and Bitcoin went down below $10,000.
The reality is that Bitcoin and crypto currencies are among the most manipulated things I have ever seen in the financial markets.
Many of the Bitcoin/blockchain stocks just pulled back and held for a few weeks.
But yesterday they dumped and look like they are rolling over into disaster.
Take a look at Overstock, which linked itself to crypto “money.”
OSTK is rolling over.
But there are some stocks like RIOT that are now breaking recent support levels and look even worse.
Most of these stocks are garbage and represent companies that make no money and are pure hype.
Last Fall I thought many of these stocks were good for pure trades like internet stocks in 1999.
But in January as Bitcoin topped I left that trade behind and warned people to get out.
Today I am repeating that warning.
I worry that there are people who may have bought RIOT because I talked about it last year that are still owning it even though I said get out.
So I am saying get out now again.
I am saying that because it looks more doomed than ever.
Most of the time when people tell you about a fad sector they never tell you to sell.
I am saying sell again.
I am saying that when the stock market has a big rally and momentum stalls and you see a fad sector like this falter get out of it and get ready to put that money to work somewhere else.
This play is OVER.
New ones will come and that is what you need to focus on.
Take your eye off the past fads and forget about them!
I talked with David Skarica to get his take on the stock market now, Bitcoin, and what might be the next fad sector.
This interview was posted yesterday after the close. To get notified by Youtube immediatelly when the next video is released subscribe to my Youtube channel by going here.
It looks like the stock market is going to dip. The DOW could go back down to its 150-day moving average, but leadership is shifting again into big cap tech. This appears to be a topping process that could play out all summer and not the start of a crash. After a dip there will likely be another rally and some stocks will lead and rally.
I detail my number one buying pattern in my new book The Two Fold Formula.
Interestingly enough RIOT had this pattern back in October and that is why I talked about it so much back then.
Now the chart is broken and looks terrible and so is Bitcoin.
In the markets we can choose what patterns to buy into and which to ignore.
To arm yourself with this pattern go here.