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Bad Week Gets Even Worse on Friday

Jim Giaquinto

At least we have the holidays to look forward to… because there certainly wasn’t any comfort and joy in the market this week. Just the opposite. After another steep selloff on Friday, the major indices had one of their worst weeks in years.

The NASDAQ plunged nearly 3% today alone to 6332.99, while the S&P moved closer to 2400 by dipping 2.06% to 2416.58. The Dow dropped 1.81% to 22,445.37. The indices started the day in the green, but rallies have been a reason to sell of late and the trend continued today.

Now here’s the really ugly stuff: the NASDAQ dropped by more than 8% this week, while the Dow and S&P each slipped by approximately 7%.

Stocks started this week with a 2% decline, but the selling really hit another gear after the Fed decision on Wednesday. Investors were desperately hoping that the Committee would take the market’s dreary sentiment into account when laying down their plans for further rate hikes. But they didn’t. The fourth rate increase of the year occurred as expected and the Fed suggested only one fewer hike in 2019 than originally forecasted.

The rising likelihood of a partial government shutdown is also weighing on investors’ minds since Washington has reached an impasse on a budget that includes $5 billion for a border wall as demanded by President Trump. 

While no one wants to see a shutdown and there’s been no actual progress yet on a trade deal with China, it’s the fear of rising rates and slowing global growth that’s really impacting stocks at the moment. Heading into the weekend, a half-day on Monday and a day off on Tuesday for Christmas; investors weren’t feeling like today was a good time to buy into all this uncertainty. 

So when will be a good time? Unfortunately, we won’t know the bottom of this correction as its happening. Maybe we reached it today! But we’ve been saying that for several weeks. There’s nothing investors can do right now except enjoy the upcoming holidays and look for opportunities to take advantage of a bounce… whenever it comes.

Today's Portfolio Highlights:

TAZR Trader: As this correction got worse and worse, Kevin really pulled back on the reins to the point that this portfolio was 25% net short with two-thirds in cash. But now the editor thinks its time to prepare for a short-term tactical bounce over the next couple of weeks. Therefore he added to his Apple (AAPL) and Square (SQ) positions and bought 3 leveraged bullish ETFs on Friday:

• Direxion S&P 500 3X Bull ETF (SPXL)
• Direxion Small Cap 3X Bull ETF (TNA)
• ProShares UltraPro QQQ 3X Bull (TQQQ)

He also sold the Direxion Daily S&P 500 Bear 3X ETF (SPXS) for an 8.75% gain in just one day. The new ETF buys are aggressive trades requiring attentive risk management. Read the full write-up for specifics on all these trades.

Momentum Trader: There aren’t many stocks nearing a 52-week high right now, so Dave certainly noticed the momentum on display at SecureWorks (SCWX). The company offers intelligence-driven information security for protection against cyber-attacks. Therefore, it’s part of the Computers – IT Services space, which ranks in the Top 38% of the Zacks Industry Rank. Volumes have been increasing over the past two weeks since SCWX reported a positive surprise of 220% in its most recent quarter. The editor thinks it could get to the $19 level. He added it on Friday with a 12.5% allocation. Read the complete commentary for more.

Healthcare Innovators: The correction has taken a big bite out of biotech, but now Kevin feels comfortable with adding a position in the S&P SPDR Biotech Equal-Weight ETF (XBI). The editor is pretty confident this basket of companies will not be cut in half from here, though it could slip to $60 before getting better. Therefore, he suggests easing your way into this position. Read the complete commentary for specifics on this move, along with the good news and the bad news concerning biotech in this volatile market.

Insider Trader: "This has been a difficult week and month for all stock investors. For those of us who lived through 2008-2009 as investors, this month is providing some flashback to those stressful days, minus banks closing and the Fed injecting money into the economy, of course.

"No, this isn't 2008 all over again. We are NOT in a financial crisis. But it's certainly been a wake up call to all of us who got real comfortable buying the FAANG stocks and riding those for years.

"We're lucky that we can follow the lead of the insiders to get a little bit of an edge on the negative market psychology. It's not easy to buy when everyone is selling, even for the insiders. When they DO buy, it sends a really strong signal.

"Let's regroup after Christmas. We have cash on hand to take advantage of a historic buying opportunity."
-- Tracey Ryniec

Have a Great Weekend,
Jim Giaquinto

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