Bull Market > Political Noise

Greg GuenthnerWhile the herd was arguing about whether it would be a smart move to sell in May, we told you last month the market looked primed and ready to sprint higher.

The action we’re seeing right now proves that the bulls still have plenty of fight left in them. The major averages are getting jumping again this morning. Stocks are fighting higher in the face of an endless barrage of political tripe. If this morning’s move holds, we could see a significant breakout in the S&P 500 by the closing bell…

Here’s your exclusive trade prep for the week of June 4th:

Tactic:

Deleting the news app on your phone is a good way to start the day.

Every single media narrative over the past week has been dead wrong. They tell us the US is losing the trade war with China and the fracas is turning downright dangerous for the markets.

Stocks went up anyway.

We hear Italy can’t get its act together. The country is in turmoil after once again failing to produce a new coalition government. Now breathless media reports are predicting that the country is in danger of leaving the EU. That could help tear down the bull market in US stocks, they say.

The result? The major averages took a dive, only to recover their losses the very next day.

Even a positive jobs report was overshadowed by negative news. Despite unemployment hitting an 18-year low of 3.8%, the media focused instead on Trump’s premature tweet that might have foreshadowed the robust report:

trump tweet

The president gets the report a day ahead of time, of course, and federal rules state officials can’t reveal data before it’s released to the public.

Whether Trump spilled the beans or not is up for debate. But I honestly don’t know what I’d do with an advanced copy of the jobs report. Does strong data mean the market must go up?

Nope.

Forget the drama. Here’s all you need to know:

After a short trading week full of media-induced turmoil, the major averages are quickly approaching their May highs. It’s time to shut out the noise and focus on the big breakouts that could trigger new trades this week.

Trade:

“Investors’ uncertainty about the FAANG group of technology megacaps appears to be over — at least for now — as Facebook Inc., Apple Inc., Amazon.com Inc. and Netflix Inc. all closed at new highs,” Bloomberg reports.

The big boys are finally back in action! It’s great to see the former leaders of the market melt up sprint to new highs. But there are a couple of other breakouts that have caught my attention this week.

Just check out the biotech sector. The iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) is finally getting its act together. The big biotech ETF climbed back above its 200-day moving average last week for the first time since late March. After an almost disastrous breakdown, IBB is back in positive territory for the year.

But the real action is happening among the smaller biotech names. The SPDR S&P Biotech ETF (NYSE:XBI) has quietly rallied off its April lows. Now it’s just a few cents shy of a breakout to new all-time highs.

SPDR

We’ve maintained a long-term position in XBI for nearly 18 months. So you can bet we’ll remain focused on individual smaller biotechs breaking out as the ETF flirts with all-time highs.

Takeaway:

One of the most important skills you can develop as a trader is knowing when to sit tight —and when to bet big.

We pumped the brakes when the market corrected in February and March. Then in April, we were especially selective with new trades as the major averages tested critical support.

Finally, conditions are beginning to improve. That means you could have a huge opportunity to make some big bets as market-leading stocks break out and a summer rally begins to take shape.

Sincerely,

Greg Guenthner

You May Also Be Interested In:

Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

View More By Greg Guenthner