State Of The Union Likely To Prompt Rotation In US Stocks

We would not be surprised to see the YM rotate after the SOTU address to levels near the CYAN Fibonacci target/support level (24,435) while setting up a new momentum base – similar to what we expect to happen in the NQ. It makes sense that this support level (24,435) would be a substantial basing level for a new momentum breakout trade to continue higher.

Our overall longer-term analysis of the US markets is that we continue to believe the upside price bias will continue and that a moderate upside “melt-up” as a renewed capital-shift continues to drive investment into the US stock market. Right now, though, we are warning that the US stock markets could be setting up for a period of 5~10+ days of rotation and volatility, after the SOTU address, that may frighten many traders. Because of this, we closed out our GDXJ position for a 10.5% gain right at the recent high, and also took partial profits on our ROKU stock pick for a quick 8% gain. So be prepared for some sideways trading and increased volatility for the next week or two.

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