The S&P 500 has not pulled back more than 3% in price for nearly 400 days now. That’s the longest winning streak EVER in the history of the index without a correction.
And last week was more of the same as both the Dow and S&P notched fresh record highs. But conspicuously absent from the year-end festivities was the Nasdaq, which fell 0.5% last week in a classic negative divergence.
The tech-heavy Nasdaq – especially the FAANG stocks – have led the rally all year, but now investors appear to be rotating out of tech and into sectors like energy with more appealing valuation metrics.
Continue to hold your ProShares Ultra Short QQQ (QID) position and QQQ puts for potential gains should the tech slide accelerate into year-end.
Curiously, even with the S&P hitting a new upside record last week, volatility was likewise on the rise. This strange divergence bears watching because if the VIX breaks back above 14, as it did on the first Friday of December, it’s a warning of more market risk ahead.
Meanwhile, gold continues to drift lower, just as our cycle forecast indicated, with the most active December futures trading this morning below $1,266 per troy ounce as I pen this.
Still, gold has quietly had a decent year, up nearly 10% year to date despite its slide since September. And you can expect gold to build nicely on this year’s modest gains in the New Year, just as we’ve been patiently waiting for.
In fact, in the chart above, courtesy of my friends at U.S. Global Investors, you can see the S&P’s recent outperformance compared to the yellow metal is resulting in the biggest discount in gold relative to stocks in nearly fifty years! Gold is extremely undervalued today and poised to break out very soon.
But before we get that extraordinary buying opportunity, gold and silver could slide a bit lower until the next upside turn date, which is converging on late December.
That’s why it makes sense to set a protective stop on your ProShares Ultra Silver ETF (AGQ) to avoid any further drawdown until we’re closer to month-end. At the same time, you should also enter a protective stop for ProShares Ultra Short QQQ (QID) to preserve last week’s gains.
Here’s the action to take right away:
1. Enter an order to SELL ALL your ProShares Ultra Silver ETF, symbol AGQ, at a price of $30.25 STOP. This order is good-till-canceled.
2. Enter an order to SELL ALL your ProShares Ultra Short QQQ ETF, symbol QID, at a price of $13.50 STOP. This order is good-till-canceled.
Get these two trades in to your broker right away and stay tuned for more updates, and a new batch of trades, coming your way very soon.
Good investing,
Mike
