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RagingBull InsiderThis Chart Says Markets Are In ‘Party Mode’

EditorEditor ·

Dear Insider, Jeff Bishop here.

I guess the market wasn’t ready to roll over and die!

SPY – the ETF that tracks the S&P 500 – had been stuck between support at $282 (the Death Line) and resistance at $294 for about a month.

And most “market experts” were calling for the market to head lower.

And why wouldn’t it?

All the headlines lately have been about inverted yields, the trade war, and a slowing worldwide economy.

But I hope you didn’t listen to any of it — I sure didn’t.

In fact, on August 23, I told you exactly what I expected to happen: 

  • “My longer-term view of the market remains bearish, but don’t be surprised if we have a run to previous highs before heading lower.
  • It’ll start with SPY closing above $294 — a dollar above the current resistance level. If that happens, I expect the market to spike higher, fast. Why?
  • Because there are a lot of short positions open in the market right now… a move higher will force traders with open shorts to cover their positions or risk even bigger losses — causing SPY to potentially run higher.
  • That’s when the panic buying kicks in and markets spike higher. It’s like a short-squeeze, at the market level.”

Let’s see how that played out…

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Nailed it.

Just as I expected, stocks rallied hard as soon as they breached resistance. Shorts were caught off guard and had to cover their positions… and we’ve kept going higher since.

The lesson here is pretty clear — when everyone thinks something won’t happen, it usually does.

I’m sure many traders thought betting against SPY near resistance was a “no-brainer.”  I mean, look at how well the old $294 resistance level had held up the previous three attempts.

But markets usually don’t do the obvious thing. If they did, most traders would be millionaires.

Once you understand that and know how to position yourself against the herd, you’ll be a card-carrying contrarian as well.

And it isn’t just SPY signaling the market is in Party Mode.

Before September, traders feared the worst. Investors were pouring into “safe havens” like bonds and gold while selling riskier assets like small-cap stocks.

Check this chart out…

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In August, bonds (blue) jumped about 12%, gold (yellow) was up 6% and small-cap stocks (red) were down about 6%.

And during this time The Volatility Index (VIX) — also known as the fear index — was up about 40% (bottom of the chart).

But since we breached resistance in early September, we’ve had a full 180:

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Small-caps are booming and gold, bonds, and volatility have plummeted.

In other words, markets are partying!

Stocks might need a bit of a breather here, and I’d expect them to consolidate around the SPY $300 level before making their next move higher.

And I’ll be ready…

It’s one of the reasons I spoke to Ben Sturgill on Thursday

He’s an IPO trading expert — and when markets are in Party Mode — you can expect cash to flow into these fast-growing companies.

Even over the past 60 days, which haven’t been kind to most stocks, there have been about two dozen recent IPOs that have delivered triple-digit gains.

Obviously, you can’t just buy every IPO that hits the market and expect to make money. There’s more to it… and Ben covered it all in this interview.

Here are just a few things you missed if you didn’t attend the event:

  1. Why you should trade IPOs over regular stock
  2. Ben’s “green, yellow or red light “ IPO trading system.
  3. Why IPOs make such explosive moves—in bull or bear markets.
  4. The life cycle of every IPO and how to profit at each phase

The replay of the training session is coming down soon, so make sure you watch it now while you still can.

Enjoy your weekend!

Jeff Bishop & Jason Bond

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