Complacency Is Dangerous in This Market

[Trading With Larry Benedict]( Note: We hope you’re enjoying all of your Opportunistic Trader content. That’s why we have a favor to ask… Would you please add services@exct.opportunistictrader.com to your contacts list? That will “whitelist” us with your email provider and help ensure these emails reach your inbox. If you’d like to learn more about whitelisting, you can check out our detailed instructions [here](. Thanks for your help! Complacency Is Dangerous in This Market By Larry Benedict, editor, Trading With Larry Benedict The Nasdaq has had a big 2024… Since beginning its run in October last year, the index has rallied just over 50%. It has made a succession of new all-time highs. Investors dream about this kind of market. But a rally like this can also leave you vulnerable to a surprise fall – just like we saw in August [when the yen carry trade unwound](. Since that August sell-off, the Invesco QQQ Trust Series 1 (QQQ) – which tracks the Nasdaq – has recovered strongly. And QQQ looks set to break higher after a brief pullback. But I’m worried that investors are too complacent once again… Recommended Link [Advertisement for Nvidia, Apple, Tesla, and Google stock recommendations]( [The 20-Second Trading Demo You Have to See]( Larry went twenty years on Wall Street without a single losing year… His former hedge fund, Banyan Capital, was ranked in the top 1% in the entire world… And he’s one of the few dozen people to earn the label “Market Wizard” (along with Ray Dalio and Paul Tudor Jones). What’s his secret? [Watch this 20-second over-the-shoulder demo to find out.]( Testing Resistance In the chart of QQQ below, the 50-day Moving Average (MA, blue line) shows its long-term uptrend. But it hasn’t been all one-way traffic… You can see the diverging pattern from June to July (orange lines). That led to the sharp sell-off in August. Invesco QQQ Trust Series 1 (QQQ) [chart] Source: e-Signal ([Click here to expand image]( When the Relative Strength Index (RSI) makes a lower high like this (lower orange line), buying momentum is waning. That typically precedes a fall. And that is what we saw… QQQ sold down sharply as the RSI fell and traded in the lower half of its range. After recovering, QQQ ground higher. This coincided with the 10-day MA (red line) breaking back above the 50-day MA. Adding to the bullish sentiment, the RSI traded mostly in the upper half of its range (above the 50% level). As you can see, QQQ gapped higher off the back of Donald Trump’s win… but that move soon fizzled out. Take another look: Invesco QQQ Trust Series 1 (QQQ) [chart] Source: e-Signal ([Click here to expand image]( QQQ ran into short-term resistance (green line) and retreated around the middle of last month. Since then, though, momentum has been slowly building. That has pushed QQQ right back up against resistance. So, what should investors look out for next? Free Trading Resources Have you checked out Larry’s free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. More Than Technicals With momentum building, QQQ will likely break up through resistance. And this could see the market “melt-up” for the rest of 2024. But investors shouldn’t become complacent even if the market makes fresh highs. There’s plenty of tinder just waiting for a spark. Sometimes markets grind higher like this until investors find a reason to sell… especially if the RSI reaches overbought territory (upper gray dashed line). Also, keep in mind that volatility is tracking at low levels again. The CBOE S&P500 Volatility Index (VIX) is back where it was in July. If the VIX turns higher alongside the RSI tracking in overbought territory… then watch out. That’s a potent scenario for a fall. Additionally, we should pay attention to more than technical indicators on the chart… We need to consider other factors… not least of which will be President Trump’s agenda. With just 47 days until Trump’s inauguration, we need to prepare for the impacts of his proposed tariffs and a potential trade war. And then, of course, there’s the big question about what the Fed will do with rates… The current year-plus rally got started off the back of prospective rate cuts. If those cuts get pushed back or put on pause at the Fed’s meeting later this month, that could light the match for a sell-off. Regards, Larry Benedict Editor, Trading With Larry Benedict [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-208-6550, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@opportunistictrader.com). © 2024 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](