The Boomer Index Gets Interesting
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Wow, 10 days down in the Dow f*ckin' Jones! In fact, yesterday's nine-day skid alone marked its longest consecutive losing streak since 1978.
We get it, it's the boomer index and nobody cares about it, right? Wrong!
Financial services and big tech make up just over 40% of the index at this time.
Let's be rational and think through this.
Why is the Dow Jones down 10 days in a row, what started this move, and what is the opportunity if any? Well, here is how I am thinking about it.
Big tech stocks, particularly Nvidia has been hit hard after recently being added to the index on November 4th of this year. Additionally, potential economic slowdowns and a recent sell-off in healthcare stocks, including UnitedHealth (largest holding in the index) following the tragic murder; has resulted in a broader market pullback impacting the Dow significantly.
But, just look at this move... This isn't a small cap, rather it's an index, in fact it's the oldest stock index that was "founded" in 1896. It's not going anywhere anytime soon.
If a large part of your trading business like myself is higher time frame (HTF) over-extension trading, this should get you excited. In fact, it should get you really excited. The permutation with the most potential is exactly how $CRWD setup for us earlier this year.
Multiple legs down followed by an increase in range expansion (larger daily bar candles as the move progresses) and a gap down in the overnight session with a first move down in premarket that becomes an A++ opportunity. - this is what I want to see (the last part needed is the gap down overnight and the first move down)
Obviously, we are comparing apples to oranges when it comes to comparing the Dow Jones to a single stock like CrowdStrike, but price action is universal during extremes (unless a true change in fundamentals, then watch out).
This is what $CRWD looked like on its final blow off day that led to an incredible opportunity.
Daily chart:
Intraday chart:
Anyways, this is exactly the permutation that I am looking for on this old fart of an index. We have seen multiple legs down followed by incredible range expansion the last two days with FOMC really helping out, and now, all I am looking for is a gap down tomorrow followed by a first move down to get involved. In a perfect world scenario, we are sub 420 tomorrow (in the ETF) with it playing out in this fashion.
This is a unique situation in which this is truly the only permutation I am looking for at this time. If we don't get it (gap down followed by a first move down), I'll be sitting it out, regardless of how it plays out.
But, if we do get that permutation, this is a pretty damn good setup that I think could work it's way back up to 430-434 in the short term, and maybe much more than that over time. I am pretty confident in the short term move if we get this permutation, and a bit less confident on what would come next.
Anyways, I wanted to quickly go over the permutation I’m eyeing on the Dow Jones tomorrow (using $DIA and $UDOW). It has the potential to set up as a pretty damn good opportunity—one worth taking on a decent chunk of risk for me (unlimited liquidity is a plus)—but it might not materialize at all. That said, I’m always open-minded and ready to step aside if I’m wrong or avoid it entirely if it doesn’t align with what I’m looking for.
This was a last-minute post, but I felt it was important to share, as game-planning potential bigger picture opportunities has always helped me tremendously.
Disclaimer: The content shared on this blog is based on my personal opinions and is intended for informational purposes only. It should not be taken as financial advice. Please conduct your own research or consult with a financial professional before making any investment decisions.
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